Call and response

Commodity prices are high: produce more. Commodity prices are low: produce more. What a great recipe.


Over the last decade, with the exception of the commodity bubble years of 2011, 2012 and 2013, oilseed crops have offered greater price stability because of steadily increasing global consumption. However, all food and fuel crop use has been growing.


In 2007, 37 million tonnes of soybean oil were produced from a global crop of 218 million tonnes of beans.


Since then, soybean production, which exercises most of the influence on canola prices, has grown steadily, up 54 percent. The carry-out stocks remain stable, around 23 percent, give or take a point or two, and therein lies the secret to its price success.


Corn, the biggest cereal, increased production 30 percent in those years, with consumption rising 25. Carry-out stocks of coarse grains are up 25 percent in that time, with negative effects on prices and market confidence.


On the farm, the gross returns from corn are at about 2007 levels despite the boost in production. American farmers saw the value of their corn go from US$54 billion to $52 billion today.


When it comes to soybeans, the value at the farmgate has risen from US$27 billion to $41billion.


To get there, soybean acreage has grown by 28 percent, jumping from 64 to 83 million acres. Farmers are also harvesting 25 percent bigger crops per acre than they were in 2007.


Corn yields are up about 15 percent in that time, with acreage remaining flat at around 86 million.


The United States didn’t magically make more land, so wheat was the loser, dropping 10 million since 2007 and about US$4 billion in farmgate sales.


Farmers were responding to price signals.


Current global wheat stocks, carried out year to year as a percentage of use, have increased about eight percent in the past decade. That is a 30-ish percent increase in stocks to use. It’s the same problem corn has.


The world is eating 124 million tonnes more wheat than in 2007, but farmers are producing 139 million tonnes more from what are globally flat acres.


Farmers are doing what the market has called for: meeting the need, with some left over.


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