More than any year since the incredibly uncallable year of 2009, this year is filled with big ag market questions. The outlook for the year could contain anything from a crop price crash to a relaunch of the historical market rally crop farmers enjoyed in 2012.
’13 could give hog farmers a river of profits that makes whole the gaping holes punched into it by the troubles of ’12, or produce another catastrophic profitability collapse.
Every year has questions and possibilities hanging out in front of it at the start of January, but not like this.
I, like every other farm newspaper reporter on the prairies, am about to spend the next few weeks listening to market outlooks at the bevy of farm shows that appear this month and carry through until March. To prep myself for that, and to get something to put into this week’s paper, I called a bunch of market analysts last week to see what they were wondering about for the new year, and my summary above – that there are an incredible number of big open questions – comes from those chats.
So here are some of the questions that seem to be hanging out there, making this year an impossible one to confidently call.
(In no particular order, just as they’re scribbled down in my notebook):
1) Will the Midwest drought continue? Last year’s drought helped to drive corn, soybean and wheat prices sky-high. Last year at this time everyone was pretty blase about the crop stocks situation, even if soybeans looked tight-ish. Corn was bearish until June. That all changed when drought struck most of the U.S. Midwest and corn potential was ravaged.
The Midwest is still very dry. Sure, we need to assume “normal” weather will return. But can’t assume it will. Especially with Midwest soils having no subsoil reserves, any continuation of dry weather could once more cripple U.S. production. What would that do to the market?
2) How much demand was killed by the 2012 rally? We’re used to ever-increasing demand from China and the rest of the developing world for crops and meat. But since the price spike of the summer, demand for both soybeans and corn has fallen off dramatically, suggesting that demand from even mega-consuming China can be rationed by high prices. What the world has experienced since the early 2000s is a demand rally, in which growing demand pulls on stable or slightly growing production, leading to repeated bouts of high prices. If that demand dynamic changes, does the rationale for high long term prices disappear?
3) How much will world production surge in 2013 in response to the 2012 spike?
4) Will the world economy continue to stumble along through ’12, will it begin an expansion phase, or will it slump into recession? However that one works out will say much about commodity demand.
5) Will farmers back away from canola acreage after the production problems of 2012, the good returns for cereal grains, the low risk of growing non-canola crops, and the end of the CWB monopoly? Or will they keep chasing the aging Cinderella crop?
6) Will lentils begin recovering and rise off a bottom, or is there further down to go?
7) Will David Bowie really release a new album this year? Announced plans for such this morning, on his 66th birthday. See: Bowie
8) Will meat demand remain strong enough, and feedgrain prices drop low enough, to give hog producers the profit payback they need to make up for 2012’s losses?
9) Will the Euroban on sow stalls – which went into effect last week – make Canadian hog exports surge?
10) Will farmers plant too much pea acreage, chasing prices and flooding supplies?
11) Will Brazil really produce 83 million tonnes of soybeans? I remember when 60 million seemed unbelievable.
12) Will flax stage a big acreage comeback because of good return projections?
13) Will Idle No More last as long and be as super-successful as the Occupy movement?
14) Will the CWB do enough business in 2012-13 to justify existing past 2013 into 2014-15?
15) Will Liverpool Football Club miraculously make a top-4 finish and earn their way back into the Champions League? I dearly hope so, now that I have invested in a brand new jersey. Luis Suarez – you are God.