Crop market’s Magic 8-ball says: reply hazy, try again

I need to take my crystal ball into the shop for a tune-up. Its view has become very hazy.

It failed me back in early January when I was writing about how the shortage of palm oil was a solid supply and demand situation not influenced by political whims and sure to provide strong, continuing support for the price of all oil crops including canola.

My crystal ball didn’t tell me that in a week or so the prime minister of Malaysia would say something that would anger India’s government so much that it would impose a boycott of Malaysian palm oil.

The ball also failed to show me that doctors in Wuhan, China, were beginning to see an influx of patients with a new type of virus that caused more severe illness than the common flu.

That virus is now officially known as COVID-19. Its fast spread and worrying death toll have caused China to impose a range of restrictions across the country that are creating a huge drag on its economy. Indeed, fears about the virus have slowed travel throughout Asia, cancelled trade and business conferences and sparked warnings about reduced corporate profits.

Of course, palm oil trade is one of the many areas feeling the squeeze.

The uncertainty is also increasing the likelihood that China won’t soon be buying huge amounts of American farm products, dashing hopes that the recent trade deal with the U.S. would immediately boost the American farm economy.

The combination of the virus and India’s boycott of Malaysian palm oil have wiped out almost all of the price gains that the vegetable oil complex made in December and early January.

Also in January, I wrote about talk of the possibility of Russia limiting its wheat exports in the second half of its marketing year and about how the Black Sea wheat production region was enjoying a mild, dry winter.

It would have been nice if my crystal ball would have told me that ultimately there would be no official limit on Russian exports and that the warm weather would extend through January into February.

Now market commentators are speculating on a bumper Black Sea region 2020 wheat crop thanks to the mild winter and increased seeded acreage.

A senior state weather forecaster from Ukraine said winter crops in that country were in “perfect” shape. Russia’s dry areas enjoyed precipitation and crops are in better shape than normal.

I’m looking at a number of other developments affecting supply and demand of agricultural products, but with my crystal ball on the fritz I can’t be sure if these issues will still be important six weeks from now.

  • Brazil forecasts a record large soybean crop of 123 million tonnes, up about eight million tonnes from last year when regional drought trimmed yields. If attained, that would make it once again the world’s largest producer of the crop, a distinction it lost last year to the United States.

As of last week, about 16 percent of the crop had been harvested, normal for this point in the season.

  • India’s government is becoming more ambitious about its pulse crop production goals.

Agriculture Minister Narendra Singh Tomar at an event Feb. 10 marking world pulse day said the country was close to its goal of pulse self-sufficiency and announced a further goal of producing a surplus to export.

Experts at the meeting noted a major investment into higher yielding varieties and agronomic improvements would be needed to attain that level of production.

It might take a while to become an exporter, but India has shown serious resolve in boosting production and has made great strides. From 2000-10, it never produced more than 15 million tonnes. But by 2017-18, it produced more than 25 million tonnes and imposed tariffs to restrict imports.

Weather problems last year presented a setback with production totalling only 23.4 million tonnes, short of the annual demand of about 27 million tonnes, but India’s government still was not prepared to lighten up on import restrictions.

It has a goal of producing 26.3 million tonnes this year.

Canada’s pulse industry continues to push for a more clear and fair trading relationship with India but it has also accepted that the industry’s hopes for the future lie with the boom in demand for plant-based foods and the growing domestic processing industry.

  • Finally, it is good to see that pork exports to China revived after that country in November ended its ban on Canadian meat.

December trade figures from Statistics Canada show China imported 23.4 million kilograms of frozen swine cuts in the month valued at $82.6 million. That is close to the monthly volume seen in the first five months of 2019 before the ban was imposed in June. The dollar amount is a record high. It also imported 3.3 million kg of frozen hams in December valued at $8.7 million.

My crystal ball does not show whether the disruptions surrounding the COVID-19 virus will hurt China’s demand for imported pork.

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