Get ready for lower crop prices.
A slowing global economy and recovering grain and oilseed stocks threaten to knock prices down to levels seen in 2009, said Jamie Wilton, a crop market analyst with Scotia McLeod.
He told Agri-Trend’s Farm Forum in Saskatoon Nov. 30 that canola could fall to the low $400s in 2012-13.
As a result, hedging and risk management are more important than ever, he added.
Wilton said farmers should jump on any short-term rally that carries canola back to the $525-$535 range by selling and locking in hedge protection for the coming crop year.
Read Also
Russian wheat exports start to pick up the pace
Russia has had a slow start for its 2025-26 wheat export program, but the pace is starting to pick up and that is a bearish factor for prices.
The level of debt carried by the United States and several European countries is overwhelming, particularly when politicians appear unable to agree on solutions, he said.
“We have really not gone through this kind of situation where we have two major economies of the world, Europe and the U.S., in major difficulties right now,” he said.
“What if the third piston on a three piston motor starts to crumble too, which is China?”
China’s manufacturing activity fell in November for the first time in three years. A prominent Chinese economist said Dec. 1 that economic growth would fall to eight percent in 2012 and to seven percent in 2013. It was growing by 9.7 percent in the first quarter of this year.
Weak U.S. grain exports also weigh against crop prices.
U.S. soybean export sales are 33 percent behind last year’s pace, corn is 14 percent behind and wheat is eight percent behind.
U.S. wheat and corn exports are losing out to cheaper grain from the Black Sea, and U.S. soybeans are being squeezed out by South American product.
The result is that U.S. year-end stocks might be larger than expected.
Production could also rebound in 2012, he said.
The U.S. has had disappointing average yields the past two years, but the shortages that have so concerned the market could become a thing of the past if there is a return to better weather and yields that match the long-term rising trend, he added.
Wilton said canola has fundamental support.
“The demand side is fantastic … the crush is very good. We are also seeing strength on the oil side of the equation so canola is gaining on soybeans.”
However, it will be hard for oilseeds to rally with U.S. soybean exports so slow and a big South American soybean crop growing with good moisture.
He said it is not a stretch to see soybeans fall back to around $10 per bushel, corn to fall to around $5 and Minneapolis spring wheat to fall to about $6, if the weather is good next year.
Those prices are lower than the past year but still higher than what was normal before 2008.
