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.
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.
