There is reason for optimism among prairie grain growers.
Many areas that were perilously dry just a few weeks ago are now well watered and if we get warmer, sunny weather, we could be looking at good crops.
In fact, good moisture seems to be the norm in almost every grain-growing region around the world. This is helping to push down international grain prices from early spring highs. A drop from the peaks was inevitable, if depressing for growers, but futures prices for most grain remain above where they were at this time last year.
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The futures market remains supported by the remarkable fact that despite forecasts for normal to above average crops in most places, analysts still expect consumption to outpace production.
The United Nations Food and Agriculture Organization forecasts that world production of wheat and coarse grain will rise 3.7 percent to 1.96 billion tonnes.
But consumption is expected to rise to 1.99 billion tonnes, causing stocks to drop almost nine percent to 362.7 million tonnes.
“The downward trend in global cereal stocks continues, narrowing the buffer available to absorb large unexpected shocks. In view of already tight stocks, the possibility of higher and more volatile prices in 2004-05 should not be ruled out,” said Henri Josserand, chief of FAO’s Global Information and Early Warning System.
Here are the weather and trade issues we know about thatcould push prices up or down.
- The U.S. hard red winter wheat harvest was delayed last week by rain that ranged from 50 to 125 millimetres. This raised concerns about reduced quality and yields and supported wheat prices.
- As the Western Producer’s deadline closed, wire services reported that Brazilian officials said China had lifted its ban on Brazilian soybeans, imposed when China found traces of a seed fungicide in shipments. If confirmed, it will free dozens of soybean-laden ships on route to China that were in limbo because of the dispute.
The breakthrough is sure to lift traders’ spirits and help oilseed prices, but the underlying problem remains that cash-strapped Chinese crushers don’t want the soybeans, bought at the peak of the market before soybean prices fell.
But China can’t keep out soybeans forever. The poultry industry, hurt earlier this year by avian flu, is recovering and influential oilseed analyst Oil World reported that soybean supplies in China are declining, meaning that it will need shipments by August.
Forecasts for large soybean and canola crops around the world will put a lid on prices, but recovering Chinese demand will keep the fire stoked and the market simmering.
- Summer is starting cool and wet throughout most of the grain growing regions of Canada and the United States. So far in most areas moisture is welcome and is acting to pressure prices lower. But crop development is behind schedule and the risk of disease is increasing. If it remains rainy and cool, markets could become nervous and bid up prices. If the weather turns more summer like, it will put downward pressure on prices.
