This winter’s crop prices are likely to be long, dark and depressing, show reports from Statistics Canada and the United States Department of Agriculture.
Huge supplies of virtually all crops and weak world demand for corn and wheat left little reason for price optimism. Only flax seemed to be slotted for a price hike, and that was because so many growers suffered a harvest disaster this autumn.
“They reaffirmed that we have a big supply of just about everything,” said Ken Ball of Benson Quinn-GMS.
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“That usually means a winter of drifting. There’s little here that could provide the justification for a major winter rally.”
The USDA supply and demand report caused almost no reaction because the market had already factored in huge U.S. soybean and corn crops.
The Statistics Canada production report contained no major surprises on the big crops, but its forecasts of large supplies of most crops helped kick prices down a few more steps.
Ball said the oversupply is so marked that only a major world supply problem could substantially raise prices.
It has happened before, Ball said. Last year the Latin American soybean crop was cut by 15 to 20 million tonnes because of disease and weather problems, but similar problems can’t be banked upon.
“This winter is not likely to be exciting,” said Ball.
Canadian and U.S. crop prices have sagged since midsummer when a huge crops became obvious. Late summer frosts in Canada helped improve prices briefly, but they soon turned downward.
Charts show that most Chicago and Winnipeg prices appear to have bottomed out, after slowing their descent recently. The Winnipeg Commodity Exchange canola price fell after the Statistics Canada report came out, but recovered later in the week, helped partially by a turnaround in the falling U.S. dollar.
The Canadian report said farmers harvested a 7.6 million tonne canola crop this year, the second largest on record and much larger than recent drought-damaged crops. The 10-year average is 6.4 million tonnes.
Canadian crop prices have fallenmuch more than American prices this autumn because of the U.S. dollar’s weakness compared to the Canadian dollar and other major currencies.
World grain prices are set in U.S. dollar terms, so when the U.S. dollar drops and the loonie rises, Canadian farmers get paid less for their grain, even if the world market price stays the same.
In late November, the Canadian Wheat Board said the strengthening Canadian dollar was a major factor behind the slide in its Pool Return Outlook values for wheat and barley.
Statistics Canada said prairie total wheat production hit 23.9 million tonnes in 2004, almost three million tonnes more than in 2003. Spring wheat production was 18 million tonnes, above the 17.5 million tonne 10-year average.
Only Manitoba saw a drop in spring wheat production.
This year’s big Canadian wheat crop is being matched by large crops in the U.S. and overseas, undercutting the price potential.
The report was great news for any producer lucky enough to have a bin full of flax.
Only slightly more than 500,000 tonnes of flax are thought to have been harvested, after maybe half a million acres were abandoned this fall because of bad weather, especially in Manitoba.
The long-term flax average is more than 800,000 tonnes. In 2003, 745,000 tonnes were produced, with most sold at high prices.
