Huge American corn and soybean crops are on the way that will likely depress grain and oilseed prices all year and I fear the pain could continue into the next crop year and beyond.
The United States Department of Agriculture last week forecast a record large U.S. corn crop of slightly more than 14 billion bushels.
Year-end stocks are expected to climb to 1.8 billion, up 53 percent over the crop year just ended.
The soybean crop is also expected to be record large at 3.82 billion bushels.
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What the weather turns out to be in the United States is going to have a significant impact on Canadian producers’ prices
Soybean ending stocks are expected to jump to 430 million bushels, about three times larger than stocks at the end of crop year that just ended.
The USDA forecast global wheat production would be more than ample — with bigger than expected production in Russia, Ukraine and China — resulting in rising year-end stocks.
Not surprisingly, the USDA forecast lower average grain prices for the crop year.
There are worries the crop could overwhelm America’s rail and barge transportation system much like last year’s big crop in Canada did to this country’s system.
There is no major crop problem anywhere in the world, at least nothing large enough to change the assumption of more than ample grain supply.
And as we report this week, the next crop from South America could also be a record so long as it does not get too much rain from an El Nino.
Since the mid 2000s farmers have seen a period when grain used in ethanol in the United States and elsewhere has been soaring and where China’s voracious appetite for soybeans has gobbled up any country’s growth in soybean production.
It was also a period when Russia, Brazil and the United States all were hit by medium to strong droughts that limited production.
Now, the ethanol boom has come to an end. In the United States the government-driven growth has stopped. Production of the biofuel will still consume a large percentage of the corn crop, but it won’t be growing.
And we can’t count on China stepping up to buy corn like it buys soybeans. Indeed, China is struggling to find a way to manage its huge stocks of domestically produced corn.
There has been a global investment boom in agriculture that is expanding the use of better seed genetics, fertilizer and knowledge. Money is going into infrastructure like roads, rail and ports in Brazil, the Black Sea region and Africa.
And while new seed genetics sometimes didn’t live up to expectations in some of the challenging weather of recent years, when the right conditions come along, like last year in Canada and this year in the U.S., the yield potential is astonishing.
After years when it seemed at least one session of every agriculture meeting was devoted to the looming food shortage crisis, it is hard to conceive of a surplus production crisis.
I don’t want to sound alarmist. There is growing global food demand. And we can’t expect to have good crop growing weather everywhere in the world every year, particularly with the volatility attributed to climate change.
But I think the next few years are not going to be as good for Canadian farmers as the last few.
And that means farmers will have to be ever more vigilant in controlling costs and debt, and increasing efficiency.
