A month ago, I wrote that the mindset of the trade about global crop supply is shifting toward comfort and away from concern.
Reports from Statistics Canada and the U.S. Department of Agriculture last week reinforced that shift.
Both reports increase the size of crops grown this year.
The Statistics Canada report had little immediate market impact, but the USDA reports on domestic year end stocks and global crop production pushed crop prices down.
The USDA increased its forecast of the size of U.S. ending stocks of soy-b eans, wheat and corn, mainly because of slow exports.
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Looking at the world numbers, the USDA increased global corn production by 8.53 million tonnes to 867.52 million, due mostly to an upward revision in China’s production. It also raised its year end global corn stocks forecast, but the number is still smaller than last year.
The USDA increased its estimate of world wheat production, raising its forecasts for Australia, Argentina and Canada.
Global wheat production is now estimated at a record 688.97 million tonnes, up from 683.3 million last month.
Year end global wheat stocks for 2011-12 rose to 208.52 million from 202.6 million last month. That is an increase of 8.77 million tonnes over 2010-11 and the largest ending stocks number in 10 years.
More grain is available, and the rate of demand growth could slow if the debt crises in Europe and the U.S. get out of hand and spark another recession.
The market could get comfortable indeed with attendant lower grain prices if the weather co-operates in 2012 and U.S. yields recover to what had been a rising trend.
Of course, weather is always the wild card.
The La Nina appears to be gathering a little steam. It was predicted to be much weaker than last year’s strong version, but there are indications it might wind up being a moderate event that does more damage than expected.
Through all of the recent negative news for grain prices, it is good to see that canola prices are holding up better than soybeans, despite Statistics Canada pegging the crop at the high end of market expectations at 14.17 million tonnes, smashing the previous record of 12.89 million tonnes in 2009.
Canola futures have fallen about 14.5 percent since Sept. 1, while soybeans have fallen 23 percent.
Canola is supported by strong demand. Seed exports to date are moving at a record pace, up 18 percent over last year, and the domestic crush is also a record, up three percent.
China’s demand for seed is much stronger this year with the establish-m e nt of new crushing plants in coastal areas that are allowed to import Canadian canola.
China National Grain and Oils Information Centre expects Chinese imports in 2011-12 to reach 1.8 million tonnes, up from 1.3 million tonnes the previous year.
