It is always darkest before the dawn.
That may be the case of the last couple of weeks. Continued BSE problems, steadily dropping grain prices and a harvest-stopping snowstorm have many farmers depressed.
But there is a little glimmer on the horizon. It appears the grain price fall might have stopped.
The Oct. 12 crop production report from the United States Department of Agriculture surprised the market with the size of the corn and soybean crops and projected year-end carryovers, but the depressing effect on futures prices was short-lived.
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China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
Soybean prices, as this was being written Oct. 25, had regained the ground lost after the USDA report and had climbed to the highest level in several weeks. Canola was also rising despite the stronger loonie.
Corn and wheat, while not as buoyant, had climbed back to pre-report levels.
Soybean’s bounce came from strong exports and American farmers holding back cash sales. Asian buyers were making deals to get ahead of ocean freight costs, which are again bubbling higher.
Another factor in the strong exports was the falling American dollar. The currency issue is a double edged sword for Canadian farmers. On the one hand, a weaker U.S. greenback encourages buyers to import more U.S. farm commodities. Strong exports push up futures prices and Canadian canola futures prices rise with the tide. But the benefit is offset by the strengthening loonie.
Another factor in the soybean market is the outlook for Brazil’s crop. The market had expected about 64 million tonnes, but low world soy prices, high fertilizer and fuel costs and disease problems are cooling Brazilian farmers’ love affair with the crop.
The latest Brazilian forecast is for 61 million tonnes. While more modest, that is still much higher than last year’s drought and diseased reduced crop.
South America’s crop will be closely watched in the coming months. Recent rain has turned around what was a dry preseeding period but more moisture is
needed.
Turning to wheat, Australian Wheat Forecasters has cut its estimate of that country’s wheat crop to 21 million tonnes due to lack of rain in many regions. That is 2.5 million tonnes lower than the USDA estimate.
While these factors have helped stop the grain market’s general decline, they unfortunately do not signal a bull market.
Too many regions of the world have had good to excellent crops this year for prices to recover to anywhere near where they were this spring.
