VANCOUVER – One of the biggest players in Canada’s grain sector believes the downturn in grain prices will be fleeting.
“This may be an aberration in what is a long-term upward trend,” Ian White, president of the Canadian Wheat Board, told delegates attending the Canada Grains Council’s semi-annual meeting.
Asked to expand on his remarks during a follow-up interview, White said nobody can predict what the future holds for grain markets given the uncertain times.
Commodity markets have tumbled because of expectations of recession, there is a lack of confidence in the Canadian dollar and freight rates are in disarray. It’s hard to make sense of anything.
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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.
But when stability returns to markets, fundamentals will take over and that bodes well for the grain sector because world stocks are low relative to demand.
“We could well see some rebound in markets because at the moment we’re just in this doldrums of lack of confidence,” he said.
White’s comments were echoed by David Rourke, a farmer from Minto, Man., who was invited to the conference to provide his perspective on risk management during challenging times.
During an interview, Rourke expressed confidence in a commodity price rebound. Despite decent harvests around the world, global grain stocks are still low and futures markets indicate there is slumping demand for fertilizer products.
That tells Rourke that grain supplies are going to plummet further in 2009, which would put upward pressure on prices similar to what happened in 2008.
“Grain prices are likely going to go even for a wilder ride within the next 18 months,” he said.
One other speaker who weighed in on the issue was Merritt Cluff, senior economist with the Food and Agriculture Organization of the United Nations.
Grain and oilseed prices are now closely tied to oil prices due to the development of biofuel, so any rebound will depend on how long the global recession lasts.
Global grain stocks are low, which bodes well for farmers but not for the 920 million people in the world who don’t have enough food to meet the basic daily calorie requirement.
“(Prices) could bounce back,” said Cluff.
The run-up in commodity prices this spring and summer was the highest in range and longest in duration in 100 years. Rice prices rose to $1,200 per tonne from about $275 in the span of one month.
“Many developing countries are suffering from this,” he said.
High prices pose a further threat to food security. The UN’s goal of cutting hunger in half by 2015 appears unachievable.
“We’re well off that target,” said Cluff.
He criticized the biofuel sector for its role in driving up food costs, showing a list of credible organizations that say the biofuel industry is responsible for 30 to 40 percent of this year’s price hikes.
The FAO is calling for an end to government subsidies and tariffs for the sector.
“We’re urging action,” said Cluff.
One grains council delegate wondered why the FAO wasn’t as outspoken in its support of genetically modified crops, which is one of agriculture’s solutions for feeding the world.
Cluff said the agency has to reflect the views of its members, who are both positive and negative on GM crops. But behind the scenes, the FAO is trying to remove politics from the debate.
“Just go the pure science route,” said Cluff. “We’re with you on that.”
