World weather affects price
Two pieces of news from the southern hemisphere last week, both weather related, could affect Canadian grain prices.
First, rains finally fell in parched Australia, halting deterioration in cereal crops at least temporarily.
The moisture added downward pressure to wheat and barley prices. In Chicago, the news from Australia helped push the December wheat contract down seven cents over the week to $3.87 (U.S.)
However, it is still very dry in many Australian wheat growing regions and the El Nino contributing to the drought shows no sign of losing its grip.
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Drought is a problem in many areas of southeastern Asia. On Sept. 4 a major newspaper in China said high temperatures and low rainfall in August caused serious damage to corn and cotton crops. Corn production is expected to be 92.6 million tonnes, down from a previous forecast of 115.8 million.
The drought in northern areas is said to be the worst in two decades and has affected more than 50 million acres of crops.
State governments are urging local authorities to prepare for “an extremely long period of difficulties” and called for emergency preparation for a disastrous harvest.
It would seem surprising, then, that China continues to export corn.
But Joe Miller, an analyst with the Indiana Farm Bureau, says the exports are poor quality corn the Chinese are moving to clean out their ports so they’ll be able to start importing later in the year.
Miller also thinks August weather in the U.S. hurt the corn crop there. The last United States Department of Agriculture estimate put the corn crop at 9.5-9.7 billion bushels.
Miller expects to see the number drop by about 500,000 bushels in the forecast due Sept. 12. And there is still the possibility of September frosts hurting the crop.
What does this mean for western Canadian farmers?
We reported in the Aug. 14 edition the comments of Errol Anderson, a Canadian analyst with Pro-Market Communications: “The word China – you get that one word in the commodity pit and these fund managers simply run to the pit. No one knows how much power they (China) do have or don’t have.”
Be aware that if China starts buying a lot of U.S. corn in the second half of the crop year, the market will rise and barley prices will tag along.
Miller predicts the Chicago March corn future contract could head to the $3.25-$3.50 per bushel range, 30 to 60 cents higher than it did last year.
