Diversification the best policy
There is a bumper harvest, grain is piling up on the ground, the handling network is outdated and a shortage of rail cars is strangling the system.
It all sounds familiar to western Canadian farmers, but this situation is in Australia this year.
Aussie farmers are harvesting an estimated 21-million-tonne crop, the largest in 13 years and the second largest on record.
Production exceeds capacity
In New South Wales, the state on the eastern side of the country where Sydney is located, producers expect to harvest seven million tonnes. The grain-handling system is designed to handle only four million tonnes.
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Prairies have variable soil moisture conditions
The dry weather in the west was welcome for preserving grain quality and advancing harvest, but it has resulted in very dry soil moisture conditions.
The big harvest Down Under is one more factor weighing down wheat prices this fall.
It’s galling to witness the wheat price free fall, considering the supply-to-use ratio is still tight in relation to the long-term average. But the fact is, what we once considered adequate is now too much.
It seems no matter what time of the year, somewhere in the world a wheat crop is being harvested and another is being sown. Shortages might develop for a short time, as they did last spring, and without reserves, prices will soar.
But that information will be acted on quickly by those producers about to seed a crop. They will boost acres and inputs on a commodity in hot demand or cut back when conditions warrant.
This rapid response to information could make markets more volatile.
Sure, people like Lester Brown of the World Watch Institute and Dennis Avery of the Centre for Global Food Issues say demand for grain will surge in the next century as China and the rest of Asia turn to more grain and grain-fed livestock to meet their food needs.
But enthusiasm about sustained strong grain prices should be tempered. As seen this year, strong prices will generate expanded production.
Diversification the key
Canadian farmers would do well to follow the course they set for themselves about a decade ago – diversify.
A broader base crop and livestock production, more processing and more non-agriculture economic development will give more sustainability than chasing the wild swings of the global market.
