It is about time to assess global weather and economic issues that could affect next year’s world supply and demand for grain.
Portions of the western winter wheat belt in the United States remain dry. As of last week, only 50 percent of the winter wheat crop was rated good to excellent, compared to 61 percent last year at the same time.
Also, the U.S. dollar continues to depreciate against most currencies, making U.S. agricultural products more affordable. This supports grain futures prices. While the Canadian dollar’s climb offsets the immediate benefit, generally, when food is more affordable demand increases.
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The rebounding global economy should also increase food demand. The American economy has caught fire recently and China’s booming economy has been big news for months.
This should stimulate other countries’ economies, boost incomes and increase demand for food.
With a disappointing harvest, Europe should see strong grain imports for the rest of the crop year.
But, its soil moisture has improved. Autumn seeding proceeded favourably and crops are emerging well, except some canola that might have to be reseeded. Ukraine and Russia also seeded fall crops in much better conditions than last year.
Rain was also more plentiful in North Africa this fall.
Argentina went though a dry spell, causing analysts to slice a couple of million tonnes from its earlier wheat production outlook. But on Dec. 1, its leading grain exchange reported that as harvest progresses, yields were proving better than expected. There is no solid evidence yet on how the dryness affected the soybean crop, which will be harvested next year.
Brazil’s large soybean acreage so far appears in good shape. Rust disease is a threat, but there are good supplies of fungicide.
Australia expects a near-record crop. However, the futures markets have already worked this into their prices.
At home, the Prairies are much drier going into winter than last year.
So as usual, there is a mix of issues that can push the market up or down. The rest of this winter should see strong exports and well-supported prices with little downside risk and the upside represented by a surprise big wheat order by China.
But next year, competition could pressure prices lower if the weather continues to smile on Europe, the former Soviet Union and North Africa.
