Producers face increased uncertainty as seeding begins

Farmers will be anxiously watching the skies this spring, hoping for needed moisture but hoping to avoid seeding slowdowns.

Regardless of moisture, they’ll be farming beneath heavens that are filled with clouds that could part to reveal a beautiful sun or break out with furious storms.

These clouds are the stories and issues hanging over the markets, any of which could have a profound effect on the prices most of the newly sown crop will receive.

There are always questions hanging over the market, but this year the uncertainty of the outlook is more extreme. These aren’t issues that merely hint at coming revisions to supply-and-demand estimates, but threaten to be asteroid-like impacts.

The potential complications include several factors:

Much of North America is going into spring dry and running on subsoil fumes. Whatever happens with the crops on this continent will have a big impact on domestic and exportable supplies of the world’s major grains, so the impact of spring and early summer weather could be immense in either bullish or bearish directions.

Crop prices are incredibly high and a testament to low supplies of many agricultural commodities.

But the level of prices is equally due to the global commodity market rally, with super-high prices for commodities like lumber and copper, causing investment money and speculation to pour into the entire commodities complex, and that’s driving up agricultural prices as much as anything to do with specific crop fundamentals.

Some are calling for a new long-term commodity bull market like the one of 2000-14. Others think this is a one- or two-year bear market rally in commodities that might not have long left. I’m one of the latter.

Which will it be? The answer to that question will have a great impact on crop and meat prices this year and onward.

How and when will the global COVID-19 pandemic end?

It’s tempting to look at the roaring economic recoveries in the United States and United Kingdom and expect to see the same thing happen here and around the world.

That might be a dodgy assumption.

There’s a chance that the world is on the cusp of a multi-year boom, with repressed demand flooding back into the world’s economy as the pandemic recedes. However, it’s also possible that, after an initial flurry of rebound growth, that the deep damage caused by the crisis will see us slide back into recession, or 1970s-like stagnation.

That’s even if the virus recedes like it appears to be doing in the U.S. and U.K. A similar phenomenon is likely in Canada, the European Union and the advanced nations of Asia as the vaccination rate hits levels high enough to achieve herd immunity.

But what we’re seeing in India this week, with millions getting sick from a virus the government thought it had mastered, with its medical system collapsing and economy reeling, suggests COVID-19 might have a lot of nasty surprises in its tail. What’s happening in India today could also occur in Africa and other populous and semi-developed places.

Those are major parts of the global economy and play a big role in the underlying demand for the agricultural commodities western Canadian farmers produce.

It’s easy to forget that Canada might be approaching a likely resolution to the pandemic crisis, but most of the planet is nowhere near it yet. COVID-19 isn’t done with us yet and in some parts of the world, is perhaps just getting going.

Befitting its gigantic population and economy, China isn’t just an issue, but a portfolio of issues.

The U.S.-China trade war had a number of significant impacts on global agricultural trade, with shifts to and away from U.S. supplies marking different periods of the still-simmering dispute.

Will the trade war continue? Will there be a new deal forged?

How about the ongoing impact of African swine fever on China’s enormous swine herd. Will it continue to drive major pork imports? Will it reduce feedgrain import demand?

And even more fundamentally, how will China’s economic growth be affected by the pandemic?

So far, China has done outstandingly well in recovering from COVID-19 and regaining its growth path.

But where it goes from here, with the global economy in question, is just a guess. China isn’t immune to impacts from outside its borders and its ability to keep the world economy going all by itself can’t be assumed.

The above issues and questions will occupy analysts and market prognosticators as spring rolls into summer.

Farmers will probably be considerably less preoccupied by them. They have a crop to seed and manage. Most won’t have time to fret about this overhanging weather.

But come the post-harvest period, we’ll probably be looking at a very different outlook, something that will have a major impact on the 2021-22 market and on farmers’ incomes.

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