Farmer intentions to seed a record large canola crop and put a record low number of acres into summerfallow would in the past pressure markets lower.
But not this year. Nothing to get excited about, said the market, which pushed crop prices higher after Statistics Canada released its seeding intentions report.
Record large U.S. corn seeding. Near record speed in planting crops in the Midwest and northern U.S. plains.
Ho hum, says the market. No reason to panic and bid prices down.
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At this early point in the growing season, the outlook is good for a big harvest in North America, but so far, that is giving the market little confidence.
The world needs big crops from the Northern Hemisphere because Southern Hemisphere crops were hammered by drought.
Markets last week were supported by further cuts to Argentina’s soybean crop. Last fall, the forecast was for 52 million tonnes of soybeans in Argentina and 75 million in Brazil.
It now looks like Argentina will produce 42 million tonnes and Brazil 66 million.
Argentina’s corn crop is also smaller, now forecast at 20 million tonnes, down from early projections of 30 million tonnes.
That deficit in production must be covered by rationing demand and encouraging new crop production, so oilseed prices continue to rise.
But beyond the South American drought, the weather restraints on crop production around the world are far from panic inducing.
Europe had problems with winter freezing and then a period of dry weather that caused damage, particularly to the rapeseed crop, but rain has been regular in April and concerns are receding.
Ukraine has similar problems and its wheat crop will be smaller. It is also a bit dry in southern Russia. However, the problems are nowhere near as black as the drought of two years ago.
There is no worry about China’s wheat or corn crops. India’s pulse production is down a little, but its wheat crop is pegged at 90.23 million tonnes, up from 86.87 million last year.
And yet prices for major crops are close to the elevated levels seen just before the crash in the second half of 2008.
They are not revisiting the panic peaks of 2007-08 but are nevertheless exceptionally strong.
The market could move a little once seeding is complete and if the weather is conducive to good yields, but not a lot lower, barring a wholesale market meltdown triggered by another crisis in Europe’s debt situation.
So what happens when the world finally straightens out its debt and deficit problems and economies grow again as they did in the mid 2000s?
There is some justification to the argument that economic conditions have less impact on agricultural products than other commodities because people must eat, whether there is boom or bust.
But that is not the whole story. A key driver of growing global food demand is the increased demand for meat.
When poor people make more money, they buy more meat and meat requires more agricultural inputs (feed grain, oilseed meal) than a vegetarian diet.
So a booming economy should drive meat demand and that should increase the demand for crops.
The world can barely keep up with food demand in a period of slack growth.
What will happen when a billion people or more want to celebrate a return to economic good fortune by ordering a meat dish at their favourite restaurant?
