Markets generally viewed the U.S. Department of Agriculture’s May 10 report predicting record large world wheat, corn, rice and oilseed production this year as price depressing.
But they did not trigger limit down moves on futures markets like the U.S. stocks report did March 28.
It was encouraging that prices were bouncing back early this week as traders returned their attention to the slow pace of seeding in the U.S. and Canada.
As the stories in this week’s Markets section show, there continues to be strongly divergent attitudes about crop production, demand and prices.
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There are potential production problems in Russia, Australia and North America, but for now, they are only potential.
For now, the USDA, which is the most influential crop forecaster, expects a record corn crop in the U.S. and big production increases in the European Union, South America, Ukraine and the former Soviet Union.
Year end 2013-14 U.S. stocks are forecast to rise to two billion bushels, almost triple the amount at the end of 2012-13.
The USDA sees global corn ending stocks climbing to 154.63 million tonnes, up 23 percent from 2012-13 and the most since the end of 2000-01.
The USDA forecasts 2013-14 world wheat production will rise 45 million tonnes, or 8.3 percent, to 710.1 million tonnes. Year-end stocks would grow 3.4 percent to 186.38 million tonnes.
Rice production is forecast to rise nine million tonnes to 479.26 million and year-end stocks to climb 2.2 percent to 107.84 million.
Global soybean production is expected to climb 16.4 million tonnes to 285.5 million and ending stocks to climb 20 percent to 74.96 million tonnes.
The May 10 report, with all its talk of record production and stocks, reinforced an idea that has dominated grain markets for most of 2013: this is the year when, finally, farmers are likely to catch up to demand and rebuild a little cushion in stocks.
Let’s recap the production problems that in the last few years have kept global grain stocks tight and prices strong despite a global economic slowdown.
Australia suffered severe droughts in 2006 and 2007.
Europe, Canada, the United States and North Africa all had below average crops in 2007.
Drought hit Argentina and Brazil in 2008.
In 2010, severe drought hit the former Soviet Union, causing major production decreases. Flooding trimmed Canadian production.
In 2011, drought hit South America, knocking down corn and soybean production in Argentina and Brazil. A summer heat wave in the U.S. Midwest knocked back corn yields.
In 2012, drought and winter damage again shrank crops in the former Soviet Union. The worst drought in decades hammered U.S. Midwest crops.
These production problems were happening at the same time as the rapid rise in the amount of grain going into biofuel.
After that string of bad luck, perhaps we are due for a year without a major disaster.
It can happen. There was a string of years in the early 2000s when global production exceeded demand, allowing year-end stocks to become a price-depressing burden.
South America is harvesting a record crop right now.
The Pacific Ocean has neither an El Nino nor a La Nina trend. The early forecast for India’s monsoon is for average rainfall.
A wet spring is pushing back the drought in the U.S. Midwest and eastern Plains, although the rain has not yet fully recharged the subsoil moisture levels.
Seeding is late in Canada and the U.S., but the crop will eventually be seeded.
As always, June and July weather will make or break crops in the Northern Hemisphere.
Right now, bigger production and lower crop prices are in the cards.
But who knows what hand Mother Nature will deal to us next?
