Worries about exceptionally tight world grain stocks are receding except for corn, and its shortage is helping to prevent a general grain price retreat.
Barring a collapsed world economy, grain and oilseed prices will likely remain attractive up until seeding season, but if Mother Nature cooperates next year, the world’s farmers might catch up with demand, ushering in a period of lower prices.
This highlights the increasing need for risk management as you plan your marketing and input buying strategy for the 2012-13 crop.
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Wheat supply is already more than comfortable except for high protein grain.
Oilseed supply is a little tight, but not a major worry and there are signs that South American soybean production might turn out better than forecast as worries about La Ninacaused dry weather are so far not coming true.
It is corn that continues to generate worries. Global corn ending stocks have fallen each year since 2008-09.
Corn prices will have to remain high through the winter to encourage farmers to increase acreage in the spring.
There is always enormous concentration on U.S. seeding plans because it is by far the world’s largest corn producer.
But it is worth noting that the high corn prices are drawing others into the game, causing them to seed record size corn crops.
Corn production in the 12 countries of the former Soviet Union jumped to 31.8 million tonnes this year from 18.55 million the year before.
Production in South America and Europe is also up.
With lower grade wheat prices languishing, will these secondary producers increase acreage even more in 2012?
Then there is the China question. The world’s second largest corn producer harvested about 184.5 million tonnes this year, up from 177.25 million the year before. Despite the production increase, the market has priced in some corn imports by Chin a. Some believe the market is underestimating Chinese import demand, but there is also a chance that they will make do with feed wheat and the big corn imports won’t materialize.
If you put a few things together – better U.S. weather, increased crops in second tier producers, disappointing Chinese demand – it is possible to paint a scenario of a weaker corn market once we get into 2012-13. I’m not saying it will happen, just pointing out that it could happen and farmers should keep their pencils sharp and risk management up to date.
There is much deserved optimism in western Canadian farming these days. Producers should use their improved resources to invest in improving their management skill instead of buying rose coloured glasses.
