As I write this, the forecast is for a drier weather trend on the Prairies that will allow farmers to get some grain in the bin and take advantage of strong markets.
Many crop prices are near two-year highs, offering some consolation to offset the poor crop.
They say misery loves company and there is a fair amount of that to go around this year.
Besides Canada’s problems, a forecast for frost in northern China, which could damage corn and soybean crops there, added to corn and soybean price strength early this week.
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Dryness in South America is also is a concern as Brazil and Argentina prepare to seed their soybean and corn crops. A La Nina continues to develop in the Pacific and it tends to bring dry weather to parts of South America.
Weather problems in Argentina have already hurt the developing wheat crop.
The Argentine government this week forecast a 10 million to 11.2 million tonne crop. That is better than last year’s drought damaged 9.6 million tonnes, but less than the U.S. Department of Agriculture’s forecast of 12 million tonnes.
That partly offsets the price negative news from Australia last week. It forecast a wheat crop of 25.1 million tonnes, up 16 percent from last year and canola at a record 2.2 million tonnes, up 17 percent. Pulse crops are also bigger.
The big Australian crops are in the east, not the west, normally the big exporting state. It will be interesting to see if their grain handling and rail infrastructure in the east is up to exporting more grain.
Weak corn yields in the U.S. are also supporting prices. The corn crop is still expected to be a record, but so is demand. Indeed the stocks-to-use ratio by the end of the crop year is expected to be the tightest in 15 years.
That means corn prices will have to stay strong to ration demand and encourage an acreage increase next spring.
High wheat prices are already presenting strong acreage competition in the eastern corn belt and farmers might consider planting soft winter wheat this fall instead of waiting until next spring to seed corn.
Soybeans will be the main competitor. Of the three major world crops, corn, soybeans and wheat, soy is the only one expected to increase stocks by the end of 2010-11, the second gain after a big rise at the end of 2009-10.
Analyst Oil World believes soybean prices might weaken because of the larger stocks. But that depends on the weather in South America.
If it is good and soybean prices fall, then corn will not have to rise much to get the acres it needs, but if there is a weather challenge and soybean prices climb, then corn will also have to rise. The stronger corn price has had little impact on western Canadian feed barley prices, giving relief to Canadian livestock feeders. A growing supply of feed wheat because of the bad weather is adding to the Prairie feed supply.
