Buying patterns change | South America a factor
The world’s crop markets are far more dynamic than they were just a decade ago, and farmers are helping make that happen, says a leading American grain market analyst.
The advent of massive South American soybean exports and better-planned North American production by farmers means pricing for the next crop year begins much earlier than in the past.
“That market has to do it every six months,” said Elaine Kub, author of the book Mastering the Grain Markets, about the corn and soybean markets.
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For decades, the battle for acres in North America took place in spring as anxious buyers scrambled in late winter and into spring to buy up new crop supplies, raising prices for crops the market was most worried about.
However, the battle for acres in corn and soybeans, which sets the price trends for wheat, feedgrains and oil crops such as canola, has partially moved to the fall, which is when the South American seeding season is starting.
Buyers who are worried about world supplies of certain crops after the North American harvest will chase the coming South American crops, creating a secondary battle for acres six months before the North American harvest.
Today’s corn and soybean futures prices combine the underlying worries of commercial users about low North American supplies after the U.S. drought with their desire for South American farmers to plant more crops.
North American farmers may also be encouraging the pricing in of next-crop-year supply concerns because many of them don’t wait until the spring to make their seeding decisions. Instead, they contract for seed in the fall and won’t grow a crop if they can’t find a variety they like. As well, many prepare their fields and buy their fertilizer in the fall.
American farmers are also making acreage decisions earlier this year because seed companies are short of North American grown seed after two years of drought and need to grow supplies in South America over the winter to meet their demands.
“Many seed companies want farmers to commit before winter so they know how many acres they need.”
While the drought impact might be transient, Kub thinks the addition of a second “battle for acres” will likely be permanent.
“Since they’re increasingly a part of the world market, especially for soybeans, the market has to do it every six months,” said Kub.
