The latest crop production numbers from the U.S. Department of Agriculture confirm that the world is awash in grains and oilseeds.
But the department’s Nov. 12 report came as no great surprise to market analysts and traders, and produced no significant short-term change in prices on U.S. or Canadian markets.
“I think these numbers had been more or less factored into the market,” said Chris Beckman, oilseed market analyst for Agriculture Canada. “I don’t see a lot of price movement.”
In fact, despite the forecast of record U.S. corn production and hefty ending stock levels, corn futures on the Chicago Board of Trade closed moderately higher Dec. 12, with December futures closing at $2 US a bushel. The price climbed another 2.6 cents per bu. Nov. 15.
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“Given the size of the crop they’re talking about, the corn market has shown remarkable strength,” said Peter Watts, grain market analyst with the Canadian Wheat Board.
Here’s what the USDA had to say about the major grain and oilseed commodities:
- The world wheat production estimate was raised by 1.1 million tonnes to a record 617 million tonnes. Larger crops in the European Union and Russia, and to a lesser extent Argentina and Brazil, more than outweighed projected declines in Canada and Australia.
- The U.S. corn crop is estimated to be a record 11.7 billion bushels, up from 11.6 billion in last month’s estimate, and 16 percent bigger than the previous record 2003 crop. Projected global coarse grain production was raised by eight million tonnes to a record 985 million tonnes, nine percent more than last year’s crop.
- Soybean production in the U.S. is forecast to be a record 3.2 billion bu. World oilseed production is projected to reach a record 388.5 million tonnes, up 2.7 million tonnes from last month’s estimate.
Beckman said while the numbers produced no significant short-term price movement, the record crops and the appreciating Canadian dollar will keep pressure on Canadian canola prices.
“We’ve gone from a shortage last year to a glut this year,” he said.
In the latest grain and oilseeds outlook from Agriculture Canada, also released Nov. 12, Beckman reduced the 2004-05 canola price outlook by about $20 a tonne to a range of $300-$340 a tonne (in-store Vancouver). That compares with $387 in 2003-04 and $415 in 2002-03.
Errol Anderson of ProMarket Wire said that while the latest production numbers are a bit bearish, the market is ripe for a short covering rally for both corn and soybeans.
He said corn could increase by 10-15 cents a bu., which could boost March western barley futures to $125-$126 a tonne, while January canola could move up toward $315 a tonne.
“This isn’t the beginning of better times in the grain industry, but it should be viewed by growers as a chance to price some grain,” he said.
As for the world feed grain market, Watts said that while the USDA numbers point to large supplies of feed grains, that doesn’t necessarily hold true for the feed wheat market.
Much of the low quality wheat produced in Russia this year is meeting minimum milling standards, leaving Ukraine as the only Black Sea producer exporting feed wheat.
“It’s not quite as burdensome as we might have expected, so the feed wheat market isn’t quite as depressed as it might have been if Russia was actively exporting,” said Watts.
