Check here for regular updates from Cereals North America, an agriculture outlook conference being held today and tomorrow in Winnipeg.
If you Tweet, follow me on Twitter at @EdWhiteMarkets because I’ll be regularly Tweeting from the conf.
BILL TIERNEY CONTINUES THE BEARISH THEME:
Bill Tierney of AgResource underlined the bearish theme to the conference so far with predictions of mid-low three dollar corn prices in 2014-15 and 15-16. He noted that crop yields can exceed the trend by as much higher as they did by falling lower than trend in 2012. Soybeans are a cheery spot in the grain markets for the next few months, until South American production comes to market.
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Soybean prices could be substantially higher now based on super-tight US ending stocks, he said, but are being restrained by way low corn prices.
Options contracts are very cheap right now, compared to any time since the late 1990s, so farmers looking to hedge or re-establish positions should consider them now.
RUSSIA REBOUNDING: Dmitri Rylko of IKAR
Russian grain analyst Dmitri Rylko painted a picture of agriculture production in the Former Soviet Union continuing to rebound and occupy a bigger place in the world grain export arena. Port facilities have improved and farm structure is changing, with individual farmers and big corporate farms taking more and more share from the still-dominant former state collective farms.
Grain exporters in the region are having trouble making sales to Egypt – usually their biggest customer – because of quality problems and Egyptian financial woes.
But generally FSU ag is improving, especially in the livestock department. Poultry and hog production is shooting higher as the area reaches towards meat self-sufficiency after years of cratered production that was wiped out by post-communist collapse problems.
Recently Russia has quietly begun allowing genetically modified crop testing and approval, with Ukraine likely to quickly follow suit. Already 20 percent of Ukrainian corn is GMO and five percent of Russia’s is GMO, although that’s not officially recognized.
NOBODY LOVES CORN, BUT VEGOILS AND WHEAT STILL LOOK PRETTY FOR A WHILE
Corn is providing an overwhelming downdraft to the grain markets these days and there has been little at Cereals North America to make anyone feel even slightly bullish about corn.
Vegoil crops like soybeans and canola, and non-corn cereals like wheat could be another story, a couple of leading commodities watchers said.
Alex Bos of Louis Dreyfus Commodities said the U.S. is getting tighter and tighter on wheat supplies and that he expects the USDA to knock down supplies Friday. Ending stocks of U.S. wheat could end up at 18 to 20 percent, down from 23 percent. That makes it close to the 2007-08 situation, but only for the U.S. The rest of the world isn’t nearly as short as in ’07-’08, however. But the tightness in the U.S. will probably help Western Canadian grain clear itself at OK prices. Bos said he’s expecting a rally in North American wheat prices and US tightness might lead to a peppier world market.
“We’ve lost the U.S. as the world’s residual wheat supplier,” said Bos.
Karl Skold of Bunge said cheaper corn is drawing in more demand and that livestock producers in North America are bulking up their production to take advantage of cheaper corn. That is leading to more demand for soybean meal, helping soybeans keep a huge spread above corn prices.
“Really, their Christmas in October is four-dollar corn,” said Skold.
Soybean meal is also strong across the world. Vegoil prices, which have been weakening for ages, appear to be bottoming, he said.
However, prices and spreads are urging South American farmers to plant every acre of soybeans that they can, so in six months time the market situation could be quite different.
THE VIEW FROM CHINA: Yang Weilu from CNGOIC
Don’t count on China to become a big consumer of export grains like it has become with vegoil crops like soybeans and canola, Yang Weilu of China’s national grains and oilseeds institute said.
China’s government is committed to grain self-sufficiency and will boost acreage and productivity to reach it.
“The increasing trend of grain output will not change,” said Yang Weilu. Lots of opportunity to increase production.
MEET MR BEAR: Dan Basse of AgResource
The 2006-12 bull market for agriculture is like over, Dan Basse of AgResource told the conference in its opening address. Biofuel demand is stagnating, per capita calorie increases in BRIC nations are stagnating, feed demand is stagnating as meat consumption increases around the world flatten out.
At the same time ag production is increasing and will likely continue to do so.
“We have not run out of the ability to raise yields . . . We can still raise productive capacity.”
Basse expects multi-years of lower crop and meat prices and a five to 35 percent decline in farmland values.
“The pressure is on farmers to plant less.”
Farm income should fall back to 2005 levels, or where they were before the bull market began, Basse said.
9:20 a.m.: GRAINY PEOPLE FROM ALL OVER
People from 16 countries are attending Cereals North America and speakers from Russia, China and the U.S. will be speaking over the next two days.
Here’s Dan Basse of AgResource opening the conf:
