Prices for grains and oilseeds have softened.
“We’ve seen things go downhill a little the last few months,” said Brennan Turner, president, Farmlead.com at the Sask Grains Expo last Wednesday as part of their Grain Millers Harvest Showdown in Yorkton recently. “It hasn’t been very pretty at all the last couple of months.”
That is not a huge surprise.
One of the truths of a supply/demand market system is that rarely are the two sides of the equation in balance.
By nature prices bump higher when supplies tighten, and that is the market signal for farmers to boost production as they attempt to capture those higher prices.
Of course if there is one thing farmers have become good at, it is production.
The move to minimum and zero-till farm production systems has put more acres into annual production.
Better understanding of the need by plants for micronutrient, and their subsequent in crop application has helped.
So too has the increased use of soil testing, and GPS mapping to ensure maximum fertilizer application where needed.
Add in great steps in terms of varietal development, including the use of genetic modification science, and farmers can grow a lot of a particular grain, or oilseed in a hurry.
It is a combination of techniques and science which has the Canola Council of Canada targeting a 52 bushel per acre average for canola by the year. The 2025 target would lead to 26-million metric tonnes of production to meet global market demand for canola.
While demand will grow for canola and other crops.
The world population of 7.2 billion in 2013 was projected to increase by 1 billion over 12 years and reach 9.6 billion by 2050, according to a United Nations report released in 2013.
That is a lot of new mouths to feed, and there are finite arable acres on the world on which crops can be grown.
But those are longer term realities, and even within that, there will be an ebb and flow to prices with corresponding fluxes in production.
In the short term though, farmers will face a situation where once again their pencils will need to be sharper.
It is of course easier to realize profits when prices are high, and over the last three year or so farmers have seen crops which have generally been better than expected each year, the current crop an example. While not a bumper crop, prospects at seeding, when frost hit many crops, were for a lower yield than most seemed to realize.
Of course the better yields are part of the reason world carry-out levels on crops such as wheat have grown too. When there is more crop carried forward prices tend to react lower.
It hasn’t helped key commodities, in particular oil, has also lowered, staying there for longer than most had expected.
While Turner did point to scenarios where crop process could bounce higher, generally tied to severe crop conditions in other areas of the world, such the current dry region around the Black Sea, farmers shouldn’t expect it.
We are in a more diverse world in terms of production too these days. More areas grow more crops. As an example Brazil has emerged as a driving force in terms of world soybeans to the point crop prices no longer look only at U.S. production.
As a result weather stress isolated to one region, even a large one, will not have the same impact of even a decade, or two ago. A crop failure will signal the market to be more wary, and certainly more nervous, but dramatic rallies will take bigger news shocks.
Overall though, prices while certainly softer, with a limited likelihood for a general return to higher levels, are not to the point of being a disaster either. There will be profits with proper production and marketing efforts through the winter, and into the 2016 crop year. It will just depend again on how sharp a farmer keeps the pencil in doing the calculations on their particular farm.
Calvin Daniels is Assistant Editor with Yorkton This Week.
