Are we turning the corner on ag commodity prices?

Farmers are always hoping for higher prices in any market, but our wishes do not always come true. However, there are signs we’re turning a corner, with global demand outstripping supply.

Many farmers and analysts have stared at their computer screen this fall to see Dec corn laser-locked around $3.50, along with other commodities like canola, soybeans and sugar feeling the same lack of volatility.

In any market, there is a focus on supply and demand, which drives the price of the commodity. The crop selection by most farmers depends on profitability per acre and agronomic factors as well.

In terms of carry over stocks the picture is beginning to change and that has some analysts thinking about the potential for how prices of corn, soybeans, wheat and rice to move higher relative to today.

According to the International Grains Counci, the trend of climbing ending stocks around the world is coming to an end. According to the IGC’s latest estimates, all-grain ending stocks around the world are dropping from 523 million in 16/17 to 493 million tonnes in 17/18. Tighter crop supplies create the fundamental traders and funds to support a move higher in the markets.

On Friday, I talked to Chip Flory, host of Market Rally Radio about the overall market picture and he brought up how demand is outstripping supply globally and the impact it could have on crop selection.

Total global consumption of the crops we are producing is outpacing production in the 17/18 marketing year. When you get to that point, the market has to decide which crops need the most incentive to increase acres in the year ahead.

 If this scenario develops as Flory describes, the market price of some of the chosen commodities could get a thrust higher and break these stagnant shackles.

We have had these discussions domestically in the U.S. and I am sure you have in Canada, but around the globe? This is one of the reasons I am starting to turn the corner and getting more optimistic on this market ahead of us.

Below is the audio version of Flory’s comments that he made on RealAg Radio Nov 8th, 2017.

 

Shaun Haney

Shaun Haney is the founder of RealAgriculture.com. He creates content regularly and hosts RealAg Radio on Rural Radio 147 every weekday at 4PM est.

@shaunhaney

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One Comment

Roman Wilgosh

When market analysts talk about direction, why do they always refer to “acres” vs “production per acre” . Increases in production , in recent times have not necessarily come increase in acres but in production per acre.

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