Photo of corn harvesting

Record harvests of corn and soybeans that fortified bearish arguments in 2016

The big crops keep coming

With 2016 nearly in the history books, it seems fair to say that the year will be remembered for its record corn and soybean harvests. Never before has any country ever produced 15.23 billion bushels of corn or 4.36 bb of soybeans, let alone both in the same season.

Not only was 2016 a year of good harvest, it was the fourth consecutive year of good harvests and, because of that, ending surpluses grew larger. According to USDA, U.S. ending corn stocks will total 2.4 billion bushels in 2016-17 or 16.4% of annual use. That is the highest stocks-to-use ratio in 11 years, an impressive accomplishment that took DTN’s national index of cash corn prices below $3.00 a bushel in the fall to its lowest level in eight years. Read more

Soybean futures – will they outperform in 2017 too?

Soybean futures outperformed in 2016, rising for the first time in four years, by 14.4%, compared with a 1.9% decline in Chicago corn futures, and a 13.2% drop in wheat.

While the US harvested a record crop, demand has been strong too – supported by Chinese imports which also set a record high, with demand supported by a recovery in the fortunes of the country’s important hog producers.

Meanwhile, values of soybean oil have been supported by disappointing global output of rival palm oil, with the latest El Niño casting a long shadow over South East Asian production.

But will such factors continue to support soybean futures in 2017? Or will the US produce another record harvest to dampen price prospects?

Read more

loonie piggy bank image

Loonie the No. 1 Trend to Watch in Agriculture: FCC

The Canadian dollar will have the biggest – and a mostly positive – impact on Canadian agriculture in 2017, according to Farm Credit Canada (FCC).

In its annual list of main industry drivers farmers should keep an eye on in the New Year, FCC said the loonie will impact every business across the entire agri-food supply chain in 2017. “Varying against the relative value of the American dollar, it can uniquely drive profits either higher or lower and is therefore our No. 1 trend to watch.”

To that end, FCC forecast the loonie in 2017 will pick up right where it left off in 2016: It will be a generally positive trend for Canadian agriculture, remaining below its 5-year average of 88 cents US, and hovering around 75 cents throughout the year.

“Watch the loonie in 2017. It could easily have the largest impact of all possible trends and drivers on the profitability of Canadian agriculture and agribusiness throughout the year,” FCC said. “It’ll certainly show up in the prices Canadian ag producers will get and ultimately, their farm cash receipts. A low loonie makes Canadian manufactured food products more competitive in foreign markets, and domestically, it’ll help shield Canadian firms from foreign competition.”

Meanwhile, FCC also compiled a list of four other drivers it believes will also impact Canadian agriculture throughout 2017.

  1. Energy prices

The West Texas Intermediate oil price benchmark is expected to remain around the US$50 per barrel threshold. Commitments to cut oil production by major oil producing countries strengthened the outlook for oil recently. But there are serious questions about the likely supply and strength of demand throughout the year.

  1. Commodity prices

With production growth and high ending stocks the big story for 2017, commodity prices aren’t likely to get much better for Canadian producers. Will lower commodity prices keep consumption and export demand strong enough?

  1. Investment landscape

The U.S. Federal Reserve chose to hike its key interest rate in December. Interest rates should rise both in the U.S. and Canada, but it’s the spread between the different rates that matters. With an outlook for this spread to grow slightly in 2017, how much investment potential will the Canadian economy hold?

  1. Global economy

The global economy will be a bit of a wild card in 2017. It’s going to impact demand for ag commodities. But as China-U.S. trade flows evolve, the question of their capacity to influence commodity prices and the long-term health of Canadian ag exports remains.


Source: DePutter Publishing Ltd.

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