The Rural Voice, 2003-01, Page 20OUTLOOK 2003: CROPS
2003 markets
show some
bnojjancjj but
pitfalls lie
ahead
There is some buoyancy in the
soybean market but also some
big question marks: the biggest
being the acreage in South America.
Stocks -to -use ratios in the U.S. are
among the lowest in years.
supporting prices, Brian Doidge,
economist and market analyst with
the Ontario Corn Producers
Association told the Farm Business
Management Seminar in Stratford in
November.
But the U.S. is no longer the
dominant player in soybean
production. he noted. 2001 was the
first time ever the production in
soybeans in South America exceeded
the production in the U.S. This is a
significant long-term reality and the
U.S. will never again recapture its
predominant role in soybean
production. Doidge said. This has
significant long-term policy
implications. Exports from Brazil
and Argentina were up while U.S.
exports declined.
"The bottom line is. folks. North
America cannot compete on price.
We are no longer the least -cost
producer in the world. But we've got
a whole lot of folks in Washington.
Toronto and Ottawa who have to get
their minds around that. We have to
change policies."
Playing a significant role in world
markets is China which has the
world's fastest growing economy in
the last 15-20 years. Growth has
brought a strong growth in
consumption of protein. leading to a
tremendous surge of soybean
imports. Those imports are coming
not from the U.S. but from South
America. yet China is such a major
player in the market that it still
affects the market in the U.S. and
Cart• da.
There is expected to be a large
decrease in planted acres of soybeans
in Ontario in 2003 because of the
16 THE RURAL VOICE
tremendous surge in the acres planted
to wheat. It's estimated 1.1 million
acres would be planted to winter
wheat, with soybeans down to 1.8
million acres from two million. With
average yields for next year that
means there will be an increase in
imports which in turn means a strong
basis level for prices.
"As a producer you want prices to
be at that import basis all the time."
Usage by crushers in Ontario has
continued to increase meaning the
stocks -to -use ratio has continued to
decline.
The problem with strong prices in
North America is that it encourages
more acreage in South America,
Doidge said. so producers have to be
ready to act on good prices here as
prices have been the highest since
1999. Don't try to wait for even
higher prices, take the good price.
when it's available. He expects prices
to ease lower and hit a downside in
late spring.
In corn. the U.S. crop of just over
nine billion bushel level means for
the first time int five years the total
supply is less than 11 billion bushels.
The 2002 crop had the lowest yield
in six years and the stocks-to-trse
ratio is the lowest in the past seven
years.
But there are some weaknesses on
the usage side, Doidge said. For the
first time in the last 20 years the,U.S.
poultry numbers declined because of
problems with contaminated U.S.
poultry blocked out of the Russian
market, backing up the whole
inventory.
U.S. corn exports remain weak,
running about 15 per cent below last
year, leaving domestic use the only
strong point. Ethanol production is
helping domestic use with 67 ethanol
plants in operation and eight more
under construction. In 2002 860
million bushels of corn were used for
ethanol production to produce 2.2
billion gallons of ethanol — both
record numbers.
There will be continuous
expansion in ethanol production in
the U.S. he predicted. The U.S.
Renewable Fuels Standard in the
U.S. Energy Bill, calls for a target
production of three billion gallons of
ethanol by 2(X)5 and five billion by
2012, more than a doubling of
current usage. That would require 1.8
billion bushels of corn, with
predictions that corn prices will
gradually trend higher to reach about
$2.55U.S. per bushel by 2012.
"The U.S. isn't dumb. They know
they can't compete on prices on
world export markets in bulk
commodities. They've got five per
cent of the world's population and
they produce 20 per cent of the
world's food. They've got to do
something. They can't cut back on
production so what they do is expand
domestic useage for renewable fuel.
Corn becomes an industrial raw
material.
"What's really happening is the
U.S. Farm Bill is buying time to
expand domestic useage as the U.S.
eases out bulk commodity exports."
"Support to ethanol on this side of
the border is roughly half of what it
is on the U.S. side," said Doidge.
Stocks -to -use ratios in the U.S. are
at eight per cent. the third lowest in
the last 30 years. This has been
pushing up prices but not nearly to
the level that might normally be
expected under such tight supplies.
"2001-2002 stocks -to -use ratios of
all coarse grains around the world are
down," Doidge noted. "They're
approaching levels we haven't seen
since 1973. If we have any kind of
production problem next spring, feed
grain prices around the world stand a
tremendous chance of going sharply
higher."
If El Nino develops, it usually
dries up parts of Argentina and Brazil
and really affects South Africa and
Australia. It can make areas of south-
eastern U.S. wetter and the western
plains drier but generally in our area
it is a normal year, Doidge said.
Corn useage in Ontario remains
strong at about 300 million bushels
with a significant expansion of
industrial use. Feed corn is increasing
because the volume of western feed
grains has declined because of two
years of drought.
Doidge said he didn't see corn
prices either improving a lot or
dropping a lot from current rates. "I
don't seen an improvement in basis
so that tells you get rid of title to the
corn," he said.0