And this fall the supply of cereal grains and oilseeds certainly appears destined to tighten significantly.
We are of course aware of the impact of the long hot, dry summer has had on crops on the Canadian Prairies. We have seen the stunted crops in the fields and experience told us yields were going to be down.
Now, as harvest is beginning, that is being confirmed by how much crop is coming off the fields.
The United States Department of Agriculture, (USDA), recently chopped its Canadian wheat and canola production estimates.
And in this country we’ve already seen government acknowledge the drought situation with programming dollars already announced to help producers deal with the financial impact of lower than anticipated production.
If it were just Canada impacted this year it would cause a ripple in terms of supply and demand since this country is a major exporter of cereals and oilseeds.
But the impact of weather is hitting more than Canada.
The USDA has recently cut its crop production estimates for two of the key American crops. The government department has stated corn and soybean production will be smaller than previously anticipated because of dry soils in key western growing areas.
Drought has also hit Kazakhstan lowering that country’s wheat production estimate for 2021.
Reports also point to weather-related harvest issues in the European Union which has producers there facing reduced prospects for wheat and barley harvests.
Interestingly, in a related sense, coffee prices may be going skyward too because of frost hitting that crop in Brazil, another weather impact on supply, and since Canadians love their coffee we can well-understand the demand side.
When you look at major production areas which include Canada, the US, the EU and Kazakhstan, all facing production lower than anticipated, the message to the market has to be tightening supplies, and that generally means prices heading upwards.
The more data that comes out as harvests continue, the tighter supplies may be, and the greater the surge in prices.
It will be a situation that will certainly mean some good returns for those producers who were lucky to get a rain or two to help yields.
But, what higher prices do much for the general farm sector is less easy to anticipate.
