The Prospect of Empty Grain Bins
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That the Prairies should be faced with the prospects of running out of crops - grains, oilseeds and special crops, to export within two years of harvesting a record setting crop is remarkable. It is all the more remarkable as elsewhere in the world stocks of grains and oilseed are mounting, in many cases to record levels.
Agriculture Canada November supply and disposition projections for all major crops - those combined, indicate that ending stocks this crop year will be the lowest in at least 24 years. This projection may be revised upwards in December, if Statistics Canada final production estimate is revised upwards. But the broad brush indication is that most farm bins will be empty before the 2016 crop is harvested.
Quite why Canada is running out of crops to export while the rest of the world seems to be otherwise challenged is not clear. This probably means there is no single or dominant factor is at play.
It could be a statistical aberration. Recent trends to the growing of lower volume higher value crops has naturally result in a decline in volume based measures of output, supplies and end stocks. However, stocks use ratios are declining which suggest this is not a major factor, see chart.continue
This same trend has found Canada moving "up market" in terms of end use. This would suggest that there is less competition as customers have fewer options in terms of alternative sources of supply at the top end of the market.
It may be that farmers are very competitive and able to accept lower prices than their competitors around the world. The lower Canadian dollar exchange rate must surely help, at least in the short term.
Farmers may be "letting off steam" in the context of their recently granted freedom to market following the demise of the single desk for wheat, durum and barley.
It could be a hangover from the handling of the 2013 crop. Farmers may be prepared at this time to discount their price expectations in order to avoid the line ups in the market place that they experienced a couple of years ago. Basis levels still appear lower than those before the 2103 harvest. And that discounting may make Canadian crops very competitive in offshore markets.
There may be little clarity in the reason for the prospect for empty bins. But there certainty is in the opportunity it presents - increasing output. This suggests increased investment in agricultural production. Recent experience suggests the marketing and transportation system are well able to cope with increased output. The backlog following the massive 2013 crop was soon moved.
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