Sunday November 23, 2014

Changing few of world food production

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As another spring drags on for Prairie farmers, hot days always seeming followed by days of cloud and rain there is a bit of good news for farmers.

“The USDA reduced the estimates for new crop US wheat production but left the world output about unchanged. They forecast a slightly lower world wheat carryout for 2014/15, while they also increased the feed grains carryout to 210.5m tonnes from 203.8 m tonnes this year. The numbers were seen as neutral to bearish,” reports

Following the record crops grown on the Canadian Prairies there had to be at least some concerns agricultural commodities could have taken a serious decline in terms of price based on world grain stocks.

Of course it may be a case where grain stocks, especially world production to use ratios, and expected crop carry-out from one year to the next are no longer the important market signals they once were.

There are trends at play which are changing the perspective of grain production in terms of price influences.

Today more countries are capable of producing grain beyond domestic use levels, which means excess, especially in good production years, hits the export market.

The world now has more sources for food grains, which means a weather pressure in major exporting countries such as Australia, the United States, or Canada, is seen as having a less dramatic impact on supplies.

The greater diversity within countries exporting also means stocks can grow tighter because the lag until the next harvest somewhere is now shorter. Some country which will be able to supply a market somewhere in the world will grow a crop, or at least that is increasingly the view.

The same vision means carry-out stocks can become tighter, because, again, some country will be harvesting soon enough to alleviate the tightness in stocks.

In terms of world food security the diversity in production is a good thing.

And there is potential for that diversity to grow, although it will take a different political approach on a very broad scale to happen.

There is little doubt many countries in Eastern Europe could produce more grain given the infrastructure and resources to do so.

One can only imagine what Canadian farm practices would do if they were possible to transfer to Ukraine, Poland and other countries in that region.

Many African countries are even further behind Canada in terms of not just in-field technology, but more importantly in a system to move and protect grains from being lost after harvest. If technology could successfully be transferred to many African countries world grain production could be greatly improved.

We often wonder how Canadian farmers can continue to grow production to feed a growing world population, but the answer to those needs long term lie in stabilizing our world and spreading the tech we enjoy among others.

In the short term indicators are relatively good for prices.

But the indicators behind the good news and the needs of our future are more important to consider.

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