Agriculture is a dynamic industry, and no single part of it operates in a vacuum. While this conference’s roots were more of a traditional market outlook forum, Grain World 2018 was a reflection of how every aspect of the agriculture industry is intertwined.
Markets are a perfect example of this. Often we think of markets in terms of today’s local price at the elevator, or what the corn futures price did last week. While those are a reflection of ‘the market’ in the here and now, it’s but the briefest of snapshots of the market as a whole.
Consider soybeans, which have been a primary focus for agricultural markets. Prices have struggled under the weight of a huge crop and impaired demand. Moreover there are projections for an enormous U.S. carryout for the 2018/19 crop year that will continue to weigh on the market. There are many moving parts that go into supply and demand, both in the short and long-term. Grain World kicked off with a discussion around trade. Soybeans have been ‘ground zero’ for the Ag sector in the U.S. / China trade dispute. Demand will struggle until there is some resolution, one that may prove to be elusive. At the same time, Canada has continued to move forward with multiple trade agreements. While the effects are not immediately perceptible to Prairie farmers, there will be benefits to the economy.
The heavy outlook for soybeans will other crops. Seeded area for corn and wheat is all but assured to increase in 2019, which in turn puts price pressure in those markets. As per usual, weather remains the biggest unknown factor for crop sizes. A likely El Nino could impact weather patterns on the Prairies, the U.S., South America and Asia.
While ‘traditional’ supply and demand factors grab the headlines, there are many other variables of monumental importance. Grain is worth what an end user is willing to pay for it, less the cost of getting it there. Logistics, at every point in the supply chain, affects this value. For example, wheat flows have been impacted by the emergence of Russia as a dominant exporter and their freight advantage into the many significant import markets.
The macroeconomic environment will also play a role on the price outlook. The Canadian dollar will remain range-bound, particularly as the U.S. dollar is going through a period of strength. Rising interest rates is another potential headwind.
Grain World 2018 delegates were also provided with insights on topics such as purchasing habits from the restaurant sector, the changing nature of outside investment in U.S. farmland, rapidly changing technology, and the growing need for strong cybersecurity in their businesses.
Murad Al-Katib, President and CEO of AGT Foods, wove these topics into an enlightening keynote address. From primary production to an evolving end user, Canada is extremely well positioned to capture enormous opportunities both domestically and offshore. However, the challenges are also great, and require a combination of innovation, collaboration, effective policy and investment. Grain World was a great forum where diverse elements of the supply chain had the opportunity to interact together and learn from one another.