With the exception of Brazil, where the decline in the country’s currency has protected profit margins for farmers against falling global dollar-denominated commodity prices, farmers around the world have been hoarding exceptional volumes of crops awaiting better prices.
The hoarding has tightened margins across the U.S., Canadian and European markets where merchants and consumers have had to pay higher prices for supplies, and were “clear in the softseed complex in Canada and Europe, where [processing] margins are down 40-50% from 2014,” said Soren Schroder, Chief Executive of Bunge.
It is believed that conditions will not change much in the short term, especially after seeing a drop in global canola output in 2015/16 to 66.6 million tons – a year on year decline of 5.1 million tons, according to the International Grains Council.
Hoarding cannot continue indefinitely however, as farmers need cash to meet capital expenditures for the next growing season, indicating that there may well be a wave of crop sales in early 2016.
The second round of presidential elections in Argentina, which is expected to bring further weakening of the country’s peso no matter who wins, is also expected to bring with it the release of soybeans onto the market by the country’s farmers in the first quarter of 2016 before the new crop.
Lynda Kiernan is Editor with HighQuest Group Media and of the Oilseed & Grain News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at firstname.lastname@example.org.