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The impact of 2018’s big events on agriculture

Several developments in 2018 will impact the future, and grain markets, for years to come

Many things happened in 2018 that history may eventually define as the events that influenced a major shift in the course of history or world commerce. Here are some events I think fall into that realm.

Global politics

The battle of words and show of force between the U.S. and North Korea over nuclear armament. Were the talks and threats enough to lead to long-lasting peace and reconciliation in the Korean peninsula or will this only push the North Koreans further down the road of nuclear armament development, forcing yet another show down with the rest of the world?

Russia’s advance into the Crimean region. Was this the start to the rebuilding of the New Soviet Union under Putin? Some believe so. The concern is only U.S. intervention can keep Putin in check, and Mr. Trump doesn’t seem to be too worried about Mr. Putin’s plans. Only time will tell what if anything may come from this.

The trade dispute between the U.S. and China. China has started to look elsewhere for goods it traditionally bought from the U.S., including soybeans. If these disputes linger, how will this change supply and demand dynamics? If this is resolved will China go back to buying as many U.S. beans as they did prior to the dispute? Many believe they will not, as they do not want to rely on just one source. Now that China is actively buying from South American locations, you can expect that will continue.

If demand for U.S. beans drops, what other crops will U.S. farmers plant? Corn, wheat, canola and or pulses are the most likely options. How could a potential shift in U.S. acres impact Canadian grain markets?

Unless the U.S. ethanol industry is reborn to consume and offset the anticipated increase in corn production from extra seeded acres, there will be more feed corn available for sale and the closest market is western Canadian feedlots. This would put a cap on prices for western Canadian growers. As the price of feed barley goes, so goes the price for malt barley.

If U.S. producers were to shift more acres from beans to wheat how could that affect Canadian producers? World wheat production and supply numbers are still at historically high levels and with the Russian and Ukraine regions increasing their production.

Since the ICE wheat futures contract was cancelled earlier this year due to trade inactivity, U.S. wheat futures contracts are the only futures markets Canadian producers can use to hedge risk when growing wheat. Currency fluctuations can have a big impact on profitability.

Merger mania

Mergers in the big chemical and seed company industries. We are seeing a mass consolidation in the global seed and chemistry businesses. This should bring new genetics and traits onto the marketplace, but will that mean better farm profitability?

Over the last 20 years as these companies took over in the world of seed breeding and development, Canadian federal and provincial crop breeding programs have been slowly wound down to the point where there are fewer varieties of grains being developed and grown in Canada.

These companies are developing new varieties and offering these genetics for sale around the world. Any advantage that Canadian producers may have had from grains developed for use in Canada will not last much longer.

Will we see further government funding reductions for plant genetics and breeding programs in Canada? Will the Canadian government try to get out of this business altogether because private business is taking over, much, I fear, to the detriment of Canadian farmers?

2018 has been a very interesting year with many big picture events taking place. When planning for the future it is going to be even more important to pay attention to what your financials on your farm are telling you. Know your cost of production and breakeven numbers. The world is getting more competitive and the best way to stay profitable in this business is to be sharper on the pencil than the next guy.

About the author

Columnist

Brian Wittal has 30 years of grain industry experience and currently offers market planning and marketing advice to farmers through his company Pro Com Marketing Ltd.

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