A LOOK AHEAD TO THE 2011 MARKET; WHAT CAN GROWERS EXPECT TO SEE AND WHAT SHOULD THEY WATCH FOR?
as we ring in the New Year most farmers aren’t thinking about making resolutions, but they are likely making plans for the coming crop year. The winter months are a time to order seed, fertilizer, plan crop rotations and think about all the ‘what ifs’ that come with farming.
No one can predict the weather, market and growing conditions, or the economy but Ontario Grain Farmer sat down with three representatives from exporting companies and asked them to make predictions for the 2011 IP soybean market. “We just don’t know what will happen,” said Sue Robert, who is responsible for the Japanese market with Thompsons Limited and chair of the Canadian Soybean Exporters’ Association. And she’s right; there are so many variables in the IP market that determine price, grower premiums, supply and buyer interest.
These exporters work with overseas buyers and Canadian producers every day and although they can’t predict what will happen in the coming year they were able to give us some insight into the IP industry and where they think it might be headed in 2011.
recovering from an oversupply
“Buyers are very cautious right now,” says Robert. “Meaning, they aren’t likely to purchase what they can’t sell and are carefully watching prices.” High IP soybean yields in 2009 resulted in an oversupply and some of that crop can still be found in warehouses. The oversupply created a marketplace where “buyers were able to pick and choose what they liked based on quality and price,” says Richard Smibert, president of London Agricultural Commodities Inc. And it appears buyers continue to have the ‘pick of the crop’ along with a cautious attitude when booking their purchases of the 2010 crop.
All three exporters agreed IP soybean acres are likely to be stable in the coming year. An increase in acres attributed to the oversupply of the 2009 crop and Carl Boivin, commercial manager with Bunge Canada predicts IP soybean acres are likely to be consolidated to rationalize the supply.
the promise of premiums
“Grower premiums reached an all-time high in 2009 and we aren’t likely to see them that high again in the coming year,” says Smibert. In fact he predicts lower premiums for growers in 2011.
A strong Canadian dollar combined with high soybean prices is likely to reduce the percentage increase of premiums growers have been accustomed to. “Strong commodity prices make IP premiums appear less attractive,” says Boivin who points out that while growers aren’t too happy about reduced premiums, buyers are in a position right now where they can easily go elsewhere to purchase IP beans at a lower price. And Smibert supports Boivin saying the strong Canadian dollar hurts grower premiums and makes Canadian soybeans less competitive.
hope for economic recovery and watch out for competitors
The Asian markets are still the top buyers of Canadian IP soybeans. “Japan is one of our main markets with a stable, inelastic demand for our beans,” says Boivin who also predicts that overall demand in 2011 will likely be lower than previous years. Demand could be higher in the Asian countries but the economic situation overseas plays directly into purchasing power, and their economies aren’t healthy. “The Asian markets still haven’t recovered from the economic downturn,” says Robert. “Consumers just aren’t optimistic so they aren’t spending disposable income.” An economic recovery in the Asian markets could go a long way to strengthen their buying power of Canadian IP soybeans.
Canadian soybeans have an advantage within the highly competitive market with its superior reputation and high quality product but we can’t get too comfortable says Smibert. “Our number one competitor, the US could be a big problem,” he continues saying he’s seeing US growers showing a lot of interest in the IP market and becoming very organized.
And while we may need to keep an eye on overseas economies and watch out for our competitors, it’s just as important for Canadian growers to lookout for their own operations by organizing and planning for the upcoming growing season. •