The New Year is here and, in the spirit of a fresh start, I offer the following wishes for 2018.
The return of volatility
In my December CSD column, I left readers with an open question; Is low volatility in commodity prices a lump of coal in my stocking, or an unappreciated gift? I finally made a decision - low volatility is a lump of coal. Volatility and opportunity are opposite sides of the same coin. High volatility leads to greater opportunities, and we need more and better pricing opportunities in 2018.
But even as I state my case for greater volatility, a voice in my head is whispering "be careful what you wish for, it might just come true."
Common sense wins in the trade wars
Let me state my opinion clearly: trade is good. And I am not just talking about agricultural products – I consider the exchange of all goods and services to be a plus for all parties concerned. For the moment, let’s narrow the focus to products important to the good readers of Corn+Soybean Digest.
NAFTA talk is making me crazy. Mexico is a large buyer of U.S. corn, wheat and non-fat dry milk. And pork, and beef and cheese. Volumes are growing. When I speak to producer groups, I told them that, as we speak, there is a good chance that a shuttle train of corn is crossing the border to Mexico. That’s because the United States sends, on average, four unit trains of corn across the border, every day of the year.
In recent months, Mexico made several grain purchases from non-traditional sources (read “not the United States”). On paper, these purchases do not make sense because other sources are more expensive due to higher transportation costs. However, put yourself in the shoes of a Mexican buyer. Given the trade rhetoric coming from some of our trade representatives, only a fool would not work to develop a Plan B for alternative sources of grain.
Canada and Mexico are our neighbors, and they are good neighbors. Common sense must prevail in the trade wars.
A crop problem
Agriculture is into a fourth consecutive year of supply outrunning demand. Demand is good, but not good enough to overcome record or near-record crops from major grain producing countries worldwide. Early signs from the Southern Hemisphere are promising. Conab, the official Brazilian crop bureau, is currently forecasting lower grain production. Is it a disaster? No. For now, we must settle for something less than another record-breaking crop.
If the wish is for higher prices - $4 cash corn and $10 cash soybeans - somewhere in this world, we need a crop problem to upset the balance of supply and demand. And that voice in my head is again whispering, “be careful what you wish for.”