The more things change, the more they stay the same.’
There was no shortage of market moving topics to write about over the past decade, from the demise of the Canadian Wheat Board to the rise of tweet-based international diplomacy, but did anything really change? Grain and oilseed prices had their ups and downs, but are finishing the decade not that far off from the levels they started with.
Nearby spring wheat futures on the Minneapolis Grain Exchange closed out 2009 trading around US$5.50 per bushel. While that market briefly climbed above US$11 in the summer of 2011, a $1 range in the US$5 to $6 has been much more common over the past two years, with nearby spring wheat futures exiting the decade within a rounding error of where they began.
The Canadian canola market also held within a broad sideways trading range during the decade. The nearby futures were trading around C$465 per tonne in late December, which puts values right around the middle of their range over the past 10 years.
Corn, trading at just under US$4 per bushel in late 2019, started the 2010s at right around the same level. Corn rallied early in the decade, trading in the US$6- to US$8-per-bushel area from 2011 through most of 2013. However, what went up, came back down and corn has held in the US$3.50- to US$4.50-per-bushel area for the better part of the past five years.
The charts show a similar rise and fall followed by five years of stability for soybeans. Nearby soybeans, at about US$9.25 per bushel in late December, are actually closing out the decade at a slightly softer level than where they started.
While every year presents its own challenges and opportunities, a number of themes kept reappearing with only slight variations. There’s no reason to think those motifs won’t continue indefinitely.
The vagaries of the weather will always be a major mover for the markets, with both droughts and floods to keep generating headlines in the years ahead. Dryness and excessive moisture were features in 2019, sometimes in the same field.
While weather markets may never change, the 2010s did see a growing recognition of larger climate shifts brought on by human activity. What the climate crisis may or may not mean for localized weather patterns in the Canadian Prairies remains to be seen. However, regardless of the individual stance on the science, mounting consumer concern and resulting government intervention will likely take on a larger role in the broader agricultural markets.
As Canada’s grain sector is highly dependent on exports, transportation issues moving that grain were another perennial theme that should continue in the next decade. Challenges with rail movement came to a head in the 2013-14 crop year, and the system remains far from fixed despite some new legislation. The closing (and subsequent reopening) of the Port of Churchill is another transportation story still being written, while oil pipelines have an influence on grain handling as well.
South America was a big player in the international agricultural markets to start the decade, and became an even larger player as the years progressed. That southern influence will be important to watch going forward.
Brazil grew 50 million more tonnes of soybeans in 2019 compared to 2010, while corn production in the country has nearly doubled over the decade to hit an estimated 101 million tonnes in 2019. Argentina has also increased its agricultural output.
Other players are also taking a larger piece of the world pie. As an example, Russia grew 74 million tonnes of wheat in 2019, compared to 41.5 million in 2010.
Looking back over the past decade, a major market moving factor that came to the fore in 2019 was trade – and especially trade with China. The U.S. and China reached a tentative trade deal as this column was being written, but without any signatures on paper there is still plenty of uncertainty heading into 2020. Canada’s relationship with the major canola buyer remains in limbo, with developments on that front key to where prices may head.
Total Canadian canola exports have increased over the past 10 years, as production of the crop has also grown. It’s interesting to note that China accounted for about 20 per cent of the 7.5 million tonnes of canola exported in the 2009 calendar year. That share rose to nearly half of the 10.3 million tonnes Canada exported in 2018, but dropped right back to 20 per cent for the first 10 months of 2019.
Where Canada fits in with China’s future appetite for agricultural products remains to be seen, but perhaps a couple of nuggets of wisdom from Chinese philosopher Confucius may shed some light on the situation as we turn to a new decade.
Writing roughly 2,500 years ago, Confucius was an originator of a common theme in technical futures analysis noting that ‘one must study the past if they would know the future.’ He also wrote that ‘life is really simple, but we insist on making it complicated.’