Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Two other threats, than weather, ag investors need to follow

Twitter Linkedin

Bad weather isn't the only risk to crop supplies.

Sure, it is a big relief to prospects for world food supplies that the decline in estimates for South American harvests has, broadly, plateaued out as dryness in Argentina and southern Brazil has retreated.

Drought looks on the back foot, but not floored, in the US too following recent storms

But better weather, and even strong harvests, are not a guarantee of ample food supplies.

Logistical question

There is the problem of getting food to where it is needed, a challenge Brazil is demonstrating in spades.

The South American country's farmers have, by setting course for a record harvest, set Brazil up to overtake the US as top soybean exporter (having already taken the crown of top corn shipper, if you twiddle the figures a bit).

But that outcome looks in jeopardy unless Brazil gets its act together on shipping the crop. Queues of vessels waiting to load up with soybeans are now said to be 60 days' long.

And it may not get better for a while. In 60 days, Brazil will be well into the start of the new cane crushing season, bringing yet more agricultural commodity volumes to be squeezed through port bottlenecks at the likes of Santos – assuming the government has averted dockworkers' strike.

States of unease

Then there is the re-emergence of political risk, which could play either way for now.

The Arab spring is proving more than a one-season affair, as Syria's civil war attests to, besides the growing economic and political unease in Egypt, which could quell demand from the world's top wheat importer.

Importantly, there is a big threat to a big exporting country too, Argentina.

The country is in a financial mess. It faces the risk of its second default in 11 years, depending on how a court case in New York turns out.

And the administration of President Cristina Fernandez de Kirchner, facing mid-term elections in October, is looking to agriculture, a major source of export earnings and foreign currency, to keep a lid on the crisis.

Under pressure

The government is pressing farmers to clear out silos - rather than hoard as they have been doing, seeing crops as a hedge against inflation which is already running at some 30%.

It is also said to be considering the reinstatement of the National Grain Board as the sole buyer of Argentine harvests a factor causing deep unease among farmer groups such as the Sociedad Rural de Argentina.

In the short-term, it is tricky to know which way this will play in the markets. Government coercion could unearth a rich cache of crop supplies.

But in the long-term, punishing farmers will only undermine production. In Russia, for instance, one reason winter wheat sowings for 2013 fell short of forecasts was that farmers feared a ban on exports which would have driven prices lower.

Global implications

Indeed, just as it looks like Russia is closing the door on damaging government intervention in agricultural markets, Argentina seems to be kicking it back open.

When Argentina is the world's top shipper of barley, soymeal and soyoil, second biggest of corn (equal with Brazil on US estimates for 2013-14), and third in soybeans, that is something the world should be worried about.

By Mike Verdin

Twitter Linkedin
Related Stories

Corn futures revive as US cuts inventory forecast, citing strong ethanol use

US officials cut forecasts for domestic corn stocks by more than investors had expected. But data are not so bullish for soybeans and wheat

Brazil wheat imports to hit highest in years, says Conab, cutting hopes for domestic crop

Conab raises its forecast for Brazilian wheat imports, as it warns of a "severely compromised" Rio Grande do Sul crop

Buoyant prices lift French rapeseed sowings, with wheat area a little higher too

Plantings of rapeseed in the EU’s top growing country have recovered sharply ahead of the 2018 harvest, officials say in their opening estimates

Abares lifts hopes for sugar futures, but cuts its cotton price forecast

A downgrade to Australia curtails an upgrade in world sugar output expectations. But for cotton, Abares ditches ideas of a global production deficit
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069