CANADIAN Wheat Board director Neil Townsend says grain prices are likely to remain subdued heading into the 2014-15 Australian harvest, with few worldwide indicators hinting at higher returns.
Mr Townsend, who visited Australia as a guest of Rabobank, said the United States' ethanol mandate had "completely changed" the face of grain production worldwide.
"As we entered the 2000s, the ethanol mandate in the US said 10 per cent of fuel had to have ethanol in it, and this led to price increases in soybeans and corn and competition between corn and soybean acres in the US," he said.
"This also produced an increase in South America in soybean and corn production.
"The Ukraine didn't traditionally grow very much corn, but they are now a big producer and exporter, accounting for 14pc to 15pc of world exports for corn."
Mr Townsend said China had produced "more and more corn" and had doubled production since the early 2000s.
"Where I'm from, Manitoba in Canada, corn and soybeans had historically never been grown before," he said.
"For the first time ever, this year more than 1 million acres went in."
Mr Townsend said there had been a significant acreage in South America put to corn and soybean crops – that had not been sown to anything 15-20 years ago. Other countries had swapped wheat or barley crops for soybeans and corn.
He said the situation gave an excellent indicator to crop prices this year.
Mr Townsend said there were some factors which could lead to higher prices.
"We have geopolitical issues, with Russia and the Ukraine fighting and a myriad of tensions in the Middle East," he said.
He said another factor was if there were major issues in South American crops.
"The final factor, and one we have the most hope for, is probably the most obscure, – some unexpected demand," he said.
Farmers growing durum wheat this season could benefit.
"There has been very poor weather conditions in Italy and France, so there is an issue with a supply of quality durum in the European Union," Mr Townsend said.
"Also in Canada, there's been a very significant rain event, which has affected the quality of durum crops."
* Full report in Stock Journal, August 28, 2014 issue.
Paula Thompson
Stock Journal's markets editor.
Stock Journal's markets editor.
