Compiled 04/11/2021
Commodity Tracker: 5 charts to watch this week
10/08/2021
Topic: August 2021 commodity charts
In August of 2021, tight global supply and market conditions led to high European gas prices, with EU gas stocks at just 58 percent full at the time and many wondering if storage sites will be sufficiently filled to sustain Europe during the winter. In the US Northeast market area, winter gas prices rallied at an all time high following concerns over flat production from Appalachia and lagging regional gas storage inventories. In Iran, Ebrahim Raisi’s inauguration as President came after conflicts between July and early August, with Raisi supporting a return to negotiations with Western European and North American powers regarding nuclear talks and resurrecting Iran’s oil sector. In Russia, 50.2 million megatonnes of wheat were harvested between the start of the 2021-2022 marketing year and August 3, while as of July 29, 1.7 million megatonnes were exported. However, S&P Global Platts Analytics decreased its estimate for Russia’s wheat output for 2021-2022 to 80.2 million megatonnes, citing the decline in the winter crop area. Finally, the Electric Reliability Council of Texas (ERCOT) approved 590.4 megawatts of new generation capacity for commercial operation in July.
Weather shocks in Brazil ripple across global commodities
18/08/2021
Topic: Drought and cold weather impacts Brazil’s farming belt
Brazil’s farming belt braced for the cold weather and dry conditions promised by the La Nina weather phenomenon that was to follow shortly after “the worst drought in nearly a century” experienced by the country. The inhospitable weather conditions simultaneously led to a sharp spike in prices for coffee and sugar in international markets and gave bullish corn traders “further fuel.” Initial estimates of production losses for next year’s crop of coffee vary between 10 to 50 percent, which in turn has pushed up prices. Similarly, corn growers were affected by the drought and frost, with many cutting their Brazil corn production numbers as a result. For the livestock feed industry, a corn shortage has forced the industry to rely on imports, with normal overseas purchases of about 1 million megatonnes expected to increase to 3.5 million to 4 million this year. Orange and sugar output is also expected to be impacted by the frost. Some scientists, such as Lincoln Muniz Alvez at the National Institute for Space Research, have linked the recent drought to the deforestation of the Amazon rainforest, while agricultural experts are concerned that the recurrence of La Nina may push the drought conditions into the new year.
What the soaring cost of breakfast may signal for global food price inflation
28/05/2021
Topic: Price surge in raw materials for breakfast staples related to the pandemic
Since the pandemic began, the cost of raw materials used in producing breakfast staples has soared, with many concerned that a commodity boom may push up global food prices for consumers. Culprits of these rising prices for agricultural products include dry weather in key exporting countries, strong demand from China, and government stockpiling of grains following the outbreak of the pandemic. Butter, coffee, milk, sugar, and vegetable oil prices have surged, while futures prices for white corn and rice have increased drastically. As a result of this increase in costs of raw materials, food companies such as Nestle and Unilever announced price increases earlier in the year. Significantly, The Baltic Dry index hit its highest point in more than a decade. For countries such as Egypt and Pakistan, who import a large share of their food, a spike in shipping costs has also added to ingredient prices.
China hog stocks shed $75bn after swine fever recovery and ‘peak pork’
01/09/2021
Topic: China’s recovery and low demand for pork following swine fever
Following massive losses from African swine fever, a resurgence in pork supplies in China has cleared approximately $75 billion of the country’s pork-related equities. The outbreak, which first occurred in August 2018, had just about halved the size of China’s hog herd in 2019, and although supplies have risen and officials have stated that China has fully recovered from the impact of the outbreak, Chinese hog futures dropped more than 50 percent since they first began trading this year. Darin Friedrichs, an analyst at Shanghai-based StoneX, noted that China has “‘entered a period of structurally lowered demand’” after high prices for pork led many Chinese consumers to turn to other proteins.
Rising wheat prices make pasta and bread expensive
09/09/2021
Topic: Surging wheat prices and tight supply impact bread and pasta production
A tightening wheat supply across Russia, Canada, and the US and increased wheat prices have meant that end products such as bread and pasta have become costlier for importing countries. The USDA lowered world wheat supply estimates for the 2020-2021 marketing year by 16.8 million megatonnes to 1.066 billion megatonnes. Meanwhile in Russia, wheat output was reduced by 12.5 million megatonnes to 72.5 million megatonnes as a result of a probable smaller winter wheat harvest due to frost between February and March. In Canada, wheat production was lowered by 7.5 million megatonnes to a ten-year low of 24 million megatonnes as a result of drought across the Prairies in July. In the US, wheat production went down 1.3 million megatonnes to 46.2 million megatonnes as a result of similar drought conditions between July and August. Globally, export prices of wheat have increased between 21 percent and 30 percent, generating higher prices for end products for major wheat importers such as Egypt, France, Italy, and Turkey. Egypt proposed to increase subsidized bread prices, which have been fixed for 20 to 30 years. Packaged pasta prices in France are likely to rise an average 10 to 20 percent due to increased durum wheat prices. Italy, who imported nearly 2 million megatonnes of durum wheat from Canada and the US in 2020-2021, may have difficulties meeting its requirement in the 2021-2022 marketing year. Turkey, which sources almost half of its imported durum wheat from Canada, also faces shrinking sources. In the US, a significant increase in bread prices has been seen. As for global durum wheat supplies, according to the USDA, both Canadian and US durum wheat exports plummeted to the lowest since the 1964-1965 marketing year. However, Mexico and the EU gained the chance to increase exports in 2021-2022, with Mexico’s wheat production forecast having gone up 9 percent higher at 1.3 million megatonnes and the EU’s production forecast up by 7 percent to 7.7 million megatonnes. In Russia, a smaller winter wheat crop is partly offset by a larger spring wheat output and significant carryover at the end of 2020-2021, but Russia’s floating export tax on wheat may cost its market share to the EU and Ukraine. Finally, in regard to price outlooks, Australian prices have risen nearly $60 per megatonne; Ukrainian quotes have risen over $70 per megatonne on the year; Russian quotes have risen nearly $90 per megatonne on the year; and Canadian quotes have risen over $40 per megatonne on persistent drought and negative harvest outlook.
It’s been nearly 20 years since inflation has been this high in Canada
20/10/2021
Topic: Canada’s inflation rate surges to a new nearly 20-year high
Higher prices for transportation, food, and shelter have led to Canada’s inflation rate rising to a new 18-year high of 4.4 percent in September of 2021. According to Statistics Canada, the transportation index has risen by more than 9 percent, gasoline prices have risen by almost 33 percent, and the prices for new cars have risen by 7.2 percent in the past year. Meanwhile food costs have surged by 3.9 percent and shelter costs have surged by 4.8 percent. Policymakers’ initial downplay of the threat of rising prices as a result of the pandemic and its impact on demand has been contradicted by many economists, who are inclined to think that high inflation may last longer than policymakers initially thought.
13/10/2021
Topic: CFA and others develop a National Workforce Strategy for Agriculture and Food and Beverage Manufacturing
The Canadian Federation of Agriculture (CFA) is partnering with Food and Beverage Canada, the Canadian Agricultural Human Resource Council, and the Future Skills Centre to develop a National Workforce Strategy for Agriculture and Food and Beverage Manufacturing in response to chronic labour issues in agriculture. The two-year project “will establish an actionable roadmap to lead the way in addressing workforce and skills shortages in agriculture and the food and beverage manufacturing industry.” The first year will collect information on existing programs and services, identify gaps, and recommend new programs and tools; the second year will develop the project.
23/10/2021
Topic: Critics claim Canadian food inflation figures incorrect
After collecting data on the prices of three food sources (evaporated milk, peanut butter, and butter), Melanie Morrison, who runs Saskatoon-based company BetterCart Analysts, has argued that “Statistics Canada’s efforts to track food price inflation data may require a rethink,” raising concerns over the validity of much of Statistics Canada’s data in the wake of Canadians’ tightening food budgets and low fixed incomes. Morrison also states that container sizes are not being accurately reflected in some cases, which means that the amount of food for the price may be shrinking. Morrison claims that her company is able to track real-world food prices “more comprehensively than Statistics Canada to help grocers make what it calls ‘data-driven decisions in real time.’” Statistics Canada relies on data from three chains it “partners” with but the names of which have not been disclosed due to “corporate confidentiality,” according to Heidi Ertl, director of consumer prices at Statistics Canada.
European Corn Risks Being Left in Fields as Gas Crunch Bites
27/10/2021
Topic: Gas shortages may risk European corn crops
French corn farmers are being told by gas suppliers to prepare for shortages, to use less of the fuel, and even to postpone collection if possible, while in Ukraine, increased energy prices have meant a slower harvest to offset expenses. However, if harvested too late, this puts European corn at risk of deteriorating crop quality and reduces farmer incomes. As of October, Ukraine has harvested about a third of its corn, while France has harvested about 32 percent.
Compiled 25/11/2021
Farmers devastated by B.C. floods return to gut-wrenching scenes
25/11/2021
Topic: Farmers face devastation after BC floods
After heavy rains beginning on November 14, 2021 led to massive flooding across British Columbia, farmers were and continue to be faced with “an agricultural disaster.” In the Fraser Valley, multigenerational farmers “watched their family businesses go under, along with their homes, have also been left to deal with catastrophic mortality and biohazard risks from animals caught in the flood.” BC is currently working with Ottawa to develop an agricultural recovery program.
Farmers’ anti-trust suits against Big Ag seek $1 billion, injunction so FBN can sell online
19/01/2021
Topic: Farmers’ anti-trust suits against Big Ag seek $1 billion
At the US district court, two antitrust suits would void contracts throughout North America in order for San Carlos, California-basd Farmers Business Network (FBN) to sell chemicals and seeds online. It is claimed by the plaintiffs that the ag defendants keep prices high by restricting access to the network. The first complaint for the estate of Jefferson County farmer Michael Piper was filed by Attorneys George Zelcs of Stephen Tillery’s firm on January 8. Zelcs “proposes to certify a class of all persons who bought a crop input manufactured by a defendant from a defendant since 2014. . . [and] proposes to certify a class of all persons who bought a crop input manufactured by a defendant from a retailer other than a defendant.” BASF, Bayer, Corteva, and Syngenta were named as manufacturer defendants, with the suit alleging that they controlled production of 85 percent of the seed market, more than 90 percent of cotton, and more than 75 percent of soybeans. Cargill, Univar Solutions, and Winfield United were named as wholesalers which accounts for 70 percent of sales volume, according to the suit. CHS, Farm Supply, Federated Cooperatives, Nutrien Ag Solutions, Simplot, and Tenkoz were named as retailers, with the suit claiming that the manufacturers only allowed authorised retailers to sell crop units. The suit also claims that more than 12,000 farmers signed up with FBN for objective performance data and 6,000 signed up for a platform designed to sell crop units online. Moreover, Zelcs states that in 2016, CHS “sent farmers a letter attempting to discourage them from using FBN,” while in 2018 the network purchased Yorkton Distributors to neutralise the “boycott” initiated by Syngentia, which initiated an audit to identify and punish retailers who made sales of branded inputs. Manufacturers that supplied crop units to Yorkton were then allegedly threatened with retaliation by wholesalers and retailers; as a result, manufacturers agreed to boycott Yorkton. The network began to develop products it can sell to farmers from its electronic platform in an attempt to address the lack of input. Zelcs writes that Canada’s bureau of competition is investigating defendants, and Zelcs asks for a permanent injunction and triple damages of $999 million under the Clayton Act.
Compiled 07/01/2022
Warm, Dry Conditions Threaten U.S. Plain Winter Wheat Belt The Crop Goes Dormant Over The Winter
20/12/2021
Topic: US Plains’ winter wheat yield prospects threatened by warm, dry conditions
As global supplies of milling wheat tighten, the US Plain’s winter wheat yield prospects have been threatened by dry and unseasonably warm weather conditions. The Department of Agriculture estimates that when the 2021-2022 crop year ends, world wheat ending stocks will be the smallest in five years. In late December, the US Drought Monitor demonstrated that 46 percent of Kansas was abnormally dry and that 6 percent of the state was in severe drought. In other key wheat states, including Colorado and Oklahoma, conditions were worse, with Colorado sitting at 68 percent in severe drought and Oklahoma at 29 percent in severe drought. Meanwhile, warm temperatures have accelerated the evaporation of moisture from soils, with 111 maximum temperature records being broken in Kansas between November 25 and December 4, states Kansas State University meteorologists.
Record Brazilian Soybean Crop Pressures Prices
29/12/2021
Topic: The collapse of the grain market in 2021
Al Kluis documents the collapse of the grain market in 2021. Beginning with soybean prices being driven from over $16 a bushel to below $12 a bushel, Kluis states that there are three reasons behind this drop. One, large corn and soybean crop yields in 2021 resulted in larger than expected production, with US farmers striking a record corn yield and one of the highest soybean yields ever despite the dry, hot summer conditions. Two, China’s record corn crop, large wheat crop, and large drop in hog numbers meant that there was a reduction in Chinese demand for soybean and corn imports from the US. Three, Brazilian farmers planted at a near-record pace, thus there is the potential for large soybean and corn crops in Brazil this year, with the potential to produce 800 million more bushels of soybeans than the US if favourable weather conditions continue. Moving on, Kluis points out three market signals that may indicate that soybean and corn prices have bottomed or are heading higher. One, basis levels improved and the bull spreads started to work when the soybean and corn markets turned higher in the first 2021 quarter, leading both markets to switch from a carrying charge market to an inverted market. This signalled both a major trend change and a bull market, though as of December 2021, the markets were in a carrying charge mode. A sustained rally will be challenging to forecast until this changes. Two, if prices stabilise and move into a sideways trading channel, then this sets up a base that can launch the next uptrend. Kluis anticipates that prices will turn higher by late 2022. Three, the first monthly close above the two previous months’ high should be considered. Ultimately, Kluis argues that the possibility of soybeans returning to over $15 a bushel in 2022 is not impossible but is unlikely, as “the current change in global fundamentals suggests global soybean stocks are expanding.” In terms of weather, Kluis argues that if the central US or Brazil develop weather problems in 2022, he “can target a rally back to $13 to $13.80. If that bullish weather pattern develops, then you will read a lot of wild price forecasts calling for $15 (or even $18) soybeans.” Kluis recommends selling the last of 2021 soybeans on any rally into early May, as this strategy worked well in 2021 and should work well again in 2022.
Uk farmers braced for spring fertiliser crunch after prices triple
02/01/2022
Topic: UK farmers prepare for spring fertiliser crunch
After fertiliser prices almost tripled and supplies were cut, UK farmers are preparing for a fertiliser crunch in spring. The reduced use of crop nutrients are expected to affect the productivity of vegetable, dairy, livestock, and some arable farmers. Ammonium nitrate fertiliser, the main product used to boost crop growth, saw increased costs due to surging natural gas prices and temporary closures of UK manufacturing plants. Though farmers have cut back on chemical fertilisers to reduce their environmental footprint, ammonium nitrate and alternatives such as urea remain crucial to most arable, vegetable, dairy, and livestock farmers, who use the product to grow grass for their animals. According to The Andersons Centre, a farming consultancy, spot prices for standard ammonium nitrate fertiliser stood at £213 a tonne in October 2020 and £615 a tonne in December 2021. Urea, phosphate, and potash fertiliser prices almost doubled over the same period. While surging wheat prices will compensate some arable farmers for the increasing cost of fertiliser, this also depends on the timing of fertiliser orders, says Michael Haverty, a partner at The Andersons Centre. According to Jo Gilbertson, head of fertilisers at the Agricultural Industries Confederation, the UK imports 60 percent of its fertiliser requirement. The US group CF Industries, which is the only producer of ammonium nitrate in the UK, shuttered its two plants in September as a result of natural gas price rises making them unviable. Though one plant at Billingham was reopened with government funding to enable carbon dioxide production, CF’s agreement with the UK government ends in January. The second plant in Ince has not yet been reopened.
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