Farmers urged to watch world trends

Five factors in grain crop ‘hedging ’says analyst

The outlook for the grains market over the next

Wayne Gordon

12 months is optimistic, but farmers are urged to keep a close eye on some major world trends before committing hedging plans for the 2011/2012 crop.
That was the word from Rabobank senior analyst, economics and commodities, Wayne Gordon who was the keynote speaker at the Hart Field-Site Group’s Getting the Crop In seminar in Clare recently.
Mr Gordon said there were five key factors for grain growers to watch over the next 12 months including the La Nina weather forecast, prospective grain plantings in the United States, drought conditions in the US mid-west, the Russian export ban and oil prices.
He said these five factors could act as a checklist for farmers wanting to make informed decisions on hedging of their grain crops for the forthcoming seasons.
“Some of these markers will be reached in the next three months and that will give growers a general view as to how they should think about their hedging strategy over the next 12 months,” Mr Gordon said.
“Using these five key indicators gives them an ability to check things off, they are key indicators of how prices will go in the next year and farmers need to be aware of those turning points if they’re hedging their crop. It’s a good checklist to follow to make sense of the trends.
“The sixth thing they should really factor in is that input costs are rising again so they have to keep their attention focussed not just on the grain prices, but also the cost of production because those prices are rising.”
Mr Gordon said he expected grain prices to remain positive in the coming year.
“My view of the grain market is another 12 months of circumstances not that dissimilar to the last 12 months,” he said. “Stocks are tight and we’ll be looking to rebuild stocks to more comfortable levels. These conditions have high volatility but are somewhat elevated. We’ll need one more crop globally to see where prices will end up.
“If all goes well, wheat prices will track around $7-$7.50 a bushel toward the end of the year.
“Good returns will be made at these prices and that’s really optimistic.
“We’ve had a good, wet start to the year, we just need a favourable spring and people should have another year of good, positive income gains.”