Grain price prediction turns positive

“Falling New Zealand grain prices may finally be reaching the bottom of the cycle given prices this month,” says Ian Morten, Federated Farmers Grain and Seed chairperson.

For the first time since March 2008, grain and seed prices internationally have seen a levelling out. New figures for January 2009 indicates the price of wheat feed, barley feed, maize and straw have stabilised with no decrease since November 2008. Grain commodities were the first major commodities group to decline. Trends indicate that it may be the first commodities group to commence price recovery.

“The drop in grain and seed prices from October to early December painted a bleak picture, not just for arable crops, but for all commodities in general. Grain crops seem to be the proverbial canary in the commodities mine, yet current data emerging locally and internationally, may give cause for guarded optimism.

“January’s price indication may at last be a sign we have reached the bottom in what I can only describe as the most spectacular price implosion in my grain and seeds career.

“I caution that this is still very tentative. Yet I am increasingly optimistic that this seems to be the beginning of the end for the current negative cycle.

“Chicago analyst Dan Basse, of AgResource, told the Global Grain 2008 conference in Geneva in mid-November that commodity prices would bottom out in the first quarter of 2009. Last year’s soaring fertiliser prices meant farmers globally planted less grain in 2008 as margins were squeezed.

“However, the recent decline in on-farm input costs, such as fertiliser and fuel, will help to lift the market. I am now predicting grain prices will start recovering at the end of the current quarter.

“Anxious growers may be looking at their silo full of grain and wish they could be rid of it right now. Yet, with the price of wheat holding steady at $380 a tonne, growers need to be patient, as the grain market may not lift overnight, but indications are that it will lift.

“While the financial crisis has affected the price of all commodities, many countries have low carry over stock levels of grain and the world’s annual consumption is well above its annual production. I am certain we can expect to see prices gradually turn around.

“The news that grain crop prices may be on the increase will leave a sweet taste in farmers’ mouths following one of the most trying seasons for many years.

“Between the frosts that destroyed grain and seed formation during flowering last year, to the recent hail storm in North Canterbury that caused millions of dollars in damage and the dry conditions of the North Island’s east coast, arable crop farming has not been without its challenges,” Mr Morten concluded.