Not-so-well known facts about world agriculture

I had the pleasure of attending the 2014 Cereals North America conference, in Winnipeg Manitoba to hear about global grain and oilseed markets, with a focus on “what lies ahead for world agriculture.”

The conference provided a wealth of information on crop production and quality, with excellent insights on grain and oilseed supply and demand fundamentals around the world. Speakers at the event challenged the audience to take a step back from regional issues and look at what’s happening around the world – a recurring theme in this blog. 

At conferences like this, I’m always drawn to the big picture information that challenges conventional wisdom. The potential of Brazilian agriculture is a good example.

The potential magnitude increased grain and oilseed production is a really fascinating fact. According to Pedro Dejneka from AGR Brazil, that country has the potential to increase its arable land by approximately 400 million hectares. This would represent an increase of 4 times the current area of arable land.

This increase in acreage wouldn’t be new land and doesn’t imply removing the rainforest; however, it would require transitioning land away from pasture use, which would be a lengthy transition for sure. The lack of proper infrastructure would also be quite restrictive and would impede farmers’ ability to move their product to market. Despite these challenges, realizing even a small percentage of the potential would significantly change the dynamics of supply and demand in world grain and oilseed markets.

We know that geopolitical events create trading or marketing opportunities because of price movements. Yet, evidence presented at the conference showed that crises very seldom impact grain and oilseed production. The recent crisis in Ukraine or financial uncertainties in Argentina haven’t resulted in changes to world grain and oilseed production. And this is something witnessed over time as well.

While geopolitical issues don’t influence production, they do influence sellers’ behaviour and thus impact world supply. This is currently being observed in Argentina, where farmers continue to hold production as a means to hedge against inflation. But the main direct impacts of geopolitical events are to create pricing volatility and influence marketing plans.  

The Cereals North America conference certainly offered good learning opportunities and stressed the importance to understand how connected the world of agriculture really is.

Craig Klemmer, Senior Ag Economist