It is that time of year again, and of course this Christmas is so different than ever before. It’s usually a time when families get together, a religious celebration for some, a cultural celebration for others. However, this year with Covid 19 continuing to stalk our land, governments are encouraging us to stay home. The mantra is, stay home this year and you’ll have a better Christmas next year. We all know the terrible infection and death count numbers. World pandemics cannot be ignored, there is no convenience about any of this.
Needless to say, food stores are jangling this
Christmas as celebrations might be muted, but an overabundance of food seems to be part of our lexicon. However, we shouldn’t forget at this time the people less fortunate. With Covid impacting us every day, there are lineups for food, whether that be at an urban grocery store or a drive by food bank.
In this column we have talked about this before. As farmers, we are thankful for food to eat and are thankful for getting thru within this Covid economy. There are still big issues, for instance the large Cargill Beef plant near Guelph Ontario being shut down because of Covid issues. Everyone with beef animals in Ontario knows what that does to a market. On the other hand, grain farmers are enjoying some very good prices. At the end of the day, this world continues to grow, and a series of events came together late this year to boost prices so much higher.
At the Christmas break as I write this, nearby soybean futures are at $12.67 a bushel and nearby corn futures are at $4.49 a bushel, both healthy prices and so much more than they were last Christmas. There are many reasons why on this and we’ve discussed many of them over the last several weeks. China is still a big factor and their population and food demand continues to grow. Chinese soybean futures have also hit multiyear highs. Spot corn futures in the Chinese Dalian exchange are also a 15 year high.
What does this really mean? Forget the nuances of futures price dissection. Increasingly, I believe these unusual higher prices mean Chinese agricultural demand is as resilient as we’ve ever thought. Sure, the past Trump administration thru a wrench into the mix in 2018, but if we dial down, it’s all coming back and more. That doesn’t dismiss the incredibly damaging trade action between the US and China since 2018. It only means that with the Chinese population growing and such a large base, demand for food keeps increasingly. At the end of the day, that food demand has to be serviced and whether it’s from Brazil (largely) or the US (less so), it has to be serviced. Our futures market is simply reacting to the reality that Chinese agricultural commodity demand is extremely dynamic.
When you think of food demand in China think about hogs and soybean demand. Then push past that and think about what that means. China is home to about half the world’s hogs, which produces about 50 million tonnes of pork per year. Think of the amount of corn that would take? Think about a rising populations with bigger economic growth numbers and it only stands to reason, more and more is needed. African swine fever might have taken out millions of hogs in 2018, but according to the Chinese ministry of agriculture and rural affairs, it will be fully recovered to fully recover in the first half of 2021. In fact, at the present time, the Chinese are 90% there. Add in all the other in-betweens on food demand and it means China is key to farm prices in North America as we look forward.
It also can be seen in obesity rates in China. According to a recent report from the Chinese Health Commission 50.7% of Chinese are overweight, Obesity rates have swung from 2.2% in 2002 to 16.4% in 2020. What’s that mean? It means they are getting more and more like us when it comes to food demand. It means if the trend continues, they will need even more agricultural commodities in the future, especially with their own limited domestic agricultural capacity.
It will continue, not only there but in places like Bangladesh, Pakistan and India. Then there is Africa, where eventually when Covid leaves and economic growth rates increase, there will be even more food demand. However, that will likely unleash a huge African production potential in futures years.
What’s this all mean for Ontario and Quebec farmers? Well, its long term good, but for now, why don’t we just be thankful for that, as well as the abundant food in front of us. From the flat farm country north of Dresden Ontario, I want to wish you all, a very Merry Christmas and Happy New Year.