For much of the past six years, the global grain markets have lurched from one crop crisis to the next, keeping inventories low and food prices high.
Now, as harvest machines across the U.S. Midwest prepare to reap the nation's biggest corn crop in history, a sea change seems imminent, one that could transform the market. No longer will a constant a fear of scarcity drive prices. Instead, traders be battling for market share instead of scrambling for supplies.
But, warn experts, we are not there yet. At least one more trouble-free global growing cycle is necessary to safely put the past few years of uncomfortably high food prices behind us. Global stockpiles, while recovering, are still far from the 80-or-so days worth of demand that will keep panic at bay.
Chief among their concerns is that demand for cash crops could accelerate now that prices for things like corn and wheat have fallen by as much as half. Meanwhile, still-elevated costs for inputs like fertilizer, seeds and fuel may dampen some farmers' enthusiasm to keep the production throttle at maximum.
"We're not out of the woods at all," said John Baize, president of John C. Baize and Associates, an international agricultural trade and policy consultant.
"We're getting to where we have to have big crops almost every year or we've got problems because demand is just growing so fast."
This autumn's U.S. bounty follows massive crops in other key growing and exporting regions of the globe including South America and the Black Sea region, which have recovered from recent severe droughts that rattled international grain markets and fueled unrest in several import-dependent nations. The United States itself is just a year removed from its worst drought since the Dust Bowl days of the 1930s.
U.S. Department of Agriculture data due to be released later on Monday is expected to provide a punctuation mark for years of global crop woes, showing that U.S. stocks of corn as of Sept. 1 - before the current harvest now under way -- reached their lowest in 17 years. U.S. soybean stocks were expected at a nine-year low.
Bumper Crops, Still-Tight Stocks
For grain traders, Monday's data is already old news, with the focus firmly on USDA projections that this year's largest-ever global corn, soybean and wheat crops will result in a significant gain in next year's end-of-season inventories.
Soybean stocks are in the best shape despite a smaller-than-anticipated U.S. crop, thanks to record crops in South America. Global stocks by the end of the 2013/14 marketing year are projected at about a 69-day supply taking into account domestic use and exports, USDA data showed. End-of-season stocks over the past five years averaged just slightly less at 64 days.