Yesterday’s USDA’s, National Agricultural Statistics Services (NASS) report made minor revisions to their Dry Bean numbers primarily dropping planted acres by some 10,000 across the USA.  The overall averages suggest the following:  Output in 10 of the 18 producing states will be lower than a year ago.  This is primarily due to reduced acres (down ~2.3% on average) however average yield is forecast to be up slightly.  Averages can be deceiving since the ‘devil is in the details’.  Pinto beans the dominant US market class is forecast to see an 11% drop in production while Navy beans– White Pea Beans the second largest market class will see a jump of 13% in production.  Forecasts of production shifts for other market classes are as follows: Black Beans down 1.5%; Kidney beans –Light Red up 9% Dark Red up 34% Cranberry Bean up 11%

To see the entire report on all commodities click here

North America’s Dry Bean crop size continued to grow slightly into the tail end of the harvest (+~3%), based on better yields than a year ago.  Both the USDA and Agriculture Canada have slightly better numbers for dry beans. 

Meanwhile here in Ontario and elsewhere the market continues to lack a grower ‘board price’ at which producers can sell their “overage”.  This has its roots in more than just the proverbial ‘harvest pressure’ brought on by a rush of greater supplies.

All commodity markets are experiencing a meltdown after the now obviously unsustainable price spike of 2007/08.  Metals, energy, soft and fibre, as well as all grain commodities are down between 30 and in some cases +50%.  After running commodity prices up, the financial investment-adviser types are now lemming-like running, or being pushed through ever narrowing exit doors of declining prices. On the surface this is managing to destroy any semblance of value.  The current “flight to safety” (a.k.a. the US dollar and US treasuries) is inflicting collateral damage on commodity prices.  A ‘bullish’ (price positive) posture on the US dollar has an equal and opposite ‘bearish’ (price negative) impact for commodities (those things that go clunk when you drop them). 

Meanwhile real world downstream bean users are caught in a squeeze.  After having paid significantly higher prices to get acres planted they are now squeezed.  They are experiencing a lack of, or higher short term financing costs courtesy of the ‘global financial crises’.  As one wag noted:  “The problem is not demand, and it’s not supply …  It’s finding anyone who can come up with the financing to buy.” 

Furthermore manufactures will be expected to live up to long-term sales contracts with retailers made months or years earlier when commodity prices were lower even though they are saddled with partially high feedstock costs.  Users will of necessity manage those costs even more stringently in order to bolster margins.  They will seek to lower their average cost base of feedstocks.  This all to regain positive cash flows. 

So as a bottom line – Until (all) commodity prices can find an intermediate floor there may be no bean price on ‘the board’.  All commodity users will now wait to re-load their supply pipeline until a floor is found, or the pipeline is empty and needs recharging regardless of where the price is.

Once this overall tentative ‘commodity’ floor has been reached, bean prices will find their value, first; on their specific market-class supply and demand fundamentals and then their relative price to the other grains. 

An article in the Financial Post by John Greenwood, clearly shows why and how the problems of the current Credit debacle is curtailing grain trade and how it has contributed directly to where Ontario’s Dry Bean Market finds itself.   No “Posted Price” – consequently risk of ownership and potential lack of cash flow is starting to impact some producers.

The article contains quotes such as “The problem is not demand, and it’s not supply …  It’s finding anyone who can come up with the financing to buy.”  “Access to credit is key…”.  In an atmosphere of ‘drying up credit’, the last thing on nervous bankers’ minds is making fresh loans.

So the Ontario/Canadian dry bean market that relies heavily on the overseas export markets is caught in the same maelstrom of “…we can’t pay you until our customer pays us (or comes up with a bid price). 

Who then bears the financial risk and the cost?  Today, for Beans, it is the primary producer.

The majority of the dry bean growing region received between 2 and 4 inches of rain last week effectively bringing harvest to a halt, says Monday’s crop update from Thompsons.  It will be Tuesday at the earliest before combines will be able to roll in most areas.  Harvest ranges from 25-70% complete with the majority of areas somewhere around 55% complete.

Michigan’s harvest was also held up by rain, but farmers were back in the fields on the weekend.  It appears the scattered frost this past weekend had no effect on the late planted navy beans in the thumb. With over 50% of the crop now in the bin, progress will continue with the favorable weather forecast this week.

The Manitoba crop is at least 90% harvested with an average yield of 1600lbs/acre of generally good quality beans, says Thompsons. Read more of the story here