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.