Following the trend of the last decade, financing for grains commodities will continue to be readily available next year. As liquidity remains high and interest rates remain low, financing risk should also remain low.

“In the last decade, we’ve had tremendous amounts of liquidity on a global basis,” said Terry Barr, senior director of CoBank’s Knowledge Exchange Division. “The central banks have made significant infusions into the financial markets. The last decade has been a very atypical period with near zero interest rates and very accommodative central banks across the globe.”

Commodity Supplies Continue to Grow

The last few years have also been characterized by significant increases in supplies of all grain commodities, as growing countries continue to expand operations. The United States, for example, has had three record-breaking corn crops since 2008, and is expecting another record crop this year.

A larger supply drives commodity prices down, as has been seen in U.S. corn marketing with its 2013/2014 corn crop. The price dropped more than 30 percent in 2013, and has dropped another 20 percent this year. This trend, coupled with plenty of available capital, means the cost for importing grains over the next eight to 12 months will be low.

The Transitioning Market

Looking toward the future, expectations are that the competition for capital will increase as markets normalize from an unusually long period of high liquidity and low interest rates.

As interest rates rise to this new normal, financing risk will increase along with costs. However, these costs are not expected to outweigh the total value of lower prices from growth in commodity supplies.

“Once we get to a transitioning period with these commodity markets, I would expect to see increased costs going forward,” Barr said. “But it’s certainly not going to reach a magnitude that is going to offset all the benefits that would occur to the importer from lower grain and oil food supply prices.”

This year will be defined by ease of financing and low interest rates, as has been the case for the past several years. After this year, the markets will become more regular after the current period of unusually high liquidity and low interest rates and move to a more competitive capital landscape. However, larger crop supplies will keep driving prices down, leading to minor impacts on overall commodity prices long term.