January is the time for predictions, particularly about prices in the year ahead.
Whether it is Crop Production Week in Saskatoon, Manitoba’s Ag Days in Brandon or Farm Tech in Edmonton, the programs include lots of market prognosticating. Cattle producers will get some of that as well at events such as the Saskatchewan Beef Industry Conference.
The speakers may do a great job of describing supply and demand and the price gyrations to date, but predicting the future is a bit like tossing a dart at a target while blindfolded.
One analyst recently wrote that new crop canola prices could drop to as low as $10 a bushel or go as high as $15 or $16. He’ll probably be right, but the prediction isn’t too valuable.
This year, even more than most, predictions are going to be all over the map. There are just too many wild cards in the equation. It’s pretty tough to nail down commodity prices when no one can predict the weather and the world economy with any certainty.
The trend is your friend. That’s one of the principles of market watching. Whatever the current trend, it’s likely to continue. If prices are edging up, if prices are edging down or if prices are locked in a particular range, the best bet for the immediate future is more of the same.
As far as trend yields, the U.S. corn crop broke all the assumptions in 2012. No one foresaw the dramatic drought-induced production drop. Here in Western Canada, canola yields were significantly off the norm because of a variety of factors. Who could have predicted aster yellows or the huge September winds that rolled canola swaths?
Maybe you go back to the trend yield for Canadian canola in 2013, but what do you assume for U.S. corn? It’s early, but it’s also dry in much of the American corn belt.
A year ago, the outlook for feeder cattle prices was absolutely stellar. Cow-calf producers were looking forward to their best paycheques ever. That was quashed by skyrocketing corn prices, which pulled up feed barley values. And then, adding insult to injury was the XL Foods fiasco.
In the end, 2012 fall calf prices ended up close to 2011 values. That was considerably better than previous years but a disappointment compared to what might have been.
Most grain prices went the opposite direction. In January 2012, many analysts said canola prices were on the way down. One analyst said prices as low as $9 a bu. were likely in the next year or year and a half.
Pea prices have also outperformed expectations. No one was predicting yellow peas in the $8.50 a bushel range or the huge premium being enjoyed by green peas.
Don’t get me wrong. I enjoy market analysis and I’ll be listening to as many presentations as I can this month. And I appreciate the analysts who generate conclusions with actual price predictions, rather than those who refuse to be pinned down.
But I also appreciate seeing and hearing the actual new crop prices that start to emerge in January. So far, we know that new crop canola futures minus a typical basis means about $11.50 a bu. for fall delivery. And there are new crop yellow mustard bids in the 40 cent a pound range, with brown at 34 or 35 cents.
Predictions are useful for planning. Actual bids are bankable.
Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at firstname.lastname@example.org.