Sell old crop now | Feed barley buyers among those expecting lower prices
This is an ideal time for farmers to sweep the bins clean and market every kernel they’ve got left.
It’s also not a bad time to price new crop grain if farmers haven’t already done so.
Prairie grain market analysts say cash prices are likely to fall to where the futures and basis say they will by the time crops are harvested.
The old crop-new crop inversion, where old crop prices are much higher than new crop, isn’t telling lies.
“Producers haven’t adjusted to what new crop values are being bid and offered now, especially with feedgrains,” said Jim Beusekom of Market Place Commodities in Lethbridge.
“Most producers are saying if we have to sell that cheap, we’ll just wait till we get there. Some doubt that prices will drop that much.”
Beusekom said farmers see old crop Lethbridge barley bids of $6.30 to $6.50 per bushel and new crop bids of less than $5 and are backing away from new crop pricing. However, he’s urging them to not expect new crop prices to rise to match old crop prices.
“The market’s really implying that that’s what the value is. I really do think it’s going to drop that much,” said Beusekom.
“I just don’t think producers have accepted that.”
Greg Hagel of Quality Grain in Calgary was equally bearish about new crop prices.
He said feedlots are chasing the old crop they need to survive the summer. However, they are then backing off and waiting for a flood of barley and maybe frost-damaged wheat that should arrive by late September.
“As the Prairies continue seeding, it’s quite late, and I think we’re going to see a lot more barley acres than what StatsCan or anyone else expected (a few weeks ago),” said Hagel.
“As people run out of time, they’ll seed barley and oats.”
Feedlots know the phenomenon well from previous late-seeding years, so they are content to wait. Old crop, delivered Lethbridge bids for barley are about $285, but new crop bids are $225. Farmers aren’t jumping at $225, but there are lots of offers at $230 to $235.
However, the buyers aren’t interested.
“The feedlots just aren’t buying it,” said Hagel.
“They’re looking at the market and saying, ‘why would we?’ They think a lot more barley is being put in the ground, and I agree with them.”
While seeding progress remains behind the norm on the Prairies, increadibly fast seeding in the U.S. Midwest in the last two weeks has put its numbers near normal, which has taken much of the pressure off the market.
Crop development is late in many areas and significantly delayed in some parts such as eastern North Dakota, but in most areas good weather in the week ending May 19 allowed progress to shoot ahead.
“They seeded an area almost the size of Texas in a week,” said Brennan Turner, who operates prairie online crop marketplace FarmLead.
“There’s a ton of acres going in very fast.”
That has added bearishness to the new crop outlook, Turner said, as analysts begin to switch from concerns about late seeding to comfort with the new crop situation.
“The market sentiment now lies with (an expectation of) normal weather conditions, (which is bearish),” said Turner.
However, the rapid pace of U.S. seeding, with about 42 million corn acres planted in one week, creates a possible future bullish surprise if the weather is not good at crucial moments.
“There’s a significant amount of crop that’s going through the same stages at the same time,” said Turner.
“If you have any adverse weather conditions at certain stages, there are a lot of potential bushels that could be lost.”
Last year’s drought had a particularly powerful impact because it hit during the tasselling stage, the most critical time for corn yield potential.
Hagel said a major U.S. summer weather problem is the best chance for turning new crop prices up.
“The only thing that’s going to pop it is if the U.S. runs into troubles,” said Hagel.
Beusekom agreed but said farmers shouldn’t bank on that happening. For now, they can take advantage of a phenomenon they’ve almost never seen before: they can sell all their old crop at high prices before the new crop is harvested.
“We have good demand for almost any grain they want to sell us. There’s very few grains you can’t get a bid on today. The opportunity’s still there to sell your grain at still-peak prices,” he said.
“Under the Canadian Wheat Board (monopoly), there were plenty of times you either were forced to push your milling wheat down into the feed market or forced to push it into the new year. You can sweep clean every crop you have, every bin you have. When is the last time that happened?”