As Franck Groeneweg scouted canola fields at lunchtime on Aug. 9, he was blissfully free of the volatility going on in the markets.
But as he looked at the thick, good condition crop sprawling across his fields, he hoped for two things: A late frost date so he could get it all in safely, and a return to the kind of prices farmers could lock in just six weeks earlier.
“Looking at that first frost date, I’m happy I’m not more than 50 percent sold,” said Groeneweg, an Edgeley farmer who is vice-chair of SaskCanola.
“But we should be OK.”
Adding to the anxiety farmers might feel over the frost risk this fall, with many farmers like Groeneweg estimating their crops are two weeks behind normal development, is the sudden evaporation of much of this year’s potential profitability.
For most farmers, $12 per bushel canola seemed a safe assumption heading toward 2013-14, since new crop canola futures stayed in a range of $520 to $570 per tonne for about 10 months.
But then canola futures slumped, skidding downward through July and into August, barely keeping above $480 after bouncing off $475.
All of a sudden canola looked a lot less enriching.
The same applies to other crops, although canola’s slide has been most dramatic.
Spring wheat futures seemed to have staved off a long descent caused by the steady fall of corn prices, staying flat from March to early June, but then they fell about 50 cents per bushel in recent weeks.
Oats futures ground gradually lower from February to July, but then also fell another leg down.
The impact on farmer profitability is much greater than the raw percentage drop in a crop price.
Each crop takes a hefty investment of fertilizer, fuel, seed, chemicals, machinery and land costs. The profitability is left over once those bills are paid.
With $14 per bushel canola, big profits are experienced by almost all farmers.
At $12, profitability is still good. At $10, farmers should be profitable, if they get sufficient yield.
With big crops in most farmers’ fields, shepherding the crop through to harvest and getting it in the bin safely is most farmers’ priority. But then they will turn their attention to marketing the crop and trying to get the best price possible during the fall, winter and spring.
On Aug. 12, after the U.S. Department of Agriculture supply and demand reports came out, many crop prices shot higher, with soybeans and canola rising especially strongly.
That has given some farmers hopes that the market has bottomed and a rally is in the offing.
But Groeneweg said he’s going to be able to live with whatever the market offers, as long as he gets the good crop that is now growing in his fields. He can accept the $10.50 per bushel for canola that is now common in central Saskatchewan.
“$10.50 is not a bad price if you get 40 bushels an acre,” said Groeneweg.
“If we get trend yields it might not be as profitable as last year, but it might not be bad.”
Groeneweg forward-priced 50 percent of his expected production for an average price of $12 per bushel, so he’s partially protected from lower prices.
But he’s mostly banking on good yields. In 2012-13 prices might have often been in the $12 to $14 per bu. range, but farmers also lost about 10 percent of their yield to high winds at harvest time and 10 percent to heat blast and disease.
If farmers manage to get the crop in, they’ll be disappointed by prices if they don’t improve by then, Groeneweg said. But farmers will still make money if prices don’t worsen.
“We’ve gotten used to $12-$14, so when it’s hitting $10 we feel horrible, but it’s not catastrophic,” said Groeneweg.
“Not so long ago we would have killed for $10.50 canola.”