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Weird marketing season to come

The numbers look nice in the most recent Canadian Wheat Board Pool Return Outlook:

2010-11 Number One CWRS 13.5 has jumped from $7.57 per bushel last month (before deductions) to $8.16 today. Durum is up 30-40 cents per bushel, with 1 CWAD moving from $6.61 last month to $6.99.

But that good news doesn’t mean much for those thousands of farmers who aren’t going to have crops that fit into those high quality categories, and who now have masses of feed grade crops to deal with.

The sense I’m getting from the marketers and advisors I’m speaking to this week is that this coming marketing season is going to be one which rewards the producer who looks around. The bad weather through the season and now at harvest has been sporadic, with some areas having good conditions and others suffering appalling conditions. That means a farmer might be in an area with oceans of damaged, feed grade crops that are jamming the local market, but if he looks a little further afield he may find areas with good demand and not a lot of local stuff competing. Basis levels are likely to vary widely depending on local conditions.

It’s hard to know how to play this one, if you have lots of unwanted feed quality crops. It seems to make sense to move the stuff right away, because low quality stuff now is unlikely in a typical year to get much more valuable in storage. But we’re experiencing a rally in the crop markets – especially with the god of feedgrains, which is U.S. corn – so that mega market trend suggests holding on might be a good idea. So on the one hand you’ve got one bit of wisdom telling you it makes sense to move the stuff ASAP and cut your losses and risks on those bad quality crops, and a market signal telling you feedgrains are rallying and it makes sense to hold on and see if the wider market rally can drag up the price of your own crop.

Quality feed barley has followed corn in the rally, but that’s only partly to do with the corn effect. Quality barley’s suddenly become scarcer, so there are excellent micro markets now in feed-consuming regions that have seen local expected supplies shrink under the cold hand of frost.

Those PRO prices today look nice, but a lot of grain growers will be fuming that they won’t be able to get at them because of all the crop damage they’re suffering. But although they’re likely to be quiet about this, I’ll bet there are a lot of relieved hog feeders out there, suddenly grappling with the reality that there’s now far more feed wheat on the prairies, and the higher corn prices that have seemed to be imperiling them again will be mitigated by lots of local, cheap, feed wheat.

One thing I’ve learned about the farming business in the almost-16 years I’ve been here is that one farmer’s bad luck is almost invariably another farmers good luck. But this year, with this scale of harvesting problems, I don’t think there’s any way the good luck will outweigh the bad. Thousands of grain farmers are going to be devastated, and a few other farmers will get a little relief.

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