LLOYDMINSTER — Commodity futures adviser Adam Pukalo said canola and wheat might see better prices this spring, depending on how several factors play out.
Speaking to farmers in Lloydminster Feb. 13 during the Agri-Visions conference, Pukalo of PI Financial Corp. said canola could rise if the Canadian dollar remains steady, even if the tariff war between the United States and China continues beyond March.
He said his target canola price is about $505 per tonne, and he recommended that farmers hedge about 10 to 20 percent, either through put options or by selling to futures.
“Say the price doesn’t get there, I have technical levels I’m watching,” he said.
“Nobody knows where prices are going to go and you have to be unemotional about decision making.”
Pukalo said for wheat he could also see prices go higher in the spring.
He said world wheat production and ending stocks are generally declining, somewhat due to droughts in Russia, the European Union and Australia.
He said there is a window for Canada and the United States to tap into markets, filling the void left behind by other exporters.
“The United States and Canada could be in a good position to take advantage of this,” he said.
He recommended farmers replace what they may have sold if they want to participate in a possible wheat rally this spring.
“Taking a portion of the funds that they got from their sales and look at replacing it, that’s the strategy I’ve been mainly looking at right now,” he said.
For oats, Pukalo recommended producers set up contracts, given most of the crop is arranged that way.
He said quality oats may reap better prices because he’s hearing lots of the crop is poor.
While farmers in the U.S. might reduce soybean acres and replace them with oats, he said there would have to be a substantial amount of oat acres to cause prices to drop.
He said the biggest factor at play affecting markets is whether the China-U.S. trade war will continue.
Referencing an article he read, Pukalo speculated U.S. President Donald Trump might not remove the tariffs until the presidential re-election in 2020.
Removing tariffs just before the campaign period could give Trump a boost in the polls, he said.
“Lifting the tariffs will propel the grain and stock markets. Trump could be seen as the saviour if he lifts those tariffs when the re-election period begins.”
Pukalo is also watching the Canadian dollar.
He said he expects the Canadian dollar to trade between US73 to 77 cents, which is in line with its 75-cent average.
He said buying call options or futures helps protect farmers from increases in the Canadian dollar, though he doesn’t believe there is a big need to hedge Canadian dollar risk right now.
He said the U.S. dollar remains strong, keeping the Canadian dollar near average levels.
As well, interest rates have remained the same, causing little movement in the dollar.
He said the dollar will also remain steady if oil prices stabilize, noting it can change whenever oil prices increase or decrease significantly.
He said he will monitor housing prices, which have fallen recently, but he believes it won’t bring down the economy or dollar.
Otherwise, the national unemployment rate remains low, a factor that indicates the economy is doing well, he said.