It’s a fascinating time in commodity markets — and that ain’t a great thing for many Canadians and some farmers.
There’s freaky stuff going on in some commodities, such as crude oil. At times the value of western Canadian heavy crude has dropped to near zero. In that it’s like the cash market value of weanling pigs from southern Manitoba.
Oil prices have crashed and the cost of refining Alberta oilsands crude isn’t attractive for anybody right now.
Manitoba weanlings intended for the U.S. upper Midwest are facing a glutted market because of packer shutdowns and slowdowns and have also dropped to near-zero values.
These are sickening drops in specific commodity prices and a tragedy for producers. Some won’t survive this.
There are weird things happening in other micro-commodities, too. Did you know that there is a panic going on in the meat and food processing industries about a possible shortage of compressed carbon dioxide? It’s essential in food processing — and many health-care applications. It’s running low because of the slump in production of other commodities, such as ethanol and petrochemical refining, from which it is a byproduct. With COVID-19 ravaging other industries, compressed CO2 is suddenly a commodity we have to worry about.
I learned about this through chatting last week with Al Mussell of Agri Food Economic Systems, a leading Canadian agriculture and food analysis outfit based in Guelph.
He, like a number of the analysts I know, is wrestling with the complexities of the evolving world situation and what that means for all of you.
“This is a learning process in terms of discovering all the connections,” Mussell said.
When a guy like Mussell, who has analyzed and torn apart agricultural commodity markets for decades, says something like that, you know you’re in unique times.
I heard the same sort of thing from Chris Ferris, a long-time commodities and industry analyst who now works with Economic Development Winnipeg.
“I am looking at this through a few different lenses that I typically would not be as concerned about,” Ferris said, referring particularly to the complexities of labour markets and the importance of foreign workers in Canadian and Manitoba agriculture industries and processing.
There are dynamics in Canadian agriculture we never normally have to worry about. Labour’s a big one. We rely upon Mexican and other labourers coming in and performing much of the demanding work on vegetable farms and in slaughter plants. How are they going to get here this year?
The processing industries that Canadian farmers feed rely upon little things we never worry about, like compressed carbon dioxide, until we suddenly realize we need them much more than we imagined.
How are container shipments, of particular concern to pulse growers, going to be affected by the need for workers to wear personal protective equipment?
How are domestic food processors and distributors going to be affected by the shutdown of restaurants and public institutions such as schools and the switch to at-home cooking and food preparation?
How will processing plant shutdowns affect the quantity and flow of Canadian agriculture commodities?
How will the trucking and railway systems be affected by all the new safety systems being implemented?
What happens if borders shut to certain products and supplies?
We’re in uncharted territory.
It’s an interesting time. It’ll be great when it’s less so.