There is no marketing magic or trading trick to get around falling grain markets.
The lesson to learn from today’s low prices is the value of a disciplined marketing plan, said Errol Anderson of ProMarket Wire in Calgary.
“This is hindsight because we are already caught in it, but in any market, bull or bear, … it boils down to having a market plan.”
Prices were not great last spring, but if farmers followed a marketing plan that included knowing costs of production, they could have signed contracts on part of the crop and locked in a profit, he said.
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“The guys and ladies who did that are OK. They won’t sell at the top of the market, but neither are the guys who gambled … .
“They gambled on a drought and on the media really hamming it up and they really got burned.”
Most markets fell another step last week after the United States Department of Agriculture reported the heat wave that seared cotton in Texas didn’t hurt overall grain production. Record soybean production is expected, as are near record corn crops and sizeable wheat crops.
Shaun Wildman, of Pool Commodity Trading Service in Regina, said the USDA now expects the amount of soybeans left at the end of the 1998-99 crop year will be about double the five-year average.
Meanwhile, Agriculture Canada forecasts a 6.9 million tonne canola crop, up from 6.2 million tonnes last year. Canadian oil processors are expected to crush more to offset some of the increased production, but the carryout at the end of the year is expected to rise to 500,000 tonnes from the tight 300,000 tonnes at the end of 1997-98.
Anderson said canola prices may rise a little in the near term if, as the harvest progresses, the crop turns out to be light due to August’s heat.
“We are finding the cereals are coming off light weight so we might have a little sprint, but rallies won’t hold in canola,” he said noting large U.S. soybean and soy oil supplies will keep a lid on prices for months.
Farmers looking for cash flow in the next couple of months should consider selling some canola if the November futures contract rallies toward $374 a tonne, he said.
Agriculture Canada forecasts a 1998-99 average canola price of $370-$400 a tonne, in-store Vancouver, compared to $420 a tonne last year.
Anderson and Wildman expect farmers will deliver limited feed grains off the combine because of low prices.
The U.S. corn crop is expected to be the second largest on record and analysts think the estimate will creep up as the combines start to roll
“They are getting to the point where they don’t know where to store the stuff,” Anderson said. The big crop will weigh on Canadian feed grain markets, as well.
Wheat markets were least hurt by the USDA report.
“The thing that really stands out is the expected world stocks number, which is tightening up by six percent,” said Wildman.
That doesn’t mean that stocks are tight in a historical context, but it does mean there is a good chance the market has hit bottom and will start to climb.
“The winter wheat crop is huge, but the spring wheat crop isn’t so big. Protein will retain a premium,” Wildman said.
“The world wheat numbers and U.S. wheat numbers confirm we are close to (crop year) lows. The Canadian Wheat Board is making the same assumption and will not be marketing much of our wheat for September or October sales. They will likely defer it, assuming values will rise.”
Time will also help turn around other commodity prices, said Anderson.
“The thing about bear markets is that they tend to last several months so we might just grind through the remainder of this calendar year and once we get out of it, then markets are susceptible to a rally.”
