Slamming into the ground isn’t a great feeling, but for farmers experiencing the typical harvest price slump, the crash may be over.
Marketing advisers say it may soon be time for producers to dust themselves off and book in some better prices for their 2005 crops.
“We’re pretty close to the bottom. I’d say this week will be the low,” said John Duvenaud of Wild Oats newsletter.
“Farmers will probably see prices putz along steadily, but they shouldn’t be dropping any more.”
But few analysts see a sudden post harvest recovery.
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“If things are set up right, you can get a pretty good bounce out of the low, but in the case of canola, we’ve got a pretty overwhelming (supply) situation,” said Ken Ball of Union Securities.
The harvest price slump is caused by the stream of trucks hauling from the combine to the elevator.
With farmers keen to sell rather than haul the crop home and store it, buyers don’t need to offer good basis levels to get the grain.
Futures prices are also often depressed because heavy harvest deliveries create the impression there is lots of accessible crop.
But once harvest is complete, grain buyers lose the advantage and basis levels tend to strengthen.
“After this week, buyers are going to have to pay farmers to open a granary,” said Duvenaud.
“That’s a bigger job than getting him to haul his truck in off the field.”
Canola
The market is warming to oilseeds, even though last week’s United States Department of Agriculture supply and demand report increased its estimate of the 2005 U.S. soybean crop.
“The extreme bearishness we felt in this market three weeks ago is beginning to fade,” said Errol Anderson of Pro Market Communications.
The recent drop in value of the Canadian dollar has helped stop canola prices from dropping to the $240 per tonne level that appeared possible in September, and Anderson thinks canola futures prices may not drop below $250 per tonne.
Ball had the same assessment.
“There’s a pretty good chance that that could hold as a low,” said Ball.
But both warned producers not to expect canola prices to leap.
There may be as much as 10 million tonnes of new canola production this fall and buyers don’t feel pressured.
“Farmers, especially in Alberta, had some exceptional yields and that allows them to sell some and still keep a lot in the bin,” said Ball.
“It may take a few weeks more to move through and it’s keeping a tight lid on the market right now.”
Wheat and barley
Wheat prices appear to be rebounding after a long slide over the summer.
The USDA has reduced its forecast of the 2005 crop and has forecasted lower than expected ending stocks for 2005-06 for the U.S. and globally.
It also helped push up wheat prices, forecasting lower ending stocks than expected for the 2005-06 crop year in the U.S. and worldwide.
Wheat prices in Canada are also being supported by the weaker Canadian dollar and the prospect that American tariffs on Canadian milling wheat will soon be scrapped.
“That’s definitely good news,” said Anderson.
Prairie barley hasn’t done as well, with large supplies giving cattle feeders comfort. However, the recent Statistics Canada report gave them a scare and barley may have bottomed.
“It made them take a look at it,” said Anderson.
“There are 500,000 less tonnes out there than we thought.”
