Crop market watchers are listening to a cacophony of conflicting concerns and trying to figure out the state of the prairie crop.
When it becomes clear, it’ll have a big impact on prices, especially for the crops for which Canadian production affects world trade, such as mustard, flax, oats, pulses and canola. If the markets conclude that the crops are doing great, prices may take a beating. If they think problems are getting bigger, prices could rise.
“This year has been awfully good so far,” said Brian Clancey of Stat Communications.
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“But what’s ideal growing conditions for growing crops might also be ideal conditions for developing ascochyta.”
Clancey’s cautious approach is echoed throughout the crop markets, with farmers, grain companies, traders and speculators trying to sort the good news from the bad.
In good news for crop production prospects, the markets are absorbing the Statistics Canada report that many more acres were seeded to canola this spring than farmers originally planned. They are also mulling crop condition reports, like the Canadian Wheat Board’s recent survey, that show soil moisture and crop development to be better than usual.
On the other hand, the markets have to assess news that should be bad for crop prospects and good for crop prices, such as reports of widespread flooding in northeastern Saskatchewan.
Shaunavon farmer Brett Meinert, a board member of the Saskatchewan Mustard Development Commission, said his favourite crop is dealing with both good and bad news right now, and it’s unclear which will prevail.
Ideal soil moisture and development this spring has created an excellent base for a big mustard crop, which would be bad news for prices.
“Two years ago we flooded the market, and last year our good production maintained that sort of heavy supply. This year looks like it’s going to do the same sort of thing,” said Meinert.
Yet the weather forecast for the next week calls for hot, maybe scorching temperatures.
“That would limit yields,” said Meinert.
The Chicago oat market is also wrestling with weather variables. Traders talk about the good growing conditions on the Prairies, but also hear a lot about the flooding. For now the reports of healthy crops are prevailing, but prices are holding up anyway because of commodity fund speculation. If continued good weather spooks the funds, a lot of air could begin leaking out of oats prices.
“What’s really bolstered prices here is fund involvement,” said Scott Merrihew of Iowa Grain in Chicago.
“The funds are … near a record long position … That’s a lot of what’s holding oats up at these levels.”
The June 22 Statistics Canada report raised a lot of eyebrows among traders, said Ken Ball of Union Securities, especially the much-expanded canola acreage. The agency now believes that farmers planted 13.3 million acres, which is an increase of 1.8 million acres from the March report and only 100,000 acres short of last year’s large crop.
“We expected the summerfallow number was too high, and that some of those summerfallow acres (in the spring report of intentions) weren’t really summerfallow, they were just unassigned acres. We expected a couple million acres of those would be put in something, just not that nearly all of them would be in canola,” said Ball.
But it was largely ignored because the additional acreage found is being mitigated by the lost acreage in flooded parts of Saskatchewan.
Clancey said the market is not sure that today’s good-looking crops will survive unharmed until harvest, but neither will it be surprised if a big crop emerges.
“The markets are not assuming that there will be a problem with the crops,” said Clancey.
“But it’s also too soon for anyone to jump up and say it’s going to be a record yield because things right now are perfect, because too many things can happen.”
