On Friday Statistics Canada dropped a report with some big surprises in it, the market heard it – and did nothing.
So did it make a sound? Here’s a better question: Who cares?
The only thing that matters in reports is market impact, so if the market did nothing with big extra production of canola and lots less production of barley, does it matter to farmers?
Well, the answer I’m hearing is that it doesn’t mean anything now, but might in the future. And might in an important, pricey way. So the report mattered. Sort of. Even if it didn’t seem to. (On Friday I was busy trying to get 200 percent EPO feed wheat pricing discounts into my saturated head, and was busy doing an interview with a potter who uses prairie clay in his work, so when I quickly checked the markets late Friday, I saw that nothing happened, so I assumed StatsCan had found nothing surprising. I must now recalibrate that conclusion to: StatsCan found nothing surprising that mattered – in the short term.)
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Let’s get to the point about how it might matter – in the future: StatsCan found 11.87 million tonnes of canola was grown by Canadian farmers, and 7.6 million tonnes of barley. Most traders had been expecting about a million tonnes less of canola and about three quarters of a million tonnes more barley. The market didn’t move on the news, some traders told me, because all the market cares about now is continuing commercial demand and the flow of investment money into hard commodities like crops, so a bit of extra canola or a bit less of barley really doesn’t amount to a hill of beans in this crazy market. Right now.
But six months from now, it might matter a lot. As we get towards the last months of the crop year, the bigger pile of canola might begin to weigh on prices, particularly compared to the less-flush-with-supply oilseeds. “Farmers might be surprised,” one trader told me. If the market starts caring about fundamentals right now, the rug could get pulled out from under producers’ bullish expectations – at some point.
What point? That’s the million dollar question. For some of you with a bunch of canola in the bin, it might truly be a million dollar question. The market’s bullish right now. The trend is up. Like the Fed, no one should be advised to fight a trend. But at some point that trend’s going to end, and with these new numbers for canola out there, that trend looks endier than it did a week ago.
