It’s terribly vexing to be a southeastern Australian farmer looking at what was- two months ago – a near-perfect crop come in as a drastically downgraded crop after harvest time rains.
It’s also terribly vexing to be a prairie farmer with malting barley in the bin hearing about the situation in Ozzieland, reading about the world malting barley market surging, and seeing yesterday Canadian Wheat Board Pool Return Outlook for malting barley actually go down by a dollar per tonne yesterday.
And, overall, it’s terribly vexing to be a prairie grain farmer watching world markets riding high, high above historical norms, and not have anything good to sell into it. That’s the plight of thousands of prairie farmers who got terrible weather last spring, summer or fall. Here’s a Roman Emperor’s comment on the sadly vexatious situation: Terribly Vexed
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Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
World crop prices don’t surge without problems having occurred somewhere, and it’s not nice to be in one of the places where crops went bad. We can just sit here and watch other farmers elsewhere get great prices that will pay off a lot of their bills. And for the thousands of farmers across the prairies that got good crops this summer, it’s a generally great time to be a farmer.
But to be a farmer who got no crop and see prices surging, it’s terribly vexing. Psychologically speaking, it’s probably easier to live through no crop and low prices than no crop and high prices. Goodwill towards fellow farmers extends only so far.
But everyone’s in the boat when it comes to see surging world malting barley prices, and not being able to get them. The PRO for malting barley only budged slightly yesterday, and in the wrong way, as if the whole Australia thing wasn’t happening. The reality seems to be that there’s almost no malting-quality barley left for the Canadian Wheat Board to price, so world prices can go as high as the sky and it won’t move the PRO much. Already farmers are exasperated and demanding answers about why so much of the crop was priced before Australia had its problems.
But it’s not hard to understand how a contractually-driven business like malting barley could see most of the available supply priced-out early in the season if production falls far short of expectations. I don’t know what the pricing percentage is, but if you do even an average amount of pricing, you’d lock-up a big proportion of a crop if it ends up collapsing in terms of quality. And if an above-average amount of contracting was done, the cupboard would be pretty bare by now. I don’t know how active the board was in pricing malting barley this year. Every time the market is high in the fall and then drops, people condemn the board for not being more aggressive in early pricing. When the market rises from fall into winter, people condemn the board for being too aggressive too early. (I remember both, vividly, from the 2007-08 bubble, when many people condemned the board in both ways – a not very coherent position). I suspect most of the board’s decisions are based on who around the world wants to buy what when, and on attempting to squeeze premiums out of buyers, and based more on the commercial logistics of making sales and delivering product than on raw price or weather speculation. I’m not sure how many farmers would want the board to become more aggressive in speculating on prices. Because of the mandatory monopoly, the bias is always likely to be on the conservative side.
So all growers can do is sit and stew as malting barley world prices surge. If bins were full and prices were rising and the PRO was leaping up, people would be sitting and smiling. But that’s not the situation.
