Supply and demand figures mean little to grain and oilseed markets because of the financial meltdown, analysts say.
“All of these fundamentals don’t matter a hoot in this market right now,” said John Duvenaud of the Wild Oats markets newsletter.
“It’s all trading on outside factors.”
However, when agricultural commodity prices stop dropping along with stocks, Statistics Canada and the U.S. Department of Agriculture have provided reasons for Canadian crop prices to sink on their own.
In its September production report issued Oct. 2, Statistics Canada said all the main prairie crops yielded higher than expected, meaning farmers will have more grain to sell this year.
Read Also
Yellow pea prices collapse on lack of demand
China’s tariffs and India’s accumulated stocks from previous imports have curbed those countries’ demand for Canada’s yellow peas just as harvest adds price pressure at the farm gate.
A USDA stocks report issued Sept. 30 found inventory of U.S. wheat at 50.6 million tonnes as of Sept. 1, up 8.1 percent from a year earlier, but that was less than the 52.8 million analysts expected.
So even though grain markets are now focused on the wider turmoil in the economy, they are also influenced by more comfortable available supplies.
“There’s 300,000 tonnes of canola here that we didn’t think was here a month ago,” Duvenaud said about the Statistics Canada report.
Large hard red spring wheat crops mean buyers of high protein wheat won’t be as worried about supply as they were a month ago, said Bruce Burnett, a Canadian Wheat Board market analyst.
“This eases off some of the (buyers’) concerns about that.”
Statistics Canada found that spring wheat production on the Prairies was slightly more than 17 million tonnes, compared to about 13.4 million tonnes last year.
Almost 10.8 million tonnes of canola were grown, compared to about 9.5 million tonnes last year.
Barley was roughly even and oats production fell by about 13 percent, to less than four million tonnes.
Durum production jumped to 5.07 million tonnes, an increase of about 37 percent.
The big production came from higher yields on prairie farms.
Mike Krueger, a crop marketing adviser from Fargo, North Dakota, said the USDA and Statistics Canada numbers mean quality wheat will be flying into a headwind caused by big world production of wheat, even if most foreign production is in the lower quality classes.
“I think wheat on its own is going to struggle,” Krueger said.
“It’s going to need a pretty good rebound in corn and (soy)beans to drag wheat along with it.”
Burnett said high quality wheat, such as what is grown in Western Canada, should hold up better than the lower quality wheat in the United States and overseas.
“At least we’re producing it in the higher quality spectrum, which doesn’t have that burdensome supply,” Burnett said.
Duvenaud said he doesn’t know what crop prices will do once the financial meltdown has passed. At first he thought world markets had entered a deflationary period, with hard assets such as crops likely to keep getting cheaper. Then he thought inflation looked more likely, with crop prices set to rise.
Now he’s back on the sidelines, waiting to see what happens once financial markets cool.
“I don’t know where we are now,” he said.
