There might not yet be clear signs of a market top being set, but things can change awfully quickly, as they did in 2008
Farmers have a great opportunity to make sales into a bullish crop market.
It’s an opportunity they should be taking seriously because these sorts of prices can evaporate, says MarketsFarm analyst Mike Jubinville.
“I still want to be an incremental seller into that rising market,” he said about strong futures and cash market prices available today.
There might not yet be clear signs of a market top being set, but things can change awfully quickly, as they did in times like 2008.
“I don’t want to get caught in that,” Jubinville said in a Feb. 4 outlook session.
Crop futures have witnessed a stunning rally since late last summer, soaring far beyond the expectations of any but a few analysts.
The rising market itself isn’t a shock. Demand has been strong, and stocks have been tightening. Crop production challenges in parts of the world have tightened the situation further, leading to the bullish situation today, with ending stocks in crops like U.S. soybeans and Canadian canola falling to levels that often spark rallies.
“We’re going to need all the soybeans and oilseeds … that the world can produce,” said Jubinville.
“It’s amazing where we’ve come from in just two years. Supply tightness is becoming rather dramatic here.
“I don’t think this demand environment is going away any time soon.”
Part of that demand story is the desire of vulnerable buyers to build up stocks of food in case of future shortages, a danger highlighted by the pandemic’s interruptions of supply chains.
“I think there’s a recognition in the COVID era that just-in-time delivery of foodstuffs was a bit (of) a precarious position for various countries to be in.”
However, the surge in prices has surprised almost everybody, offering farmers prices not seen since the end of the commodity bull market in the mid-2010s.
Jubinville expects strong canola prices to last into the summer, based on the fundamentals. That gives farmers a chance to price any remaining old crop in their bins.
With new crop, lots of attractive prices are available today, with $11 per bushel the “floor for now.”
Twelve-dollar new crop bids are commonplace. Those are opportunities farmers should be considering. Right now, the bull market might look like it has strong legs under it, but when things change, they can change quickly.
“You’ve got old traders. You’ve got bold traders. But it’s rare to find an old, bold trader,” said Jubinville.
“They get killed off by too many risks.”