Prairie grain farmers need a reality check when it comes to grain prices.
Brenda Tjaden-Lepp, head of FarmLink Marketing Solutions, says the record high commodity prices experienced early in 2008 have created some unrealistic expectations.
“When prices are high, everybody gets caught up in the enthusiasm, but that’s when you’ve got to be disciplined and realistic,” she said in an interview after speaking to farmers attending the Agri-Trend Farm Forum in Saskatoon last week.
“Some farmers almost seem to think now that last year was the norm or that they deserve those prices and they’re going to wait until they come back.”
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China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
That could be a long wait, she said.
There’s a good chance for significant recovery in agriculture in 2010-11, said Tjaden-Lepp, but in 2009 prices for most commodities will be lower and futures markets will remain under pressure.
That means farmers should not pass on current prices in the hope that the market will return to last year’s heights
“Today’s prices are well off the highs and there’s not much upside potential, but historically they’re pretty good and they’re still profitable in most cases,” she said.
“Yes, input costs are high, prices are down and margins next year won’t be anywhere near what they were in 2008, but did anyone really think that was going to last forever?”
In her presentation to the conference, Tjaden-Lepp painted a bleak price outlook for canola, oats, durum and malting barley.
She said that in a time like this it’s more important than ever that farmers do careful analysis and planning and stay calm.
“It can be volatile and emotional but there is no need to panic,” she said.
“The more cold, hard numbers you have on paper that you have to answer to, the easier it will be to move through this.”
If a producer sees a profit to be made, he or she should lock it in right away: “There is tremendous risk in holding unpriced contracts.”
Farmers always want prices to be as high as possible, said Tjaden-Lepp, but they shouldn’t be too disappointed at the current situation.
Other countries are far worse off than Canada as a result of the global downturn, and within Canada other sectors and regions, such as auto manufacturing in southern Ontario, are far worse off than western Canadian agriculture.
Farmers felt the impact early in the steep decline in commodity markets and a slowdown in world trade, while for other sectors it’s just starting to happen, she said.
“We got hit quickest and hardest, but we’ll probably move out of it quicker and more easily as well,” she said.
