Prairie crops are late and some first-frost dates are less than two weeks away, but market prices have not shot up in fear, say analysts.
“We have no weather premium built into this market,” said oats analyst Randy Strychar of Ag Commodity Research.
“If we have one, it’s so small I can’t see it.”
Errol Anderson of Pro Market Communications said crop prices have allowed for a frost factor “to some degree” but nowhere near enough to cover shortages of quality crops caused by any wide-scale frost.
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“This thing would quickly go up to $350 (per tonne on the Winnipeg Commodity Exchange for the November canola contract) if a big frost hit,” said Anderson.
But if the next couple of weeks pass without frost and the crop starts going into the bin, prices could plunge.
“If we escape frost, I really fear we’re going $300 or lower,” said Anderson. A gulf of about $1 per bushel gapes between the two scenarios.
Because of the possibility but not likelihood of frost, Anderson thinks canola will trade between $320 and $335 per tonne in the near future.
“We’ll be caught in that $15 range until we get closer to the combine,” he said.
Strychar thinks many oats buyers are not taking the frost threat seriously. The prairie oat crop may be large and in good condition, but a serious frost could change that quickly.
“I think everyone’s banking on having a huge crop in Saskatchewan if we have any losses in Manitoba,” said Strychar.
Present prices “are all predicated on getting through the next four weeks.”
Strychar was surprised last week to see some large put option trades in oats at the Chicago Board of Trade.
“That’s still going short,” he said.
Strychar said some oat buyers assume that many farmers will sell straight from the combine this autumn, so they don’t need to lock in supply. A small amount of oats was forward-contracted this summer.
But with prices so low, “I don’t think they’ll be lining up to sell to you. This is pretty low.”
Environment Canada said there was a frost risk on Aug. 18 and 19, but temperatures will probably be warmer than usual after that.
A long, warm fall would allow crops to ripen nicely and cause market prices to relax. But a frost this week will probably scare all those who have assumed plentiful supplies of quality prairie crops.
“If on (Aug 19-20) we get a whacking frost, we’ll be off and running,” said Strychar.
