Did they get good prices?
Did they sell at the wrong time? Should they keep hanging on to whatever crop they have left in the hope of getting a rally like last fall?
Many farmers are asking these questions, and so are market analysts, who admit this year’s markets have stunned them.
“I think there are a lot of surprised people in the trade, not just farmers,” said Statcom canola analyst Nolita Clyde.
“We always knew the possibility was there, but I don’t think people expected prices to fall as much as they did.”
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Prices for canola and wheat roared upward last autumn when people realized how short those crops were in Canada, the United States, Australia and Argentina.
At harvest time, many predicted canola and wheat prices would be firm and likely rise over the course of the winter. Some criticized the Canadian Wheat Board for making sales early in the crop year, before the expected market peak was reached. Many canola growers and analysts thought there was no need for producers to rush to price their crops.
Now, CWB analysts believe they achieved above-market prices for many of their sales even though they faced tough new competition. Canola analysts and traders feel glum, however, after seeing their market collapse for unclear reasons.
Most farmers and marketers know few people ever capture the highest point of any market, but a sick sense of loss floats over canola sellers.
“It’s sad right now because we’re well under the highs,” said David Reimann, a commodity broker and analyst with Benson Quinn-GMS.
“Farmers overall have done fairly well, but most weren’t able to take advantage of the highest prices and dispose of their crops.
“I can’t say I blame them. We all expected the market to continue to climb when it was up around the highs, but then it started to slip.”
Reimann said unlike wheat prices, which were battered by the ability of nontraditional exporters to push product into the market, the slide in canola and vegetable oil prices isn’t easy to understand. Canola prices have suffered many little cuts that all add up to bloodied returns.
“It’s been quite a shock,” said Reimann. “A good chunk of the market is quite stunned.”
Reimann thinks vegetable oil prices generally have suffered because palm oil stocks are bigger than expected, India has stayed out of the market, and global uncertainty about a war in the Persian Gulf has made buyers cautious.
Canola oil prices slid for several reasons: the Canadian dollar increased in value; Statistics Canada found more canola stocks than originally forecast; troubles at Saskatchewan Wheat Pool pushed many farmers to sell their crops; and farmers are scared that prices will keep falling.
“Some people are throwing in the towel, saying ‘I’d better get something now,’ ” said Reimann.
He thinks there is still some upside in the canola market, because Japanese users need to start buying canola faster to meet their needs and because vegetable oil prices could rise if India starts buying, but he admits his optimism has been shaken by this year’s slide.
“The market is behaving very oddly for something that should have been quite bullish,” said Reimann.
Brian White, head of market analysis at the wheat board, said he thinks his organization’s marketers achieved higher prices than most people in the wheat market.
“We’ve done better than the U.S. market,” said White.
“We have managed to capture, for a portion of those sales, the high prices that were there in September and October. We’re pretty happy with where things stand.”
CWB Pool Return Outlooks have been falling as world wheat prices have fallen, but White said Canadian farmers will get as much per bushel on average as they did in 1995-96, whereas American farmers are getting less. Wheat prices peaked in 1995-96 due to poor wheat and corn production.
The wheat board has not yet sold all of Western Canada’s wheat, durum and malting barley, but White said it would have been impossible to sell the whole crop at the market peak.
“You can’t sell everything in one concentrated period,” said White.
“It doesn’t work like that. We still have a job to do. We still have crop to sell.”
He said farmers shouldn’t assume all the wheat that is left will be sold for lower prices. While unlikely, another rally could occur if large areas of North America remain dry.
“It’s still very dry out there in the hard red winter areas,” said White. “We could get a second spike in the market.”
Clyde said many farmers with canola now rue their caution in the fall price rally, even though that was also the advice from most analysts.
“Lots of farmers looked at some pretty good prices and didn’t book them,” said Clyde.
