The markets finally woke up to the threat of frost last week and began paying risk premiums to account for the danger that cold will reduce the amount of top quality grain harvested.
Oats, canola and soybean futures prices rose Aug. 20 and 21 after reports of frost in Saskatchewan, Manitoba and several U.S. states.
The November canola contract at the Winnipeg Commodity Exchange rose more than $20 per tonne last week and was up about $22.50 on Aug. 23, even as the Canadian dollar strengthened. Chicago Board of Trade oats futures rose more than 14 cents US per bushel.
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The areas of the Prairies most affected by last week’s frost – central Saskatchewan and southwestern Manitoba – contain part of the main production area for milling quality oats.
The extent of the frost damage was unclear, but it work many buyers to the danger that another frost with more serious results could come before the late crops are ready for harvest.
Analysts are already speculating that farmers will hold back from pricing any more of their production in the hope of seeing prices rise higher on frost damage and frost fears.
“The direct impact of the frost and slow developing oat crop … is going to be a halt to selling by growers,” said Ag Commodity Research analyst Randy Strychar in a market commentary.
“In fact, we are already hearing reports of growers looking to buy out of forward delivery contracts. It’s unlikely growers are going to sell any volume given current conditions.”
At the WCE, futures prices for feed grains initially fell slightly as traders speculated that frost damage last week and in coming weeks could produce larger than expected feed quality crops, depressing prices. But on Aug 23 barley prices recovered while feed wheat fell again.
Frost also touched crops in the northern part of North and South Dakota and Minnesota Aug. 21, pressuring soybean prices sharply higher early this week.
