World markets appear to be laying a feast for prairie farmers. All the producers have to do is bring the food.
“Hopefully we can grow a crop this summer,” said Brad Hanmer, a Govan, Sask., canola producer who describes himself as “very optimistic” about the big gains in oilseed markets and the prospects for higher Canadian Wheat Board grain prices.
“I hope all farmers can get their bins full with these prices,” said Hanmer, president of the Saskatchewan Canola Growers Association.
For years, many market analysts have said declining world stocks of most major commodities would cause a sustained rally in grain and oilseed prices. But most have been surprised at how long it has taken for prices for crops like soybeans to rise.
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Now that they have, prices are shooting skyward.
“It’s mind-boggling,” Tony Tryhuk, manager of trading for RBC Investments, said March 18, a day after U.S. soybeans surged above $10 per bushel on the Chicago Board of Trade.
“It’s becoming unprecedented.”
Canola prices have risen, but not by as much as soybeans, the vegetable oil leader. Wheat and barley still have mediocre prices, but many analysts expect those commodities to rise sharply as well during the spring or summer.
Wild Oats Market Advisory analyst John Duvenaud is cautious about the wheat outlook, but thinks vegetable oil prices will not fall and could surge more if weather problems hit any major crop this summer.
That price strength will allow his farmer-clients to rebuild their finances.
“They’ll make some of the money back that they’ve been paying for the privilege of producing food for the past few years,” said Duvenaud.
World grain markets follow closely the world supply and demand estimates and forecasts. When world ending stocks begin to get small, buyers usually worry and begin buying, causing prices to rise.
But for the past few years, ending stocks numbers have steadily fallen and buyers haven’t panicked.
Duvenaud thinks the Chinese government was behind the tardiness in the market. Huge grain stocks were built up in China during the 1990s. Then the government decided to liquidate them after 2000, sucking much of the demand out of the world market.
Now that those stocks are mostly gone, buyers are getting worried again. That won’t lead to buying in the short term, but to a longer term shift.
“The world has been living in a bear market for grains … Now it’s moving into a bull market,” said Duvenaud.
Canadian Wheat Board chair Ken Ritter said the change in market sentiment is needed.
“I think maybe we’ve hit the bottom of this agricultural cycle,” said Ritter.
“Things are starting to look better – and much better. It’s the first break we’ve had in the five years since I’ve been chair of the CWB.”
