End of the boom | Analysts predict bearish prices for wheat, oats and barley due to ample stocks
ST. JEAN BAPTISTE, Man. — They didn’t raise anyone’s hopes, nor did they dash them.
Two market analysts who spoke at St. Jean Farm Days last week shared the view that 2012 will likely be less profitable for most farmers than 2011 or 2010 but won’t be a washout either.
“Big picture, I have to admit, I’m mildly bearish,” said Wild Oats newsletter analyst John Duvenaud. “The stocks of most grains are adequate.”
Mike Jubinville of Pro Farmer Canada offered a similar outlook.
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“It’s not that I’m feeling bearish about the marketplace going into 2012. I think there’s going to be opportunities for growers to lock in some reasonable crop prices during the course of the marketing year,” said Jubinville.
“But I tend to find after a two year stand, markets have a tendency to exhaust. My gut feeling right now is that the highs have already come in.”
Most crop prices have fallen since last summer, and the analysts saw little potential for a new bull market unless a major weather event destroys an important crop.
Ample stocks of most crops mean there’s little reason for buyers to panic about supplies.
Corn stocks are lower, but Jubinville said the weakness for the past six months in corn prices reflects the generally bearish all-crops situation.
“The marketplace is telling us something has changed here,” said Jubinville, suggesting last year’s high corn prices prompted users to buy cheap wheat and reduce their overall demand.
That doesn’t bode well for a corn price rally.
“The overall up trend, the rally, is done.”
As a result, he’s selling barley when he sees prairie bids of $4.50 per bushel or higher.
The analysts doubt oat prices will rise much in coming months, with Jubinville seeing resistance to prices above $3.40 per bushel.
“My inclination is going to be to sell it all (old crop) on the next opportunity into that pricing environment,” he said.
Nor was either too hopeful about canola prospects for the rest of the winter or into the new crop year.
“If we’re holding onto $10 canola, by the time we combine this year’s crop, count yourselves lucky,” said Duvenaud.
Jubinville was happy to see the present short-term canola rally, but he doubts it will reverse the longer-term lower trend.
He’s ready to recommend his clients sell the last of their old crop canola as soon as the present rally appears to fade.
He might also start pricing some new crop soon because the upside outlook isn’t promising and the downside could reappear.
“Assuming we have normalized production in 2012, $12 a bu. might be as high as this market needs to go,” said Jubinville.
“Could we see $450 (per tonne) futures this year? Under the assumption we’re in a stagnant macro-economic slow growth environment, assuming we have normal production … are we going to see $10 (per bu.) canola, $9 canola? My thinking is that some time in 2012 we’re going to see prices like that.”
Neither analyst was bullish about spring wheat prices, seeing the world awash in cheap wheat from the former Soviet Union and big stockpiles elsewhere.
“Wheat’s in a bear market now and I think it’s going to continue in a bear market,” said Duvenaud.
“(But) the red spring wheat does have a lot more strength than most wheats do.”
Duvenaud was most optimistic about canaryseed prices, which he thinks have the best shot at a rally. Mexican demand has increased, even if Canadian canaryseed has been mostly cut off, which should lead to bigger sales this year as the crop finds its way to anxious buyers.
Duvenaud and Jubinville said their generally glum outlooks shouldn’t disguise the fact that they expect prices in 2012 to be profitable.
“I think we’re going to have profitable spikes that we can use as pricing opportunities, but I don’t look at 2012, short of having production related problems later this year … I don’t think we’re in a scenario where we’re going to start a sustained bull market,” said Jubinville.
Added Duvenaud: “These real good prices, I think we’re on the end of that boom now.”
The windfalls might be over, he said. “But over time farming is still the place you want to be.”
