Many western Canadian farmers are facing a marketing problem they haven’t had to think much about for the past five years.
They, and many of their neighbours, will probably have a good crop to sell into a glutted market.
No matter who you spoke with at Ag in Motion, farmers reported having or seeing great crops across most of the Prairies. If that continues through harvest, there could be a lot of crop out there.
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That’s a better problem than having too little crop to sell, but it does bring its challenges, some of which farmers might have got a bit rusty with in the recent drought-reduced and flooding-reduced seasons. It’s time to knock off that rust and lube the gears.
“They’ve got to sharpen their marketing skills because we’re in a different environment,” David Drozd with AgChieve told me at AIM.
“Don’t wait for the harvest lows to sell. Start looking for opportunities now.”
(You can watch the three minute interview with Drozd, below, for more on this.)
It’s been easy to move most crops in recent years because grain companies didn’t have enough. That made it easy to move on good basis, usually for good prices based on short crops.
That probably won’t be the case this year if things get to maturity without disaster. For example, on the cross-Prairies tour that MarketsFarm’s Bruce Burnett recently competed, durum looks to be 19 bushels per acre better than last year, unless it gets blasted by heat. That’s a lot more durum.
He’s pegging wheat yields at about 10 bu. per acre above last year. Canola could be up about five bu. per acre. Pulses look much better than last year.
(See Sean Pratt’s interview with Burnett below.)
“You’re going to see some pressure on the grain-handling system, especially for the first third of the crop year,” Burnett told me on the final day of AIM.
While most crops should be better supplied than in previous years, some will also be oversupplied in world markets, such as cereal grains, which are facing a huge incoming U.S. corn crop. Corn futures have slumped from late June from nearly US$5 per bushel to just above $4 today. That has a negative effect on all grain prices.
U.S. soybeans have also been grinding lower, which doesn’t help canola values.
Pulses and special crops are in a more variable situation, depending on each crop’s unique supply and demand fundamentals and the markets they trade into.
“I think the strategies are going to be different for each of these commodities,” said Burnett.
(For much more on the special crops outlook, especially for mustard and lentils, see the video interview with BroadGrain’s Peter Gorski below.)
The time to start thinking about strategies is now, not when the crop’s flooding in at harvest, bin space runs out and bad decisions can be made in a rush. Lots of farmers are beginning to do that now, despite being spooked by the short crop years when having enough to satisfy contracts became a worry.
Farmers are also beginning to liquidate old crops they’ve been clinging to. A few analysts told me that they keep coming across farmers who still have substantial crop in-store. For some it’s been a matter of hoping for better prices. For others it’s a gamble on quality spreads. Others just like having “money in the bank.”
However, with a possible flood of crop coming to market in a couple of months, moving that old crop is something a lot of the analysts are urging.
“There were a lot of grain trucks on the road,” said Burnett of what he saw on his 3,500 kilometre crop tour.
“It’s been in fairly tight hands until now.”
As those hands loosen, one of the dynamics of recent years will slip. It’s going to be a different market, unless something goes very wrong, and we need to ponder what that might mean for a crop that some think could be a record.
It’s a nice problem to have, but that doesn’t make it less of a challenge that needs to be faced.
