Farmers are hoarding crops as they would Halloween candy in hopes they may be in for a winter treat.
“We’re all kind of cautiously optimistic that commodity prices will recover somewhat because the fundamentals are still there,” said Ian Wishart, president of Keystone Agricultural Producers.
Farmers marketed grain for cash flow straight off the combine but plenty are taking the wait-and-see approach with what remains in their bins, anticipating better times ahead.
“I think we’re going to see some over-winter price strength, frankly,” said Wishart.
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“That’s the general feeling amongst the farm community and you can track that in sales because nobody is selling much right now.”
Deliveries of most crops are down from last year, according to the Nov. 2 issue of the Canadian Grain Commission’s Grain Statistics Weekly report.
Wheat and canola are the only two crops where deliveries are up. Overall, deliveries are down four percent from 2007-08. That’s despite an 8.2 million tonne or 13 percent increase in grain, oilseed, pulse and special crops.
Brenda Tjaden-Lepp, chief analyst with Farmlink Marketing Solutions, said farmers appear to be listening to prognosticators who are telling them to lock the bins until the markets come back.
“I think that is terribly irresponsible advice,” she said.
There has been a “sickening drop” in crop values in recent months and some special crops simply can’t be moved because no bids exist.
“But good grief, this is not the end of the world as we know it,” said Tjaden-Lepp.
Prices for many crops have been profitable throughout the freefall. She said it is wrong-headed of farmers to stop delivering under the assumption that agriculture is not affected by the financial turmoil that has gripped the world economy.
“To say it is all going to be fixed by January, that is dreaming. That is absolutely dreaming.”
Farmers need to realize the international trade of agricultural commodities is also affected by the global credit crunch, she said.
Every week there are reports of shiploads of grain being stranded at port as buyers back out of contracts signed when prices were sky high. Other buyers can’t get the letters of credit they need to import grain.
“This is not somebody else’s problem,” said Tjaden-Lepp.
“That is a really unfortunate perspective that’s out there. That is going to lead to some nasty surprises.”
Greg Kostal, president of Kostal Ag Consulting, expects a season-long game of cat-and-mouse between farmers and grain handlers.
“Farmers have sold what they wanted to sell and have squirreled away what they are comfortable with,” he said.
He doesn’t foresee much upward movement on prices given the piles of grain lying on the ground in the countryside.
“Users know it’s a buyer’s market. They’re not going to chase it higher,” said Kostal.
On the flipside, while farmers won’t be able to hang onto their grain forever, they will be selective about when they release their grip.
Kostal predicts the marketing pattern for the remainder of the year will be small price blips causing farmers to sell in spurts. He has already seen the first signs of that with the canola basis narrowing in recent weeks, enticing farmers to move the oilseed.
“The most probable scenario is that we’re evolving into a choppy sideways range. Supplies are much bigger but you just selectively feed the elevator pipeline,” he said.
