The quickly approaching harvest will create numerous price ramifications in the weeks and perhaps months ahead.
Considering that most areas received ample rainfall and that there hasn’t been a lot of sustained heat with temperatures over 30 C, it’s actually a bit surprising that many pea, lentil and barley crops have significant ripening. The first harvest reports aren’t far away.
Conventional wisdom is that harvest pressures prices and this can certainly be true in crops like peas. If the crop looks big and producers are anxious to deliver off the combine for bin space and cash flow considerations, prices can soften.
With lentils, on the other hand, the best prices can sometimes be right at harvest time. Companies have shipping orders to meet and they can be anxious to get their hands on product.
Early harvest results always matter. If initial yields look high and quality looks good, prices are more likely to take a hit. If the reverse is true, the marketplace can react accordingly.
Quality is certainly a factor to watch with durum. Has quality been hammered by fusarium as happened in 2016? That year, there was no shortage of durum, but high quality durum was not abundant. A great deal of fusarium-affected durum was sold to feedlots.
Quality disasters of the past have shown that you shouldn’t give up searching for buyers even when a crop initially appears unmarketable. Uses can usually be found, but it might take a bit of patience. A crop almost always has a commercial value eventually and sometimes that value improves significantly as the market develops.
The yields and quality of canola and wheat matter to price levels, but not to the same degree as crops like lentils, peas and durum where Canada dominates the world export market. Our wheat has to be competitive with all the other exporters and our canola tends to be priced in relation to soybeans.
Harvest price pressure can be real in those crops if deliveries outpace shipping capacity, but our production doesn’t have a major impact on world prices.
On a minor acreage crop like mustard, it’s a different story. We dominate world exports and with mustard acreage down dramatically in Saskatchewan and Alberta there could be interesting ramifications. Even with good yields, it appears production will be down substantially.
Knowing that, producers might be inclined to hold product off the market in anticipation of higher prices to come. That market behaviour could magnify the shortage and create a self-fulfilling prophesy.
While initial harvest results are important to markets, what happens during harvest can have a huge impact. Extended weather delays from rain or snow can decrease quality with crops like lentils and durum particularly vulnerable. As the volume of lower quality crop increases, the price spread between grades will typically widen.
Although combines will soon be rolling in many southern regions of Western Canada, lots of crops are still grass green. We’ve been spared widespread early frosts for many years, but those events can decimate crop quality over a wide region with huge price ramifications.
Every year is different and a multitude of factors are all at play in the marketplace. Producers are anxious to get a handle on their yields and quality. So are buyers and end-use customers. Monitoring and understanding harvest results while watching price quotes can provide some clues as to the best marketing strategies.