So how are you feeling about crop prices?
Down? Flat? Kind of uppy?
There were reasons offered by crop market analysts at the Manitoba Special Crops Symposium, which has been going on here in Winnipeg for the past two days, for feeling all three ways.
Where are we at? That’s where all the analysts agree: prices have dropped since early January and have – at least temporarily – stopped their descent. There were divergences past that point.
David Drozd, the Winnipeg technical analyst offered a cautiously bearish outlook, suggesting that crops like canola show all the signs of being unable to break out much to the upside. Every time they hit resistance levels they have been bumping off them – a bad sign. Canola could easily fall back down to the $353 per tonne level, and if it breaks through that it could fall down to the $313-317 area. He’s not looking for a lot of upside surprises.
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More positive was Mike Jubinville, another Winnipegger who thinks the present flattening out of canola prices and most crop prices is the sign of a market trying to build a base from which to rise. He’s holding to his long term view of most commodities, which is that they tend to go through two years of rising prices (done that), go through two years of weakening prices (done that) and then go sideways in a range for a couple of years. He thinks we’re right now at the start of that sideways bit, with a range of $350 to $450 for a couple of years. Â In the near term, rather than a fall back like Drozd is expecting, he thinks the odds are on for a spring rally that could reach $405 per tonne, or about a 50 percent retracement of the recent fall.
There has been lots of chatter around this special crops event about special crop bids falling noticeably in recent weeks, as the other crops have plunged. Special crop bids haven’t fallen nearly as much, but they’re down and buyers have backed off the market. Jonathon Driedger, another Winnipeg-area analyst, gave a cautiously optimistic assessment of the situation: prices are likely to strengthen and he’d be leery of taking many old crop edible bean prices now, but if they rise a few cents farmers should consider taking them. He’s not outright bullish, but he thinks the present sell-off will wear off soon and buyers will come back to the market and bid prices up a few cents. There are six months left in the marketing year and lots of time for this present weakness to fade, especially with relatively tight stocks.
Jubinville noted that this is around the point in time every year at which the crop markets move into a strengthening phase. It’s a well-known phenomenon in the corn and soybean markets. There are often ugly surprises early in the calendar year that depress prices (like this year’s Jan. 12 USDA reports) and if there aren’t weather threats to the South American crops (this year again) prices weaken further. But then, from mid-February onwards, the markets begin worrying about buying enough new crop acres to ensure an adequate supply and North American weather and soil conditions begin to rattle markets. So things tend to get better until June proves that a big enough crop has been planted, and they weaken again. That sort of set-up seems to be occurring this year.
A sunflower grower I was speaking with senses the sunflower market is in transition right now. The old crop contracts have mostly been swept up by the companies and they’ve backed off the market until they find some more demand. But once they find it they’ll be back and trying to get whatever’s left in farmers’ hands, and they’ll do that by boosting prices again.
So where does that leave us? Is the market going down, going flat, about to go up? If you went to the Manitoba Special Crops Symposium and listened to the market outlook sessions and tried to come up with a consensus view this is what you would get: I dunno.
