Are you embracing this big bottom that’s before us now?
Are you mad we haven’t bounced up off it?
Or are you too dark-minded to see it as a bottom?
Across the crop markets, prices have stopped falling – for some time now – and a couple have been edging up. Let me show you four charts. Here’s Winnipeg canola:
Pretty flat, huh? Here’s Minneapolis Hard Red Spring Wheat:
Here’s Chicago Soybeans:
And corn:
The two commodities of most interest to us – spring wheat and canola – are the flattest here, with both corn and soybeans showing a weak bounce off an at least near-term bottom.
But is this the new, long term bottom we’re all looking for?
An aspect of my job that has given me ample opportunity to discuss this with a number of analysts is the conference coverage I do most weeks. Especially in the mid-winter, from January to early March, there seem to be nothing but a fearsome phalanx of conferences calendaring their way towards me here in Winnipeg and around Manitoba that I have to run out and confront. The year always starts with my favorite farm show – St. Jean Farm Days in St. Jean Manitoba – and then picks up steam with events like Manitoba Ag Days in Brandon, the Manitoba Swine Seminar in Winnipeg and the Manitoba Special Crops Symposium. At most of these events – and it’s usually the highlight of the program and the most attended session – is the market outlook. This year I have seen a bunch of them, and quite a few were by the same two guys: Mike Jubinville of ProFarmer Canada and David Drozd of AgChieve. They aren’t connected, but they’ve both been visible this winter giving their in-depth takes on the longer term market outlook.
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They are men of radically different perspectives: Drozd favours technical analysis while Jubinville emphasizes fundamental supply and demand factors. But they are both looking for the same thing: a bottom to the crop markets.
Both think crop prices have probably moved up into a permanently higher price range since the late 2000s commodity market surge. The collapse since 2008 doesn’t suggest that the range is going to continue to be the same one as in the 1980s-2005 period. The market’s got to find a bottom somewhere and then begin trading between the high (probably 2008’s peak prices) and the new bottom. But neither is sure where that new bottom is going to be. That’s why this flattening of prices and soft bumps up in the crop market charts above are so interesting. These could easily fulfill a desire to see a bottom forming.
It’s right on schedule for Jubinville. “I think we’re basing and may see a four to six week period rising into spring,” Jubinville said at the special crops symposium. That was a few weeks ago and doesn’t conflict with how prices have continued to chart. He thinks we’re in a $350 per tonne to $450 per tonne medium term range. The flatness recently lends weight to that view.
Drozd, who also spoke at the special crops symposium, thinks there’s a strong chance this is not yet the bottom. He, like Jubinville, sees the $350 line in canola as important. (I believe the exact support level he sees is $353.10) But there are a lot of bearish technicals that suggest it could give way, with the next support level beneath $320.
Neither of these guys is convinced they know where the bottom is. It’d be nice if we have already reached and never again fall under $350 per tonne for canola. Both would be happy if the recent flatlining proved permanent. But nothing is clear as gin yet.
However, boys and girls, I think we have some reason to feel a little more confident that we did a few weeks ago. And that’s a nice feeling as everyone gears up the big iron for spring. This bottom may be big and flat, but it’s a lot softer now in the $380s than it would be if prices skinnied up.
