Today’s Canadian Wheat Board Pool Return Outlook for 2010-11 pushes many prices up sharply – surprising no one – but there are no happy surprises awaiting those in the malting barley pools, which hardly moved at all.
Number One CWRS 13.5 pops up to $9.31 per bushel from $8.85 last month; Number Two CWRS 11.5 rises to $8.14 from $7.67; Number Three CWRS rises to $7.27 from $6.89. (With the bad crops out there, I’m quoting grades I wouldn’t normally mention.)
Number One CWAD rises to $8.55 from $8.08 last month, with other grades showing gains of 30-50 cents.
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Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
The B Pool for Feed Barley rises to $5.12 from $4.90.
Two-Row Malting Barley rises slightly to $5.53 from $5.49, while Six-Row rises to $5.16 from $5.12.
No one’s going to be surprised by the increases, after hearing about rapidly rising crop prices around the world, food riots overseas, and nothing-but-bullish outlooks from everyone and their neighbor’s dog Blackie.
But many will be disappointed by the lack of movement in malting barley prices, considering the world lack of the crop post Australia harvest disaster, even though most people think the board doesn’t really have any left to sell. Does the board have anything at all left to sell into this wonderful price environment? Doesn’t look like it. And there has been lots of talk around the ag markets about world malting barley prices not rising yet, as buyers are apparently scared to be the first guy who pushes prices through the roof.
Here is some of the commentary from the PRO about durum and malting barley, the two crops that farmers probably have had the most hopes for:
DURUM: “The demand story that is making headlines in wheat – a greater proportion of buyers showing interest in putting on coverage sooner than later – is also a dominant story with regards to durum. The market has finally realized that the supply of durum is tight.”
MALTING BARLEY: “Malting barley prices have remained firm over the last month and the market has begun to realize just how tight malting-quality barley supplies are this year. The definition of malting-quality barley remains very fluid. Maltsters who still have outstanding barley requirements will reduce quality specs to use any barley that can feasibly made into malt, which has worked to soften the price response to the tight supplies of higher quality.”
Funny how underwhelming a PRO with some big price increases can seem, taking one grade of wheat over $10 per bushel, but after hearing nothing but bullish news for weeks, it just meets what we expect. And verifies our fears about malting barley.
So, let’s look at some cheery charts, and hope future PROs keep going up like this one did.
Nice chart, huh? All these ags are up. What’s a little weird – and I didn’t torque the chart duration to come to this result – is that the three crops here have risen almost exactly the same amount over the past six months. This chart shows percentage of increase, and it’s interesting that with all the deviations from each other over the past few months, for all sorts of fundamental and technical reasons, they’re all back together again. This means nothing, but makes an interesting chart.
How much of this is a crops- or ags-specific rise? There’s the tricky question. We know all the bullish fundamentals, but let’s look at canola versus some things that have little fundamental connection: gold, copper and Brent crude oil. (WTI’s kinda wacky right now, so I’m using Brent as a better crude gauge.)
Rather similar, aren’t they. (Except for gold.) And rather reassuring, if you’re long crops. It’s nice to have powerful cross-commodity strength behind the ags. What does the gold aberration signify? Could be any of a dozen things, but the one I’m going to go with, because I want to believe it, is that the market has momentarily calmed down with its economic and financial fears and gold is settling back as the perceived need for people to buy gold bars to store in their basements in expectation of another financial apocalypse is lessening. With all the other commodities having nice rises recently you’d expect gold to be there too, as humanity’s favorite inflation hedge, but I suspect gold’s primary role recently has been a hedge against apocalypse, and while that has momentarily lifted, gold has momentarily drifted down, even as some inflation fears have rekindled.
