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Changing times, yet again for grain prices

With risks of global change and bad harvest weather, farmers can take action

Over the past month a number of things have happened that are going to impact world grain prices.

Reports from the Ukrainian Ministry of Agriculture are saying that due to conflicts they expect that at least 15 per cent of the crops in Eastern regions will be lost because they have not been tended to properly. Shipments out of the major ports are continuing as normal, but there are concerns that any further escalation in the conflict could target these ports and cause some real problems.

Harvest in parts of the EU and the U.S. have begun and volumes look to be up from early estimates. This has buyers waiting to see how low prices will go as there looks to be plenty of volume available.

Rains in some regions of the EU, particularly France, and in parts of the U.S. and across the Prairies are is impacting harvest yield and quality. This is forcing some buyers who need high quality grains (wheat) to look elsewhere and or forcing them to buy up good quality old crop stocks or new crop stocks sooner than they had expected to cover their needs. This panic will help support prices for a while but there is still a lot of wheat harvesting to be done over the next four to five months.

Logistics problems continue to persist in the northern U.S. states where most facilities are full of newly harvested grain and waiting for rail cars to ship to port.

Will this problem rear its ugly head on the Prairies as we head into our harvest? Most likely, yes. We will no doubt experience the typical yearly harvest congestion scenario where grain comes in faster than it can be shipped. The question is how many cars will be available and which elevators will get them. If we see the railways follow their strategy from last winter of shipping from the closest points to port, then the Calgary Edmonton corridor elevators will be well served going to Vancouver and the facilities in eastern Manitoba will have good shipping to the Lakehead, but everyone in between might be sitting full and waiting for cars.

U.S. Department of Agriculture crop tours have concluded that the current U.S. bean and corn crops are going to be record-breaking crops.

Here at home

If we look at the current situation across the Prairies we find ourselves in a rather precarious place.

Crops in general are late compared to last year and the five-year average. Cool weather and rains have not helped, delaying maturity and bringing us very close to freezing temperatures. Frost was reported in northeast Alberta and northwest Saskatchewan in the later parts of August which will no doubt impact crop quantity and quality.

We need warm weather for another month. This would allow us the opportunity to export our milling wheat into those markets that the French cannot serve this year because of their poor quality crop, and hopefully help to elevate prices here.

Exporting feed grains from Canada is not very lucrative because of the freight and the location of the majority of the buyers. French feed wheat will already have a head start on selling into those markets because their harvest is two or three months before ours. They are also closer to the end users, so they can sell cheaper due to lower freight costs.

We will most likely end up marketing the majority of our feed grains into our local feed markets. The volume of feed grains we produce will dictate where price will go, especially if exporting is not a realistic option.

Another major concern is the massive record corn crop being harvested in the U.S. The U.S. regularly exports a huge volume of corn into the world feed markets but if those markets are being flooded by cheaper EU feed wheat then you will no doubt see corn values start to drop accordingly. They will continue to drop until they either buy back some of their export markets or they are cheap enough to sell into Canada (against our lower dollar) into our feed market. If that happens, you know what will happen to our feed grain values.

So how do you try to best protect yourself from these kinds of possible scenarios?

Do you realistically expect to get your entire wheat crop off without any frost problems?

If your answer is yes, do nothing and get it in the bin ASAP.

If your answer is no, maybe you should consider selling some feed wheat for immediate movement at harvest at current levels before prices slide any further if a frost event should occur.

Hedge or use options on the Chicago wheat futures to protect yourself from the worst case that some or all your wheat is feed and prices collapse over harvest.

Use crop and revenue insurance products like those offered by Global Ag Risk Solutions.

This way you can protect yourself against both production and revenue shortfalls to a minimum dollar value per acre. If you lose quantity and quality and prices collapse, that insurance payment could mean the difference between making a profit or facing a huge loss.

No one knows what will happen, but if you prepare and protect yourself as best you can with the right kinds of insurance and a good marketing plan you can greatly reduce your overall risk and exposure in the market place, become more profitable and sleep better at night.

About the author

Columnist

Brian Wittal has 30 years of grain industry experience and currently offers market planning and marketing advice to farmers through his company Pro Com Marketing Ltd.

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