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Market outlooks at Farm Tech 2016

Understanding Market Bulls and Bears: Two farm marketing experts were analyzing the markets in Edmonton in January

I attended Farm Tech 2016 in Edmonton this January to see the latest in Ag technology.

This three-day ag information show was an early sellout once again, which shows just how popular it is. Those those attending the show are getting younger.

On the technology side there continues to be exponential development in the areas of new equipment design and improvements, seed varieties, chemistry technology, drone technology and farm management software that includes yield mapping, inventory management and monitoring systems.

All of this technology has been designed to help improve farm efficiencies and/or profits. All producers need to do decide which of these technologies will work best on their farms. Everyone’s needs are different, and “must haves” are different from “nice to haves,” which can make it very difficult for farmers to decide which is which.

The concurrent sessions covered everything from fertility management to weed, disease and pest management, market and weather outlooks, farm labour and farm and family dynamics, the future of food, management strategies and world ag trade.

I was not able to get to all of the sessions I would have liked to attend, so I chose the ones that focused on the grain markets and marketing.

Errol Anderson was the first presenter to do a market outlook and needless to say the room was packed. When a presenter starts out by saying, “Please don’t shoot the messenger,” you know it is not going to be pretty.

The markets

John DePutter also did a market review to a packed room. The two speakers were very consistent as to big concerns and what they saw as the possible outcomes for grain markets.

Both speakers talked about U.S. monetary policy around interest rates in a world of devaluating currencies. Errol Anderson believes that the projections for U.S. growth are misleading and that the U.S. dollar is going to have a day of reckoning soon!

They both noted that when the U.S. dollar starts to fall, the Canadian dollar will be pushed higher. This won’t be good for grain prices — our historically high wheat basis levels will disappear. Canola futures will come under pressure to remain competitive against U.S. soybean futures.

Another area of concern for both speakers was South America, because of the imminent harvest of another bumper bean crop. When you add that to the devaluing Peso in Argentina, farmers there have great incentive to sell into world markets, putting pressure on U.S. beans and Canadian canola futures.

Both speakers talked about canola supply and demand, and the fact that we have big supplies but demand is also very strong. But will that continue when the No. 1 buyer of oilseeds is struggling? China’s economy and the devaluation of the Yuan is likely the biggest concern.

China is the No. 1 buyer of commodities. If China pulls back on purchases, world grain ending stocks will increase, pressuring futures values lower.

Russia’s economic woes, and the collapse of the Ruble, are having an impact in the wheat markets. Russia continues to aggressively sell wheat into world markets in an effort to stimulate economic life back into the economy. This will keep world wheat prices under pressure until Russia runs out of exportable stocks, which looks to be a little while yet.

Pea and lentil markets are also at historical levels. This is due to production shortages, primarily in India. They continue to be in a hot dry spell, so prices are expected to stay strong. Anderson suggests new crop pea prices of $10/bu. or better are pricing opportunities that you should not let pass by.

World oil prices were mentioned only to say that if something should happen to drive oil prices higher this would also drive the Canadian dollar higher, which would not be the most beneficial for Canadian grain producers.

Both presenters felt that oil prices and the Canadian dollar seem to have found a bottom for now, depending on what may happen with oil supplies.

Recently, Russia and Saudia Arabia came out with a proposal to reduce oil production by five per cent in an effort to try to stabilize world oil prices. The mere mention of a reduction was enough to send crude oil prices and the Canadian dollar higher, so who knows, maybe the bottom is in in both of those markets.

So here we are back at my normal sermon: know your costs of production and your break even prices. The bigger risk this coming year is going to be the Canadian dollar. As it moves up the price for your grains is going to move lower. Be ready to act on pricing opportunities that will make you a profit!

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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