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2018 was a year with potential

Most commodity prices followed the same trend in 2018, hitting their highs in May

corn harvest

Winter is the time to review what happened last year, and take those learnings to heart as we prepare and plan for the coming year.

First, let’s look at the Canadian dollar in 2018. The dollar has a major impact on both the costs of farming and the returns on commodity sales. Currency risk needs to be managed as part of your farm business plan.

The Canadian Dollar started out 2018 in the $0.80 range and topped out at just over $0.81 in late January before starting a long slow slide to a low of $0.73 on Dec 31. That’s a 10 per cent drop in value from the high of $0.81.

If the dollar had stayed at $0.81 this past year then you most likely would have seen a reduction in overall revenues from your grain sales of around 10 per cent due to the dollar, as prices would have been competitive at world market values. For example, instead of selling canola for an average of $11/bushel you likely would have been selling it for $10/bu.

Grain markets in 2019

Canola futures started out 2018 trading in the $500/t range and pushed to the year’s high near $530/t at the end of May. Then prices fell slowly downward to a low of $470 in late November, with a $20/t rebound before heading back down to a low of $470 again at the end of December. Year-over-year, canola futures were six per cent lower January 1, 2019.

Canola prices are strongly influenced by the U.S. bean futures. See if you can spot any correlating factors between these two markets this past year.

Minneapolis wheat futures started out 2018 trading in the US$6.25/bu. range and hit a high near $6.65/bu. at the end of May before plummeting $1/bu. in June, then rallying up $1/bu. in July due to weather. From there, futures took a steady walk down a steep hill to a low or $5.44/bu. on Dec 27. Wheat futures are down 13 per cent year-over-year.

Soybeans started 2018 trading in the US$9.70/bu. range and hit a high the end of May near $10.60/bu. Due to rains starting and the big crop potential, beans dropped hard over six weeks to a low of US$8.65 and then it spent the rest of the year trading in a range from US$9.30 to US$8.25, closing out the year at US$8.80/bu., down 10 per cent year-over-year on January 1.

Corn started 2018 trading at the US$3.50/bu. range and hit a high like all the other grains at the end of May, in this case, near US$4.35, only to follow the same pattern as beans and drop over the summer due to rain and potential for a big crop. For the balance of the year futures struggled, closing the year out at $3.80/bu., up nine per cent year-over-year on January 1.

All of these grains hit their high value for the year at the end of May, no doubt due to weather. The spring season started off well but turned warm and remained dry through May, pushing futures values higher. Then the rains started and futures markets began to pull back. Rains continued and futures fell even further, trading in the lower levels for the rest of the growing season. North American crops were estimated to be better than average, giving the market a level of comfort that stocks would be ample for the coming year. Buyers were in no hurry to purchase new crop.

It is easy to see now that the best time to have pre-priced last year’s crop would have been in the later part of May or early in June as the markets began to decline. But how could you pre-price grain when you were facing a potential crop wreck due to dryness? You weren’t sure if there would be rains, or what would happen at harvest, or what sort of quality you would have.

Here you are again on the rollercoaster of emotional marketing that I have referred to in previous articles that will most often keep you from making good solid marketing decisions for your farm! Did you know your costs of production for every crop you grew in 2019? Did you run your breakeven analysis for each crop you grew, so that you knew what prices you needed to be selling at to be profitable?

About the author


Brian Wittal

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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