Farm Business Communications is starting off the new year with a new daily grain marketing commentary for our Alberta Farmer, Grainews, Manitoba Co-operator and Country Guide West websites. It’s prepared by Brian Wittal, who has spent more than 27 years in the grain industry, including as an elevator manager and producer services representative for Alberta Wheat Pool, regional sales manager for AgPro Grain, and farm business representative for the Canadian Wheat Board, where he helped design some of the new pricing programs. He also operates his own company providing marketing and risk management advice for Prairie grain producers. Brian’s daily commentaries focus on how domestic and world market conditions affect you directly as a grain producers. He welcomes feedback and information on market conditions in your area.
January 5 — Grain markets seem to have bounced off of the bottom and are finding support as we enter the new year on the hopes that a new U.S. president will instill confidence in the U.S. and world economies. Concerns of dry weather in parts of South America that could start to impact on soybean yields are also supporting markets for the time being.
World grain buyers are coming back into the markets as economic stability seems to be settling in and they to believe the bottom has been found in these markets.
World stocks for all major grains are in good to excess supply, so export sales need to remain brisk for the balance of the year for all grains to use up the inventory and the only way that will happen is if the price is right and buyers are encouraged to stock up.
Weather scares will always add some excitement to the markets in the short term, but what we need to remember in Canada is that we have a large canola inventory — and as long as our dollar stays at 85 cents or less we will do OK, but if it starts to climb again, canola futures will be forced to drop in order to remain competitive in the world market against U.S. and South American soybeans and/or palm oil.
Currently March canola futures are at $427 per tonne. There seems to be support at these levels for the moment but if weather concerns in South America change, or if the Canadian dollar rises, canola will struggle to stay at these levels.
New-crop November 2009 canola futures values are $457 per tonne, which would net back between $9 and $10 a bushel depending on your location and the basis you lock in. What’s your break-even? Is there a profit at these levels?
We have ample supplies of feed barley and feed wheat and I don’t see any real reason for these current prices to change strictly because of the excess supply.
World wheat markets are struggling to maintain current levels, again due to the fact of large world supplies. New-crop prices being offered through CWB basis contracts are something to watch, as they do offer some decent returns based on historical prices.
We will be back tomorrow with more market intel. — Brian