Executive Summary
Risk Management is key. Regardless of your personal stance, whether BULL or BEAR this market will have your head on a silver platter if you are WRONG. Make no mistake, in this market it takes only a fraction of a second to lose a million or so. With that in mind lets take a few moments and maximize this 2021 crop.
World Commodity Stage
These markets are WILD. Limit moves have now become common place in many commodities. The weird thing is that this extreme volatility has bred complacency in many farmers which is incredibly ironic. It seems that prices will always return back and there will be another shot. However, this is not true. Just look at Bitcoin. It has dropped by almost 50% in a matter of days. Although Bitcoin is cryptocurrency, it demonstrates that money is looking for a safe home and right now, money is single and ready to mingle. This is incredibly important for commodities because this “homeless” money will create volatility.
In my opinion, at this point in time, the only thing farmers need to focus on is government policy and weather. Throw supply and demand out the window ‘til harvest.The reason why I say that is because supply and demand is relatively range bound and slow moving. Government policy and weather will cause a rapid change in perception of what is to come. This rapid change will translate into a volatile market in a world where the S&D is already on edge
Bulls and Bears
Canola
This spring there has been close to 5 million metric Tonnes of new canola crush capacity which translates into approximately 7 million new acres of canola grown in the next 3 years. This is HUGE.
Overall, the supply is extremely tight and every bin in Canada is empty.
Demand is very strong! There’s a reason why 3 new crush plants are being built.
Don’t worry too much as canola prices are likely to remain strong. It goes without saying that this year’s crop will be a market mover.
Barley
There is virtually no barley left in the country; however, it is almost June and demand is starting to taper off as cattle are coming off feed and headed to the BBQ.
The rain event that happened on Monday, May 24, 2021, changed the game as most of the prairies got a significant drink which pretty much guarantees a crop. As a result, the barley price has dropped almost $1/bu.
Wheat
Wheat has been hit on all sides. The big elevator markets got hammered along with the futures and lost much of their lofty prices. In the feed world, the price did the same as barley. It too dropped $1/bu.
Although the weather is having a very bearish tone, I remain optimistic because the net acreage is down and wheat will continue to follow both soybeans and corn.
wrap
This 2021 growing season is almost perfect. Most farmers seeded fence post to fence post. Every slough got seeded. Then a few days after seeding was done the majority of the prairies received a much-welcomed gift. Overall, things are looking pretty good. Yes, the market has come off it’s highs, yet the current fall prices are at decadal highs. Right now you need to evaluate your marketing risk strategy. The real situation is that these markets could move 1, 2 or even 5 dollars a bushel up or down. Unfortunately, this is a classic “can’t win for trying.” This is the reality you’re faced with. Perhaps, now is the time to focus on profits and leave the speculation to the speculators.
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