In a year everyone would rather forget, one very bright spot has been the 2020 harvest. The weather cooperated and, generally speaking, crop yield and quality have been very good to excellent across the country.
Global demand is looking pretty good too, says Bruce Burnett, director of markets and weather information with Glacier FarmMedia. “Generally the markets have gone up,” he says. “Recent Canadian Grain Commission (CGC) numbers show we had the best August for exports to China, with good demand from Asia overall. That’s put some air in the market.”
Commission (CGC) numbers show we had the best August for exports to China, with good demand from Asia overall. That’s put some air in the market”
Director Of Markets And weather Information Glacier Farmmedia
Indeed, the CGC’s August export figures show canola, wheat, barley and peas all doing well: just over 450,000 metric tonnes (MT) of canola went to China and Japan together, China alone took nearly 220,000 MT of wheat, 136,000 MT of barley and 74,000 MT of peas. “The only crop that hasn’t seen a jump is soybeans,” says Burnett.
And perhaps that’s nothing to worry about yet. “This is just one month into the new crop year, so you can’t say this is a trend by any means,” he says. But it is a good signal. “The 2017-18 and 2018-19 crop years were strong, then exports really dropped off in 2019-20 because of trade issues and disputes. So it’s encouraging to see exports come back like this.”
Grain prices are rising, too, and part of this is a result of an unexpectedly small U.S. corn crop. “The USDA was predicting a 2.2 billion bushel carryout at the end of the crop year, but stock levels came in below two billion so we are starting this year with smaller stocks of corn,” says Burnett. “And because the crop is below early expectations and demand for U.S. corn is strong, prices are increasing. It sold a record amount to Asia, particularly China, and this is driving markets.”
To recap, then: the price outlook for grain has improved, transportation logistics are fine and there is good demand for all the commodities we produce. There has to be a catch, right? Well, if there is, it’s the all too human temptation to want too much of a good thing.
“Making plans for next year will be interesting,” muses Burnett. “Do you grow more canola because the price is high? And do you take away from pea acres to do that, but pea prices are also high?” The old expression about borrowing from Peter to pay Paul comes to mind.
Even wheat presents a conundrum. “Wheat prices on a cash basis are not that great right now, but they’re okay. And with demand rising and quality high, they will likely increase despite record world production. ” says Burnett. “This is one of those scenarios where you pick a crop, any crop, and it’s good news.”
It is awfully tempting to hold off on some selling to gain a higher price, but managing risk is still critical. “The problem is, when prices are going up, they don’t go up forever,” says Burnet.
“If you’ve marketed to your cash flow needs already and you can capture some carry in the market, then great. But have a plan, look at harvest quality, and stick with your plan. When you’re supposed to be selling, then sell.”