Spring in my Step

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Executive Summary

Once again another spring is here. The Twitter world is now flooded with baby calves, tractors and chemical deliveries. The market is concerned with supply and demand, politics and of course weather. Come to think of it farmers are also obsessed with weather. :)

Here in Canada, farmers had some good opportunities to price grain at pretty good prices. For the most part $7.50/bu HRS wheat was easily achievable, 11 dollar canola and of course who can forget barley. This year feed barley decided no more second fiddle. For the first time in many years feed barley traded above $5/bu for a significant time. In fact, most people have never seen barley march to its own drummer to the same degree that it did this year. Many a grain farmer welcomed this gift. However, now is the time to look forward to new crop.

World Ag Stage

Where is all this grain coming from? Stocks just keep growing. This does not paint a bullish picture for grain.

As the chart below clearly demonstrates, the world ending stocks have increased substantially. In fact everything has doubled; corn has almost tripled. Don't kid yourself the current prices may very well be in line with the current supply and demand situation. Perhaps, politics is only an excuse?

Canada Grain

The biggest issue farmers are facing this year will be the political factor. Yes, we can all agree that politics has always played a huge role but it seems like politics is dirtier than ever.

So, what does a farmer do?

Since seeding plans are almost complete, there is little that one can do in terms of flex acres. Now, we must all turn our heads towards effective marketing and what does that look like? This year things look complex, it looks competitive, and I dare say wild.

Folks, this is the new world. It's the new normal. It's my specialty.

How do we move forward in such great uncertainty. Did you know that a 2.5% increase in net selling price could net the average central Alberta farmer an additional 30 grand?

As a producer how do you manage this kind of financial risk?

Let's take a moment to discuss the feed barley market, perhaps we can delve into canola and wheat at another time.

2018 barley market caught the majority of traders by surprise. The market stood alone and rallied an exuberant $1/bu while wheat and canola basically remained flat during the fall and winter. For example, On Aug 3, Oct 31 and March 13, I traded #1 HRS wheat at 7.50. Barley is a completely different beast. It has rallied from 4.25 on March 2, 2018 to, as of last week, 5.25.

In short, the Canadian Barley market was basically a "made in Canada" opportunity. The strong rally was precipitated on a small 2018 crop, a low dollar which made exports attractive and corn imports competitive. It was the perfect storm for a singular crop rally. And as we all know the markets will always find a way to return to equilibrium. Don't expect barley bids to

start with a 5 this fall. Reality says, new crop will return to normal spreads and there will still be excellent windows of opportunity; however, farmers will need to develop cat like reflexes.

An article in the Canadian Cattlemen shows us a very important number. That number is the total carry over. The 2019 marketing year is estimated to have over 2 million tonnes as opposed to 1 MMT this year. A carry over like that puts us into 2016 levels which from my records shows barley prices closer to $3.50/bu. Now, lots has changed since then like an elevator export program, but the fact remains: more barley in the bins.

Armed with this reality it is time to make an educated evaluation on where these barley prices will end up in the next 12 months. What kind of range will it trade in? Well, in my opinion, I believe barley will trade between 4 and 4.50. I think under the current situation this is a very real target. If you only consider the Canadian/China spat and the fact that there will be 93 million acres of corn grown in the US. Those two factors alone is enough to convince me that barley will lack luster this following year. Now throw in an expected increase in Canadian Barley acres.

Basically if you have any old crop left now is the time to sell it. As for new crop it is time to determine what is a reasonable price to sell at. If you don't know you need to call me.

Hunting for Bushels

We are currently looking for

25,000 Bushels of Barley,

16 loads of Feed wheat, 6 loads of green peas. -

If you could help us out we would appreciate it. Thanks in advance. call 403-782-5488

What Are We Learning Right Now

The other week I spent a day at a conference learning about the hemp in Canada. I thought it was very interesting; however, I'm slightly skeptical that hemp will be the next big thing in Canada. From what I gathered I do think it has potential to become minor crop that does make financial sense on certain farms.

I was especially intrigued by the potential of CBD, a non-psychoactive cannabinoid. Apparently that industry is posed to have huge growth potential and is predicted will hit $22 billion US by 2022.

Things We Need To Consider

The current political rhetoric is a complete wild card. As crop plans are being finalized everyone should consider the political ramifications of each crop. For example, peas are closely tied to India, Saudi Arabia uses a lot of barley, China buys everything, US imports corn into Canada. Unfortunately, politics are part of the supply and demand equation.

Moving Forward

We have about 6 months before new crop arrives in full force. As far as marketing is concerned, the number one thing you can do is take stock in your fall financial obligations. Then plan for them accordingly. Because with the current world situation anything could happen at any time and you don't want to be caught holding the bag.

Call To Action

Guys and Gals. Make sure you pass this edition of Market Insights onto everyone you know. The more informed everyone is the more Everyone Wins.

Thank You.

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Any Questions, Remarks, Queries, Ideas or Topics:

Types of Grain Traded: Barley, Wheat, Canola, Off Grade Canola, Peas, Pulses, Oats, Flax, etc.

Basically, I can find a home for just about anything.

CALL GREG

Office:403-782-5488