Commodity prices may have peaked in 2011, ProFarmer analyst Mike Jubinville told farmers attending the St. Jean Farm Days.
“My gut feeling right now is that the heights have already come in,” Jubinville told producers.
“It’s not that I’m feeling bearish about the marketplace going into 2012, personally I think that there is going to be opportunity for growers to lock in some reasonable prices,” he said.
The one exception is canola futures, which continue to be strong and providing support for cash prices. However, he said basis levels will likely start to widen before the price of canola futures can climb any higher.
Cash bids on old-crop canola currently range between $11.75 and $12 a bushel, while new-crop bids are coming in between $10.75 and $12.75 a bushel.
But the analyst cautioned that macroeconomics, dry conditions in South America, and the anticipated open market in Canada will also affect prices in the year ahead.
“There are so many variables at play here and so many things we can’t predict in advance, so a lot of these things are going to evolve over the course of 2012,” Jubinville stressed.
If the Canadian Wheat Board does enter the open market as now expected, Jubinville said people will be looking at fall-delivered prices for wheat, durum and feed barley, as well as past CWB outlooks in an attempt to predict prices. But the commodity specialist said those aren’t “bankable” numbers.
Despite ongoing legal questions surrounding the future of the CWB, Jubinville said forward pricing offered by grain companies gives farmers a realistic picture of what to expect for their crops. He recommended his clients go ahead and sell 20 per cent of the new wheat crop now.
“Historically speaking, there has not been a time in the history of Canadian agriculture where you’ve been able to lock in a forward price of $7 per bushel for wheat at this time,” he said.
Some growers expressed interest in holding on to old-crop wheat for the new-crop year, but Jubinville described it as “rolling the dice” on prices.
Does it pay?
“Is the market really paying you for holding that wheat for that long? I’m unsure of that,” he said. “There is uncertainty in the wheat market, it is a well-supplied, international marketplace, based on its own supply/demand fundamentals — it doesn’t look particularly bullish.”
Jubinville said he is cautious about saving old crop if he can’t secure an old-crop price ensuring a significant premium.
Oats were the black sheep of the 2012 outlook, defying supply-and-demand fundamentals, he noted.
“Every year there is always one commodity that confounds me and seems to operate outside of what supply and demand suggests it would do,” he said. “One would think there would be a premium entering on to the marketplace… there is this dynamic relationship between oats and the corn market and oats seem heavily discounted relative to corn in this environment.”
He added there is little if any benefit to holding on to last year’s oats for better prices and expects the price to stay between $3.25 and $3.40 a bushel
“I had some grain I was going to hold on to, but after listening to this I’m going to really look at selling it, because it sounds like now is the time,” said Reg Wachtendorf, who grows canola, oats and soybeans near Niverville.
“And the fact that he said oats weren’t going up — that surprised me,” he added.
The prospect of low and steady oat prices was a disappointment to many at the annual gathering.
“I’ve got oats still in the bin and was hoping for more than the $3.30 he was talking about,” said Jim Stoesz.
The Altona-area farmer now plans to sell his oats this spring, aiming for the possibility of a slight rally in pricing as new crops are planted.
“But I was happy he wasn’t talking collapse in prices,” Stoesz added.