The calendar says it’s spring, and we’re ramping up quickly towards the seeding season.
Although plenty of cropping plans are already completed, it’s that time of the year where last-minute decisions are going to be on the table.
Neil Townsend, market analyst with GrainFox, joined Lyndsey Smith on Wednesday’s edition of RealAg Radio to discuss what the markets are telling us about acreage swaps, fall pricing opportunities, and thinking ahead to 23/24 crop year.
In the last while we’ve had some tumultuous circumstances: major banking issues, China visiting Russia, etc., and it begs the question; is the current pullback we’ve seen in the markets all related to this?
Townsend says that in the Canadian environment, where one of the major issues is inflation, there’s a perception that food is very expensive — which, anyone who has visited the grocery store lately would likely agree with — but what we often don’t think about is the difference between a farm product that’s shipped to an elevator or exported in bulk versus something that reaches the grocery store shelf.
“I think in the environment of all this uncertainty and volatility, people are uncertain which asset class they want to hold. There’s no right answer right now, because we don’t know if the main concern is interest rates. Because that seems to have capitulated these banks, or is the main interest inflation? And that sort of tends to theoretically hurt everybody,” he explains.
Looking at the volatility in the commodity markets, although we’ve seen a drop across the board, canola has really witnessed some weakness. This, says Townsend, is mostly coming from the European market, as it’s really been beat down, and is the lead in this situation. (Story continues below interview)
“What’s happening in Europe is there’s relatively good production potential next year, but there’s a lot of cheap canola — or what they call rapeseed — available for import, like record crop from Australia, and significant amounts pouring in from Ukraine over the border. So the market has started to go down,” he notes.
“I think the big fear is that we’re going to lose out on export market share, because of this abundance of Australian production. My only comment there was that we haven’t really seen evidence of that yet.”
For wheat, although it’s a bit of a mixed bag, Townsend says you can expect there is going to be strong demand for Canadian wheat.
“We might have an export program that we haven’t really seen in the past — with more wheat than we’ve shipped in many years.”
That could be because of decreased production out of Russia, as Townsend says that Russia has has a very big export program this year. There’s two views on their production last year. One view is that Russian could have a 100+ million tonne crop, but the other perhaps more realistic view is a much reduced crop, somewhere south of 85 million tonnes.
“Russians themselves, and people who are well suited in Russia are talking about an 83 to 85 million time crop there. So if you take their number of 104… we’re talking about, you know, almost a 20 per cent decline. And [if] you just add it all up, and you’d say that probably their ability to export in 23/24, will not be that what it was in 22/23. And I think that bodes very well for Canada with the smaller Russian production of smaller Ukrainian production, very short crop and Argentina that just happened,” he says.