Cash grain prices in Western Canada are starting to rebound off the harvest lows, but not by much. Canola has seen some strength, as it continues to hover around $500 CAD / metric tonne on the Winnipeg ICE futures board. On the cash markets, $11 CAD / bushel is available for deferred delivery and should not be ignored (you’re making money at that price!). Hard red spring wheat cash prices continue to trade sideways for the most part with spring 2018 cash prices in Western Manitoba only about 40-50 cents / bushel above the spot price near $6 / bushel.
The sideways wheat prices aren’t just being seen in Western Manitoba but also globally. But the weight on wheat prices is helping to spur buying interest. For example, Algeria has purchased 660,000 metric tonnes at a delivered price of roughly $211 USD/tonne (or $7.20 CAD per bushel). But part of the reason that wheat prices haven’t really gone anywhere is because global production estimates continue to grow. The Russian wheat crop was upgraded by private analyst IKAR. They bumped their estimate to 83.7 million tonnes compared to the USDA’s current forecast of 82 million tonnes.
Further, Australia is finally getting some rains. The weather should help the summer crop, but it is slowing the pace of the winter crop harvest. National Australia Bank still thinks that there will only be 18.7 million tonnes of wheat produced in the Land Down Undaa in 2017/18. This figure would be a 10-year low and half of the monster crop produced last year. In Argentina, Lanworth raised its forecast for the 2017/18 wheat harvest to 16.8 million tonnes. Lanworth’s number is still below some other forecasts, but given the rains there, we have a lot of unknowns of Argentinian wheat production (and quality) at this point.
FocusEconomics tracks analysts’ global expectations for primary agricultural commodities. Analysts have shown an increase in bullish sentiment for corn. For futures values, 4Q2018 corn prices are pegged at an average of $4.25 USD/bushel, according to their insight. Currently, the December 2018 corn contract sits around $3.93 per bushel. This means analysts anticipate corn prices to increase by a little more than 8%. For soybeans prices, average forecasts come in at $10.00 for late 2018 contracts. This is in line with the current value for November 2018 soybeans futures contracts. For Chicago soft red winter wheat, the average analysts’ guesstimate is for $4.80 per bushel. That’s about 35 cents/bushel lower than the current value of the SRW December 2018 contract at CBOT.
Many, including yours truly, wish that these prices were available for movement tomorrow! They’re not. But deferred delivery of 2017/18 and even new crop 2018/19 pricing is attractive. My ask of you: don’t tread sideways. Book an appointment with your banker AND accountant before the end of October. Set up cash targets at the local elevator and also post that later delivery or 2018/19 forward contract on FarmLead.
Brennan Turner hails from Foam Lake, SK, where his family started farming the land in the early 1900s. After graduating with an economics degree from Yale University, Brennan played professional hockey and worked as a Commodity Analyst on Wall Street before starting FarmLead.com. FarmLead was named one of Canada’s top startups in 2015 and one of Forbes most innovative companies in agriculture in 2017.