That was the message producers attending an ‘Ag Appreciation Evening’ sponsored by Lakeview Insurance at the Grain Millers Harvest Showdown in Yorkton heard Wednesday evening from Matt Snell, Senior Risk Manager at Stone X in Chicago.
Snell began by admitting when it came to predicting what prices might do over the next year he had no idea, and suggested if anyone suggested they knew what might occur they would essentially be selling “snake oil”.
But, analyzing the current situation is easier.
“It’s been a perfect bull market,” said Snell.
In terms of canola Snell said he has “never seen prices as high as they are,” a situation supported by a lower Canadian harvest of about 12.7 million metric tonnes.
The lower production is significant as demand remains high, offered Snell.
“Demand is still there,” he said, adding it’s “starting to reduce our stockpiles.”
The situation is such that the veg oil carry-out in stocks to use is down to six per cent, said Snell, which “is the lowest we’ve seen in a very, very long time. There’s an insatiable amount of demand.”
The biggest driver in terms of demand is China, and there have been suggestions that country could increase purchases farther, but Snell said betting on that happening might not be the wisest move. He said to bet on China buying more “is taking a lot of risk in my opinion.”
But with prices in the $22 to $23 a bushel range right now things are great for canola sales.
“The market is telling me to sell right now,” said Snell. “I don’t know if prices are going to go higher ... They are the highest ever ... But, no one ever went broke making a profit.”
It’s much the same story with wheat.
“Usage continues to go up,” said Snell, and with “crop issues” in Canada and the United States, prices have climbed.
However, unlike canola the carry-out of wheat is higher, which may hold the market from going higher.
Snell added that the EU and Black Sea countries are now the largest wheat producers and he proclaimed growing conditions there “copacetic” which suggests good crops.
Still, today prices for wheat are good.
“If I have wheat, the market is telling me to sell now,” said Snell. “I can’t say they won’t go higher, but these prices are very attractive . . . They (wheat prices) don’t spend a lot of time past $10 (a bushel).”
What lies ahead is far less certain with a number of things which could boost prices farther or cause a decline depending how they play out.
For example, canola seems to be pushing to record high prices in isolation, which is unusual, said Snell.
“We haven’t seen the same rally in the soybean market,” he said, adding at some point consumers of canola oil may simply switch to lower valued soy oil.
And, in terms of soybeans a huge crop is being grown.
In Brazil “they’re planting fencepost-to-fencepost,” said Snell, and the U.S. has a huge crop.
“Canola can only go so far if beans don’t follow with it,” he warned.
Similarly, wheat is influenced by corn, and the United States has just grown the second largest corn crop in its history, so that is a factor to remember, said Snell.
And, moving forward Snell told producers to watch what is happening outside of grain and oilseed prices.
Snell said when COVID-19 hit there were fears the stock market would be hit hard but added “all of a sudden the government came in and bailed us out.” That bail-out allayed the fear people had and the market went up.
But, if investors get nervous and begin to sell off it can be a signal that commodity prices for grains and oilseeds could decline too, said Snell
“Another outside influence you need to watch closely is crude oil,” he said, adding that is particularly true in terms of canola “. . . As crude oil goes up we see increased demand for biofuels.”
The biofuel market looks to canola, soybean and palm oils for its production.