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Getting a handle on crop prices

It is the time of year crop price prognosticators spend a lot of their days, and likely a few of their nights, over their crystal balls and Ouija boards trying to get a handle on what prices will do in the coming months.

It is the time of year crop price prognosticators spend a lot of their days, and likely a few of their nights, over their crystal balls and Ouija boards trying to get a handle on what prices will do in the coming months.

And farmers flock to producer seminars and read every article they can to figure out what is best to plant once the snow disappears.

In the last couple of years farmers have been able to focus more on crop rotations and worry less about potential prices because almost every crop has seen profitable prices.

This year there is more volatility on the horizon for prices.

That is not unusual given the current situation.

High prices mean there was a generally tight supply of grains and oilseeds, and that usually means farmers, not just here, but around the world, will push production. They will plant more acres of crops which they think can make them the most money.

That is a pattern about as old as supply demand economics and food supplies.

When supplies grow tight prices rise, farmers produce more, and prices drop.

Regardless of outside influences, government subsidies, weather and similar, prices were going to face downward pressure based on increased production.

But this year appears one of those when prices could topple off the table, or bounce back to record highs.

The trend lower is the easy scenario. Higher production and normal yields would be enough to take prices lower. The better worldwide yields, the greater the influence downward.

In normal circumstances, recognizing normal in crop production is a fleeting thing, one would expect pressure on prices.

The reverse though is certainly possible.

Less than ideal weather in 2012 puts American production this year into question.

Less than ideal spring weather south of the border would be the signal for markets to move higher.

If any other weather issues were to affect the 2013 crop, for example here on the Canadian Prairies, then the sky could be the limit for prices.

Of course the triggers for the highest prices could mean farmers face low yields, meaning capturing the high prices may be difficult.

So like most years, farmers will face price uncertainty, but there are scenarios which could see recent strong prices continue through 2013.