Fantasy Markets: Is It Our Time?

Is this our time?  Old crop and new crop corn is pushing $6/bushel.  Soybeans are pushing $14 and $15/bushel.  Diesel fuel is $1.32 per litre.  Soft wheat prices though down from their winter highs, are still pushing $6/bushel.  Even the Canadian dollar has backed down from its November 7th, 2007 high of $1.1003 U.S. to 98.15 cents U.S.  Is it our time?  I dunno.

However, it sure feels that way.  I can remember a mere short two years ago mounting several platforms with thousands of farmers in front of me.  It wasn’t an easy time.  We had $5 soybeans, $2 corn and no agricultural safety net to help us.  Ethanol was an abject theory in Canada and it seemed everybody was looking for an answer.

Maybe what I should have said was go home, produce as much grain as you can, then throws all the marketing rules out the window.  Wait, wait and wait some more and you’ll be the benefactor of some of the best grain prices you could imagine.  In fact forget about the best you’ve ever experienced, because we’re going even higher.  Throw out those past marketing rules!

Let me give you an example.  Last fall forward contract wheat prices were about $4.40 Can./ bushel delivered to an Ontario elevator in July of 2008.  Historically, that was quite good.  It led one respected Canadian cereal specialist to say publicly on the radio during fall wheat seeding to “plant and sell”, “plant and sell.”  Needless to say, we all know the rest of the story.  Wheat markets exploded and for those who relied on that advice or simple historical averages got left behind.  Throw out those past marketing rules!  Of course nobody knows what the market will do.  That’s of course is why that statement from a cereal specialist was such a mistake.

Still, there is a bit of “fantasy” in all of this.  It’s like the ground we’re walking on refuses to stop shifting.  For instance I took part in the DTN Webinar this afternoon given by DTN Senior Analyst Darin Newsom.  If you haven’t taken part in one of these, you should.  I’d like a lot more Canadians to take advantage of the great market intelligence Darin imparts.

I took back much from Darin’s words, but it was pretty obvious based on the market action of the day with Dec corn moving up to $6.70 and November soybeans moving to $14.32, Darin was making some important final changes to his numbers.  He even said during the webinar, some of his assumptions had changed based on the market action of June 5th.  In other words prices had moved through resistance levels and previous highs.  In many ways, he was directing us as if we were moving toward landing on Mars.  Nobody has ever been there before, but here we go!

For corn Darin pegged the futures target for old crop corn at $6.88 with the futures target for new crop corn at $7.18.  I’ll let you see the other prices for yourselves when DTN posts the webinar next week.  With the DTN National Corn Index currently at $6.29/bushel, it’s still a world higher than what we have in Ontario.

Of course we’ve all learned that as futures prices have moved higher, partly on the back of pin striped pirates (index and hedge funds) who no nothing about grain, basis has turned ugly.  In fact convergence or arbitrage, once taken for granted is no more.   Moving ahead if things continue to spiral upward, basis and cash markets in Canada may take on a life of there own.  However, into this vacuum, there will be many Canadians who look at historical averages and cry foul.

For those of you living in Quebec or Western Canada that might give you a warm feeling about your single desk grain selling agencies.  For instance in Quebec, many farmers don’t know exactly what they’ll be receiving for wheat.  Marketing for them is out of their hands.  And of course in Western Canada we still have the Canadian Wheat Board and despite the announcement of Barley freedom day again on August 1st, the chances are better of me being elected the Premier of Saskatchewan.  The political wrangling continues.

So is this our time?  Is it the time where finally you can capture some profits and plow them into your business?  Is it that time, where you finally can get that debt paid down?  Is it our time where we can make reasonable financial plans and actually expect to get everything paid ahead of schedule?  Is it time for soybeans to finally get to $20/bushel and corn to $8/bushel?  Is it our time?

I think so, but I’ll never be sure.  There has been too much water under the bridge to make me forget the price battles of the past.  I’m not sure I can throw all of those past marketing rules out the window.  However, this is 2008 and our marketing world has changed.  I must change with it and so must you.