We’re into another weather market concerning our crop prices. No, it is not the 10 cm of blowing snow that I’m expecting tomorrow, it’s more so heavy rain that they’re getting in Argentina as well as the benign weather that the Safrinha corn crop in Brazil is currently enjoying. Something tells me that I’m a bit more concerned about that cold weather than South American rains. However, we did see a bit of life in the commodity markets this past week. Let’s hope it’s a trend that continues in the spring.
It’s hard to say because things are quite bearish at the moment even with a ripple in the grain market this past week has stirred the hope of many. Keep in mind, we took the long escalator down on the price front and usually we take the elevator up. I don’t see any elevator in my future unless it’s at Sabrina crop getting into big trouble in Brazil. There is still a chance for that, and market watchers will be in tune with that as we march through April and May.
You have probably heard it many times that hope is not part of a marketing plan. I do not necessarily concur with that as I’ve been through quite a few springs where hope is about all I had. However, as we head into 2024 maybe we should be a little bit more pragmatic on where we are. New crop corn in Ontario is being bid at about $5.80 a bushel as I write this. My question is should we all put standing orders in for $6 or $6.26 bu and sit back and wait. Is that being pragmatic or is that being a little bit crazy?
The answer of course is blowing somewhere in the wind. However, new crop bids right now are higher than what many producers can receive for their old crop corn. Might it be pragmatic to lock some in? Interestingly enough, I had a conversation with a grain merchant last week at the Grain Farmers of Ontario March Classic in London ON. He told me that some of his best customers never change, they just have a systematic consistent way of selling grain. Of course, in this down market selling old crop at this present time doesn’t give off the best feeling.
We all know that the non-commercial players in the grain market have been incredibly short for most of the winter season. In the last few weeks, we’ve actually had some of those non-commercial players covering their shorts or changing their market position. That is one reason why we have seen a bit have a turnaround in grains. It has always surprised me this year that we didn’t have a post-harvest rally. In many ways that shows you just how bearish things have been. Big supply has been winning big and that continues.
Thankfully there might be a little bit of hope in our Ontario fertilizer market. I listened to a presentation last week on how fertilizer prices are going to be lower this year than last. In fact, nitrogen products are a lot lower in a global market that’s been fractured beyond belief. A year ago, Ontario fertilizer supply was rocked from boats being sunk in the Black Sea as much nitrogen was sourced out of Russia. We all know how that ended up with sanctions and tariffs and much higher fertilizer prices.
Like Russian wheat on the world market, Russian fertilizer is also cheap but of course it is sanctioned since the start of the war. Canadians cannot access Russian nitrogen. Needless to say, it is being accessed through other points like in the Middle East but that is not a bastion of peace anymore either. As it is, it’s pretty clear at least for this year in 2024 fertilizer prices in general will be down from where they were a year ago and significantly so. That should help with our pragmatic marketing decisions going forward.
Keep in mind what I said a few weeks ago that sanctions and tariffs do not work. Eventually, conditions change. I just got back from Bangladesh, the Maldives and Dubai where you hear Russian voices everywhere. India is sourcing not only cheap oil but cheap Russian fertilizer. The world is nasty when money is involved and eventually, we’ll probably have Russian fertilizer on our farms again. It is simply a question of time and I suppose a little bit of pragmatism. The world is a very uncaring place at times.
One of the redeeming features of our Ontario Quebec marketing horizon as we look out over the next few weeks and months is our continuing low value of the Canadian dollar fluttering between 73 and 74 cents US. From a marketing perspective, it’s like a bionic arm. However, if it suddenly decided to go to $0.80 or $0.85 by Christmas it would be more like a crutch.
So, as we move on, how pragmatic can we be? Sure, there’s been lots of doom and gloom but there also looks to be a path forward. Risk management never grows old. Yes, it’s time for that again.