Canada: Farmers watch as cereal prices slump while oilseeds soar

You think it sucks to be holding unpriced spring wheat right now?

Imagine holding lots of Disney stock. The Mickey Mouse Co. is down to 52-week lows that take it back to where it was in 2014, before it pulled off a doubling into 2021.

That kind of swing — doubling, then dropping right back down — isn’t uncommon in the commodity markets. Farmers are used to it. Each crop year has its own reality.

But that isn’t how big, diversified corporations are supposed to act. Disney is one of those “buy and hold” stocks that people feel pretty comfortable keeping in their retirement portfolios, or their kids’ RESP accounts.

You don’t treat crops like stocks. You grow them and sell them. Stocks should get more and more valuable with time.

Disney, a mature company, isn’t supposed to be volatile. Yet it is, highlighting the uncertainty of our times.

Disney has suffered with lagging attendance at its parks despite the post-pandemic travel binge, which many think is the morning-after effect of the TV streaming business disappointments, and its scrap with Florida governor and struggling Republican presidential nominee hopeful Ron DeSantis.

Farmers are feeling disappointed over the slump in cereal grain prices, led as always by corn prices but hitting all wheat prices. Spring wheat prices haven’t been immune, regardless of drought in the Canadian Prairies and the U.S. Great Plains. In late July, Minneapolis spring wheat futures were hitting US$9.40 per bushel. At the end of August, they were down to sub-$7.80.

For drought-suffering western Canadian farmers, pricing wheat hasn’t been a priority since few know how much they’ll get in the bin. Seeing that US$1.60 slide in spring wheat values hasn’t been pretty.

When wheat growers put on their canola grower hats they’re happier because canola’s been staging a rally, pulled along by strong soybean oil prices. The prices aren’t like they were a year or two ago, but getting back to plus-$800 per tonne prices for November is a relief after the midsummer slump to $620. With any luck, lots of farmers will know how much they’ll have to sell soon and be able to protect some of those prices.

There are specific market situations that have been making cereals slump while vegetable oils soar, but the clearest factor for wheat and canola growers is that the big crops are leading and our secondary crops are following.

That walks us into a fall market that’s looking remarkably placid, following the U.S. jobs report on Sept. 1, which suggested the much-hoped-for “soft landing” for the economy and interest rates might actually be happening.

A slightly higher unemployment rate, more people getting back into the job market, a smaller increase in average hourly wages and other anti-inflationary factors mean the U.S. Federal Reserve Bank is unlikely to hike interest rates in September, and less likely to raise them in November.

Inflation might be dying, and interest rates might be about to roll over. That’s what the markets are hoping for.

If that’s what happens, it’s great news for crop markets because that means a recession of any significance is unlikely and economic growth can restart soon with lower interest rates than today’s.

Perhaps we’ll get a placid and constructive autumn, with escalating prices raising all our ships.

But one thing we know for sure: everything changes when traders, economists, buyers and sellers get back from summer holidays in this week after Labour Day.

Maybe this autumn will be calm, cool and collected. Maybe it won’t. It’s a change of seasons and time to roll into the reality of 2013-14.

Tags: canola, prices, wheat, drought, stocks, Prairies, markets, corn, spring wheat, vegetable oils, grain, soybean oil