Top Crop Manager

What goes up will eventually go down


What goes up will eventually go down
Half a year can make a huge difference, in prices, in supply and demand, and in world production, and as columnist Kevin Hursh points out, the good times wrought by the prospect of high prices can just as quickly head the other way.

September 10, 2008  By Regina Leader-Post

When grain prices are rising, it's easy to get caught in the mentality that the good times are here to stay.

Well, in recent weeks, grain prices have followed the rest of the commodity complex lower and that has significantly altered the returns expected by producers.

In addition to the effect of the commodity complex, worldwide production numbers have swelled for many commodities and there are no major crop production threats for the trade to focus upon.


Canola has been highly volatile, but the general direction over the past couple months has been down. Rather than lofty prices well into the teens, the cash price for canola is now under $11 a bushel — on some days well under.

Flax prices are still listed in the $15 to $16 a bushel range, but that's down from $20 a few months ago.

Unless something changes, the next pool return outlook (PRO) for wheat from the Canadian Wheat Board will be lower because American futures prices have been slipping.

The price of yellow peas just keeps dropping. Prices currently being quoted are in the $6.50 a bushel range — a far cry from the $10 plus that was available just a couple months ago.

Market analysts say buyers and end-users are walking away from the market.

There's a general feeling that pea prices have been too high relative to many other commodities.

Peas have become a major crop in Saskatchewan. Many producers were counting on their peas for early cash flow and they want to move some product to free up bin space for later harvested crops.

However, dropping prices are a tough pill to swallow.

It's a dramatically different fall than last year, when prices just kept rising.

Producers who may have been penciling in gross returns of $300 an acre are now looking at $200 an acre and many producers will decide to store their peas hoping for better prices in the months ahead.

While lentils will be the best money maker for a lot of producers, those prices are also softening.

CGF Brokerage and Consulting of Saskatoon is listing red lentils in the 32 to 35 cent a pound range, down significantly from the 42 cents once available.

Mustard prices appear to be remaining pretty solid, but canaryseed has dipped. CGF is listing a price of 25 cents a pound. At one point, new crop could be locked in at 30 cents.

Compared to a couple years ago, prices still look very good. Compared to what was available and compared to rising input costs, prices are not nearly so attractive anymore.

Fertilizer prices have risen steadily since the spring and farm input retailers are expecting higher prices next spring for glyphosate herbicide and a whole host of other inputs.

The wet weather at the beginning of September is also going to nip returns for a lot of producers. Bleaching and sprouting is going to cut the grade and therefore the value on many crops.

There will still be some amazing returns for producers with good yields, especially if they made astute marketing decisions, but tightening margins provide some sobering reality.

It's human nature to become overly pessimistic when times are tough and overly optimistic when times are good.

Hopefully, we'll never see a return to the bargain-basement grain prices of a few years ago, but there's little doubt that grain prices which go up can come back down again just as quickly.

Somehow though, input costs never seem to decrease.


Stories continue below