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New Small Grains Market Information

Recognizing the monumental shift in the Canadian grain marketplace and the resulting information gap, LeftField now offers a new Small Grains Letter covering wheat, durum, barley and oats. This weekly Small Grains Letter provides brief market developments and comprehensive market indications, including futures and cash prices, basis, spreads, global price tracking, S&Ds and statistical reference material. For more information, check out our services page.

10-Year Projections - Really?

At the risk of denigrating my profession, I really wonder about the value of Ag Canada releasing 10-year income projections for agriculture. I realize a bunch of assumptions and disclaimers go into these forecasts, but c'mon, really? Apart from annoying farmers and allowing bureaucrats to fill in blanks in their budgets, these forecasts are essentially worthless. First of all, no one can accurately predict the future (The Black Swan is recommended reading) of macroeconomic events, although some might guess right occasionally. Secondly, most agricultural markets are affected by this little thing called "weather" which is also highly unpredictable despite our best attempts. Finally, the forecasts ignore the basic rule that agricultural markets follow cycles -- high prices encourage higher production which causes low prices followed by lower production and higher prices, over and over again ad infinitum. So predicting an extended period of high prices simply ignores Economics 101. At best, market projections have about a six-month shelf life and even that's stretching it. Those who admit we can't predict the future tend to make the best risk managers.

Too Much Hype?

If you look behind all the hype about shrinking food supplies and commodity inflation, you'll probably noticed that it's mostly coming from a group of people with a very vested interest in making the markets go higher. That's right, news stories (and we use that description loosely) with headlines like "Get ready to be swamped by food inflation", are based on the sales pitches of commodity fund managers whose only interest is driving prices higher. In one sense, these are self-fulfilling prophecies; if you scream "food shortage" loud enough, someone will buy what you're selling. They conveniently forget that markets are cyclical -- high prices will encourage production and discourage consumption. That's Economics 101. We're not saying that commodities are plentiful right now. It's just a caution that when you see reports proclaiming new eras or new paradigms, consider the source.

Signs of Life

While traveling to various meetings across the prairies, I have been pleasantly surprised by the number of younger farmers in the crowds. After years of seeing mostly grey heads at farmer meetings, the share of twenty and thirty-somethings at every location was large enough to be striking. This is a great sign of the optimism in the industry and will help dispel some of the traditional doom and gloom that the media tends to focus on.

Marketing Support for Special Crops

The 2010 Canadian Special Crops Marketing Manual will help buyers and sellers answer questions such as:

How do current prices rank against historical values?
When is usually the best time of the year to market crops?
How often are prices at various levels?
What are the relationships between various crops?
How are prices in international markets behaving?
What factors are influencing the Canadian marketplace?

Click here to see a description of the Canadian Special Crops Manual. The Marketing Manual will be shipped in late 2010, but a discount is available for early orders.

The New Paradigm

I came across an article the other day that proclaimed "Higher Crop Prices Permanent, Says Top Economist". I'll give him the benefit of the doubt that he didn't choose the actual wording of the headline, but any economist who suggests prices will stay high forever must have flunked Economics 101. It seems every time we have a monster rally, someone will always claim that it's the new paradigm. It's the flipside of when prices are in the dumpster and the pessimists say that things will never get better. The truism that the best cure for high prices is high prices still holds true (and always will).

Curious StatsCan Numbers

When we look at the Stats Canada acreage and production estimates, we have to wonder what happened to all those flooded acres. Earlier this summer, some very credible people were "guessing" that anywhere from 8.5 to 12.5 million acres. Oddly, the survey shows that "only" 5.5-5.8 million acres were unseeded. What gives? We know that reports often get exaggerated, especially when things are looking bad. Once again, it looks like we got sucked in by the doomsday predictions.