Grain Market Analysis

Scott Shiels

Scott grew up in Killarney, Man., and has been in the grain industry for more than 25 years. He has been with Grain Millers Canada for five years, doing both conventional and organic grain procurement as well as marketing for their mills. Scott lives in Yorkton, Sask., with his wife Jenn. www.grainmillers.com

Tight stocks, high prices

As we roll into summer, following one of the driest springs on record across Western Canada, one cannot help but wonder: where are we going from here? Grain stocks across Canada, the U.S., and most of the world, are very tight, and from that, grain prices are relatively strong in all commodities.

In early May, we saw canola prices set record highs in the old crop months, while new crop contracting opportunities have also proven to be quite lucrative. The question remains, how much is a safe amount to forward contract with uncertain conditions ahead? While production is never a certainty until the crop is in the bin, taking advantage of traditionally high prices is almost a necessity with the ever-increasing cost of production on a canola crop these days.

Another crop that has pricing encouraging early contracting is flax. Flax prices have been high all year, and really, for several years. Challenging as flax can be to produce, those of you that have engaged in growing it, have no doubt over time learned the intricacies and nuances of producing this financially beneficial crop. Lack of weed competitiveness, difficulty to harvest, and residue management are all challenges one must face when growing flax, but all of these can be all but forgotten when the market hits $20/bu.

Of course, where would an article from me be without mentioning oats? For the last number of years, one thing that we have been noticing is the effort being put in by farmers on their oat crop. For the longest time, oats were that crop that went in last and essentially filled in the acres that didn’t get seeded to something else on time. Well, that just simply isn’t the case anymore. Research has proven that earlier seeding of oats is beneficial for weed control, as oats are highly competitive, and has shown increased yields and test weights at harvest. The other factor that has really played out well with oats is the newer varieties’ ability to allow farmers to push more fertilizer down with them. For the longest time, farmers really had to be careful about putting too much nitrogen with their oat crop, as it didn’t take much to cause it to get really tall and lodge badly prior to harvest. Now, varieties are being bred with shorter heights, and increased straw strength, allowing farmers to push their nutrient package with their oats, which pushes yields higher as well. With traditionally high prices being paid for milling oats, this combination is proving to be very advantageous for Prairie oat farmers.

We have been fortunate to receive fairly general rains across Western Canada in the later part of May, but if dry conditions return, we could be into one of the biggest bull markets of all time. Much of this year’s crop was seeded with barely adequate moisture, so there could still definitely be concern for the ending quantity and quality of this crop. This slower start should leave lasting strength in the markets, giving farmers ample opportunity to market their grain at pretty high prices.