There’s a global grain glut, but it shouldn’t have a negative effect on Alberta crop producers come fall, say two market analysts.
Although it’s early days yet, both were quick to add.
“We’re at the stage of the year when there are more questions than answers,” said Chuck Penner of LeftField Commodity Research in Winnipeg. “There are all sorts of questions where we’re waiting for answers now. Over the next six weeks, we’ll get a huge pile of those answers.”
In 2016, there were record-high yields across major crop sectors around the world.
“This year we’re probably going to see the U.S. crop ratings not be as good,” said Errol Anderson, president of Calgary-based ProMarket Communications. “It’s pretty hard to repeat the super-duper crop ratings that the U.S. has had in the last year or two.”
There has been a lot of talk about huge global supplies in the wheat market, but sometimes things get misconstrued. Global wheat supplies continue to expand, thanks to production from the Black Sea region, Argentina, and Brazil, said Anderson. But the large amount of wheat in China — which is sitting on half of the world’s wheat crop — is distorting the picture, he added.
For exporting countries such as Canada, the U.S., Russia, and Argentina, wheat supplies aren’t as monstrous as the bears in the market would like exporters to believe, he said. And hard red spring will continue to do better than the rest of the wheat market, said Anderson.
Penner is expecting markets for quality wheat to strengthen, especially if weather conditions aren’t favourable.
“That doesn’t mean that we’ll see $10 wheat by any means,” said Penner. “What I’ve been telling farmers for a while is in a market like this, we’ll see some sort of gradual improvements for wheat over the long term.
“Over the short term, there will be volatility, and there will be ups and down, then a gradual improvement. That’s the wheat market.”
Anderson thinks this year could be good for barley producers in Alberta.
“Barley prices are, to me, an emerging bull market. I can see higher barley prices down the road,” he said.
There are signs the world barley crop is going to shrink, which will help local barley producers. China and Saudi Arabia are both buyers of Alberta barley.
“We’re seeing barley prices start to take off in places like Australia, which is the biggest exporter,” said Anderson. “That’s having a bit of influence in Western Canada, although Western Canada is a bit insulated for some of these factors.”
Any production problems with American corn crop will help the barley market on the feed side.
Yellow peas could also be a bright spot. Pulse markets are doing well, although India’s continued insistence that exports be fumigated remains a potential issue. However, the expected drop in Prairie pea acreage will support prices.
And canola continues to do well.
“China and the U.S. have been keeping our supplies quite tight,” said Penner. “We’ll probably see record acres this year, so a large part of the outlook will depend on yield.”
“It’s a good market. Canola is right in there. We might flip here and there, but it’ll get bought up again.”
A new wild card this year is the political turmoil in the U.S. under President Donald Trump. If events in Washington or the end of one of the longest bull runs (currently eight years and counting) roils the stock market that could spread to commodities, said Anderson.
“It’s a bit of the unknown — I think we’re due for some form of correction on the equity world,” he said. “It might shake commodities a bit. A lot of unknowns, really and then you stir in Trump.”