The last two decades have seen crop commodity prices become volatile all over the world. The current trends seen in world agricultural markets can be vastly different from year to year, making it challenging for growers to predict financial outcomes.
According to the OECD, looking forward to 2025, “ the biggest market changes will occur in developing countries. On the demand side, continued but slowing population growth, rising per capita incomes, and urbanization will increase the demand for food and prompt consumers to diversify their diets by increasing consumption of animal protein relative to starches. For this reason, the prices of meat and dairy products are expected to increase relative to the prices of crops. Among crops, the prices of coarse grains and oilseeds, used for animal feed, should rise relative to the prices of food staples.”
Crop Commodity Prices are Changing
In the past 10 months Canadian crop commodity prices have increased when compared to normal or historical levels.
Kent Anholt, Operations Manager/Merchant at Rayglen Commodities Inc, speaks to the volatility of pricing. “Commodity markets have been on turbo for the last three quarters of a year with multiple different commodities hitting all time price highs from durum in the low twenties per bushel to canaryseed trading at better than 55 cents/lb picked up on farm. We have seen new watermark prices on commodities like canola, flax, and mustard that blow the previous highs out of the water. Low supplies, world weather issues, supply chain issues, speculative money pouring into Ag are all partial reasons for the price volatility around the globe.”
Commodity pricing by crop type
According to the Government of Canada, below is some of the commodity pricing we can expect to see into 2022.
Wheat (excluding durum)
Average Price: $10.89/bu
Average Price: $8.71/bu
Average Price: $6.99/bu
Average Price: $7.25/bu
Average Price: $7.87/bu
Average Price: $22.68/bu
Flaxseed (excluding solin)
Average Price: $29.21/bu
Average Price: $16.33/bu
Average Price: $29.39/bu
The Future of Crop Commodity Prices
The onset of COVID-19 has had a big impact on crop commodity prices in a number of different ways. Supply shortage opportunities, issues with worldwide logistics, including container shortages and government lockdowns, and food aid programs have all caused market shifts in one way or another.
“From this year, I would bet we will see considerably lower values than what we see today,” says Anholt. “One hopes that some of the values we are seeing establish some new, higher, normal trade ranges for our markets, but supply and demand will ultimately dictate and a world market will have lots to say about that.”
The economic outlook, for the world and Canadian grain markets, is expected to continue being affected by the international uncertainty caused by COVID-19, rising energy prices, and increased fertilizer and transportation costs.
What Growers Need to Know
Anholt says that it’s paramount to know what your profit levels are based on your ever-changing expenses and production.
“Knowing these levels will be instrumental in helping to make marketing decisions that best suit your farm. The numbers we are seeing today are not sustainable forever; know when to take some risk off the table.”
Anholt also says that the most successful growers use a few handy rules in terms of grain pricing.
- Sell for a profit
Recognize when profitable commodity prices are on the table rather than hoping to sell in the future for the highest price.
- Practice incremental sales
Piecemeal commodity sales as prices move up, you may never be totally right in those sales but you’re never totally wrong either.
- Remember that no two years are alike
Just because something worked this year does not mean it will work next year and vice versa; a failure one year could be a success the next.
- Have a broker on your team
A good broker helps keep you up to date on pricing and on top of pricing and program opportunities. Anholt and the brokers at Rayglen work with growers to strategically sell for a profit.