Canadian Poultry Magazine

All Things Considered: Strange Times Ahead

Jim Knisley   

Features Business & Policy Farm Business

Strange Times Ahead

A man walks up to the bar and says: “I’ll take 100,000 tonnes of
wheat.” The lady behind the counter replies: “Certainly sir.” She then
yells to her co-worker: “100,000 thousand tonnes of oats.”

A man walks up to the bar and says: “I’ll take 100,000 tonnes of wheat.” The lady behind the counter replies: “Certainly sir.” She then yells to her co-worker: “100,000 thousand tonnes of oats.”

The customer perks up and says: “I’m sorry, I want wheat.” The lady says: “Certainly sir,” but doesn’t change the order.


When the order appears from behind the counter, it’s oats.

“What’s going on, I twice specifically ordered wheat and you’ve given me oats.”

“Well sir since we’ve run out of wheat, oats is the new wheat.”

He ponders the problem. “Oats,” he says, “are for horses and Scotsmen. I have no horses and I’m not Scottish. How about some barley?” “Certainly sir. 100,000 tonnes of oats,” she shouts.

“Oats is the new barley,” she explains.

“But I don’t want oats. I don’t need oats,” he says.

“Well sir, in that case, we can put you on our special priority, enhanced delivery program for wheat and barley.”

“That’s terrific,” he says. “When can I expect them?”

“Would next November be too early,” she asks?

“Next November,” he sputters.

“Yes sir,” she says. “But, of course, delivery is conditional on availability which is conditional on weather and whether there is any left after we serve our triple and double priority customers.”

“Of course you could always order corn,” she said “and you might just get some if some of those new ethanol plants in Iowa don’t come on line this year.”

The customer leaves muttering, sputtering and shaking his head.  “What was all that?” a voice calls out from the back room.

“Just more shock and awe as another customer gets used to the new world order,” she says.
The above conversation has never taken place and likely never will. But anyone who has bought grain this year or follows commodity markets can attest that the world changed in the past year. What will happen this year depends on the weather and grain producers.

Right now, it looks like producers in North America and elsewhere will plant more wheat, more soybeans, more canola, less corn and less of everything else.

Wheat prices are at or near record levels, supplies are at or near record lows. (There is also a report that the U.S. has oversold this year’s wheat crop, which could further pressure supplies.) Wheat is also comparatively less expensive to grow than some other crops.

Barley also looks attractive. When brewers start complaining about tight supplies, you know more is needed.

But everything else looks good too. Corn prices are down from the record highs of a year ago, but some analysts, who believe acres will move out of corn this year, are forecasting $5 a bushel corn and tight supplies.

Just about everyone expects more soybeans to be seeded this summer, but depending upon the weather even that might not be enough to keep beans out of the teens.

Canola is also pulling in big money.  On the down side fertilizer prices have doubled in the past year, seed costs are way up, fuel costs are higher than ever and pesticide prices have soared.
Despite the higher costs net returns from grain and oilseeds look to be better than they’ve been for decades.

It’s often said that the cure for high prices is high prices. They force lower income buyers out of the market, they bring on new producers and more supply and they generally result in production shifts to high profit crops from those with lower returns.

Some of this has already happened. Prices have pushed some poorer countries out of the marketplace, forcing them to rely more on aid than trade.

Elsewhere the Ukraine, Russia, Poland and other Eastern European nations are preparing to ratchet up their grain production. India and China are also looking to produce more.

Brazil, already a huge player in soybean markets, looks to become bigger by bringing more land into production.

Australia needs rain. With rain Australian wheat production can virtually double but, because their seasons are the reverse of ours, that looks to be next year country.

As to the weather, it’s worth mentioning that this summer will be the 20th anniversary of the last big North American drought. Crops from Iowa through Saskatchewan wilted and those who produced half a crop felt fortunate.

While grain supplies tightened that fall and winter, there was a fair bit of grain in storage.  This year there is no grain in storage, any significant disruption of supply will result in rapidly rising prices.

And it won’t just be traditional grain buyers setting the markets. There is a lot of investor (and more than a little speculator) interest in commodity markets right now. This could add to the volatility in markets as people who can’t differentiate a kernel of corn from Colonel Saunders bet on cloud formations over Kansas.

There could be strange times ahead.

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