Seed in the Snow Watch it Grow
As we embark on yet another growing season farmers across the world will face the inevitable challenges. Of course there will be the standard too hot, too cold, too wet, too dry and of course the prices are always too low. However, this year is different. More than ever outside forces are affecting agriculture like ever before. The political spectrum and craziness is off the walls. It seems that as soon as something is normalized then BANG a new geopolitical situation smacks us all right in the gut. Yet, farmers get up and stand tall. We always grow the crop and always do our best.
World Ag Stage
What is going on in the world and what it means to you.
African Swine Flu in China China has an outbreak of African Swine Flu. This is a deadly hemorrhagic disease in hogs. Basically it causes them to bleed out internally. Most strains are 100% fatal. It is highly infectious and has spread all throughout Africa, Europe and Asia. It can be spread through many vector hosts like ticks, wild boars, and many other bloodsucking creatures (not sure about politicians). The virus is extremely robust and many strains exist. This makes vaccinations and quarantines difficult, which is why a massive cull must happen. If the reports are correct, the number of hogs culled could reach between 100 and 200 million.
Personally, I'm currently not buying anything that has been grown in China, because this virus is so robust and deadly. I would hate to accidently spread this virus to one of my hog farmer friends. Take time to research this virus. This is serious!
Why Is This A Big Deal?
This is huge because China produces over 1/2 the worlds hogs. In fact, they produce 433 million hogs, and this cull could be almost half of them. For comparison, Canada is only 14 million, US is 73 Million and EU is 150 million. This is a scenario that changes the supply and demand equation of everything that is related to hogs and pork production. In fact, this is so dramatic it changes the S & D of things that aren't even related to pork. This S & D change proves that my Saskatchewan born mother was wrong when she said "what does that have to do with price of rice in China". Ha Ha, jokes on her. Everything is related to the price of rice in China. #teenager
Beyond Meat IPO
On May 2, 2019 the food world changed. It changed big. And , every single farmer had better pay attention! If you don't, you might as well PUT THE FARM UP FOR SALE TODAY. This Change was the IPO of Beyond Meat. In the most basic sense Beyond Meat is a vegetable based meat alternative, which in itself is nothing new. There are many meat alternatives at the grocery store and most have been around for a long time. However, this time its different. It's different because.. Marketing. Any company that can post an IPO gain of 163% and be worth approximately 4 billion dollars in one day knows what they are doing when it comes to marketing. A company like this catapults the "synthetic meat" industry into main stream consumerism. It has the potential to change consumer behavior. Don't be stupid, this is a big deal!
Why Is This A Big Deal?
Well, it goes without saying that agriculture and more specifically the meat industry has been vilified in the fake news world. Unfortunately, we live in a world where people who don't even know that a carrot is a root are spewing their agricultural prowess like a bunch of dressed up chimpanzees nattering to anyone who will listen. Although we producers know it's crap, it's what them City Slickers perceive as fact. Perception is always number one for consumers.
Now, here's the good thing for Canadian farmers. One of the main ingredients in this vegetable based meat is pea protein. Peas are something that most Canadian farmers can grow. Not to mention we are good at it, and in my opinion there isn't even a country that comes close to Canada's quality and excellence. This is good. There is strong demand for our peas and other vegetable proteins. In 2018 a survey from the research firm Nielsen found 39 percent of Americans are actively trying to eat more plant-based foods...1 I believe this is an opportunity for Canadian farmers and processors. Let's just admit it. The consumer wants a vegetable based protein source. So, let's give it to them. Why can't Canada supply the best vegetable protein in the world? That's right, we already do!!
I decided not to talk about the canola situation right now, because I simply can't digest it all and reduce it to a paragraph. It's very complex, so let's deal with it once it stabilizes. However, if you need any help or have any questions give me a call, anytime.
Right now, let's focus on growing the world's best canola.
As of this writing we are rapidly approaching market convergence, which for those who don't know, is when old crop prices converge to match new crop prices. In agricultural there is always new crop just around the corner and once the crop is grown there is a whole new supply and demand equation. Basically, the old crop S&D is reconciling with new crop S&D kind of like back in school when the math teacher added letters and forced you to find X. Right now the market is looking for its X. However, it's not you, it's not me, we've just grown apart, we are taking different trails in life, we can stay friends. Well, in some ways the market is like a relationship. Two parties, a new crop and old crop. They are the same, yet completely different.
Don't forget it. The minute you lose sight of this is the minute you start exchanging pennies for dollars. This exchange for pennies over dollars is what we are seeing right now in the Canadian feed market. It's absolutely crazy. I have never seen this kind of spread between new crop and old crop. We are talking close to $50/mt or at least buck a bushel. Something has to give. Which one? Old crop does down. Or New Crop Goes up. Well if I was a betting man, which I am, I would stack the odds in my favor. I would check prices at elevators, check out the futures markets, and take a look at the cattle market. I would call Insight Ag Marketing and ask a few questions. Bottom line, I would hedge my bets.
The thing about Canadian feed market is that it's pretty small in the overall greater scheme of things. It really is a local market. This is why feed wheat is worth over $6.00/bu FOB in Central Alberta and at the local elevator CPS wheat is only 5.25 DEL. Traditionally, elevator CPS wheat and feed wheat are within pennies, except feed is always picked up. This shows you exactly what convergence is all about. There are no vacuums in economics. Money will always flow to opportunity. If there is any grain in the bin, now is your opportunity. The market is telling you it wants your grain right now. It wants old crop grain. If there is a weather market that market will be based off of new crop S&D. Translated, the starting price is $4/bu (new crop) not $5/bu (old crop). That means a weather rally must climb over $50/mt for new crop prices to even compare to old crop. Under the circumstances those odds are terrible. Actually, worse than terrible. Anyways, If you have any wheat or barley in the bin you need to phone Greg at Insight Ag Marketing. He will be around his phone from 7am to 8pm all day, every day.
What Are We Learning Right Now
Today I learned that when you're trying to make cinnamon honey in a large mason jar don't heat it up and break it in your wife's oven. She doesn't like it and burning cinnamon honey smokes a lot and smells bad. (for those who don't know, I also keep bees)
Another thing that I have been working on is looking at longer term historical pricing levels to try and figure out worst case scenario for canola and other commodities. This is done by looking at commodity super cycles and then evaluating the current situation. Then you take that information and extrapolate it to form an educated opinion.
Things We Need To Consider
Anything we need to consider
World Politics - Not to sound like a broken record, but world politics are the number one issue facing Canadian and World farmers today. It is part of the S&D equation and sometimes it is the only part of the equation. As we go forward, this year more than ever, we need to have the geopolitical climate on the back of our minds at all times. We need to look forward toward opportunity, yet know when to cash in. We need to have strong a grasp on risk to reward management. Even Kenny Rogers wrote a song about it.
In the next week what can you do to move yourself ahead.
Step One - Seed the crop.
Step Two - Solve all the world's problems while driving the tractor. (don't lie we all do it. If they would just listen to us...).
Step Three - One thing that needs to be done is evaluate your cash flow situation in the fall. Right now there is not a lot of opportunity to be pricing grain, yet most of us are going to need some money in the fall. Ask yourself how much money will you need and which crop you should sell to cover your financial obligation.
Step Four - Call Greg and tell him how you solved the world's problems. He can help you with the grain marketing part.
The farmer has to be an optimist or he wouldn't still be a farmer. - Will Rogers
Farmer Brown put up a pig-shaped weather vane, but he's not happy with it. Instead of pointing with the wind, the pig vane keeps pointing toward the feed trough.
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Types of Grain Traded: Barley, Wheat, Canola, Off Grade Canola, Peas, Pulses, Oats, Flax, etc. Basically, I can find a home for just about anything.