Coronavirus leading to ag market uncertainty

EAST CENTRAL — Jonathan Driedger, vice-president with LeftField Commodity Research, said the coronavirus is leading to uncertainty in markets for producers.

Driedger discussed this in a lecture to producers on Feb. 6, at the Saskatchewan Institute of Agrologists (SIA) Agriculture Update in Melfort.

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His talk focused on “five charts for producers to watch.”

“China is such an important market for global grains in general, but particularly for oil seeds and vegetable oils so that’s where canola is vulnerable,” Driedger said. “It’s not just canola – it’s soybeans and palm oil, some of those other oil seeds and veg oils that rely so heavily on the Chinese market have also pulled down sharply.”

Driedger said the best thing producers can do is keep a good understanding of the costs of production.

“Try to then build a marketing and risk management plan around that. Nobody has a crystal ball, nobody knows what’s coming around the corner. Within this the market does provide opportunities to lock in better prices, manage risk and protect some margins.”

In his talk, Driedger discussed predictions for both the canola and corn markets – knowing that there is uncertainty due to the coronavirus.

“I think from a price perspective there has been a lot of pressure on canola prices but I do think there is some room for prices to improve a bit,” he said.

“We’re not talking about a rocket ship type of a price response, but maybe some stability in maybe clawing back some value a little bit – partially because it’s maybe been a bit too heavily sold.”

He said one of the biggest risks for corn right now is what’s going to happen to United States production this year.

“Last year, their crop was down due to fewer acres getting in because of spring weather and also some yield challenges. What is going to happen to production if they get all their acres planted that people think they might? If they get a normal growing season the market is going to simply be oversupplied with corn.”

Driedger said that since corn is such an important crop, there is a risk of that weakness spilling over to other grain and oilseed markets.

“It’s easy to be negative, but I think even in markets that sometimes trend sideways or lower there’s always opportunities,” he said. “So just be in a position where you can take advantage of those opportunities when they arise which a big part of that is understanding your business, your risk and your own budgets.”

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