Farmers prepping for 2021

As we push into the middle of January, amidst all the COVID-19 and politicking, pencil farming is hitting full tilt and producers and buyers alike try to secure some contracts and a sense of what Plant 2021 acres will look like. Future markets are gearing up for next WASDE report (out on Tuesday, Jan 12) are looking mostly at South American weather, trade restrictions (i.e. Argentina and Black Sea countries limiting exports), and general market impact of the ongoing COVID-19 pandemic and U.S. politics. In the meantime, the Canadian Loonie is sitting at 2.5-year highs, and given the unfortunate state of stately affairs in the U.S., there’s a strong likelihood that it could appreciate back above 80¢USD.

While lots of factors could prevent the Loonie from appreciating, there are two main variables I’m watching: (1) President-Elect Biden coming into office and, ideally, an aura of calming collaboration, and/or (2) the current Canadian government keeps spending like a Powerball lottery winner. For Canadian farmers, if the Canadian Dollar weakens, then basis levels usually improve, but if the Dollar goes higher, then basis levels usually get worse. Thus, if you’re thinking about new crop pricing for crops like wheat or canola, you have to be thinking about currency a little bit.

For hard red spring wheat, futures values have improved by a healthy amount compared to last month and a year ago. As basis levels are mostly flat compared to these periods, cash values are reflecting the current rise in futures, and so locking in some acres on a flat cash basis isn’t a bad idea. Accordingly, this is where it’s important to know your estimated costs of production AND average yield expectations. Therein, you should know how much your cost of production will change, per bushel, if your average yields actually turn out higher or lower than your average. Knowing these numbers now helps you better understand exactly where your grain marketing plan sits as the growing season unfolds.