Farm Market News review

THE 2017—18 MARKETING year will be remembered for the tariff war between the United States and China. Already weighed down by the prospects of huge U.S. crops, the uncertainty over the trade situation applied further pressure to the grain futures prices in Chicago. The greatest toll was on the soybean market where the prices plummeted in the early part of the summer. After weeks of uncertainty, the trade war became official when the U.S. and China traded the first shots, imposing tariffs of $34 billion on each other’s goods.

SOYBEANS

The average closing old crop soybean price in Chicago in 2017-18 was $9.70, down 14 cents from the previous year’s average of $9.84. It was well below the previous five-year average of $11.38. The five-year mark is boosted by the high prices of 2012 and 2013 as the effects of the severe drought in the U.S. lingered in the marketplace.

The highest closing price in Chicago was $10.78 on March 5, 2018. The lowest price at the close was $8.19 on July 13, 2018, a week after the first salvos were fired in the trade spat. As speculation over the trade troubles grew, traders began discounting the prices in the market in June. The old crop soybean price dropped by about $2.03 per bushel from May 25 ($10.42) to July 5.

Although it occurred early in the 2018-19 marketing year, a tweet from U.S. President Donald Trump epitomized the volatility of the marketplace. On November 1, Trump wrote on Twitter that he “had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina.” The tweet was enough to spark a rally in the markets as soybean futures closed 25 to 30 cents per bushel higher.

The average Chatham-Kent (CK) high cash price for 2017-18 was $11.86, down 51 cents from the 2016-17 average of $12.37 and lower than the five-year average of $12.98. A stronger Canadian dollar pressured the basis levels in 2017-18. The average U.S. exchange rate was $1.28 for the marketing year. In 2016-17, the average was $1.32. When looking at just the CK high basis, the average for 2017-18 was $2.16, which was 37 cents lower than the average of $2.53 in 2016-17.

During that period of the price drop in Chicago, the CK basis improved. On May 22, the CK high basis was $2.40. On July 30, it had reached $2.80.

CORN

The average Chicago cash price in 2017-18 was $3.64, which was slightly higher than the previous year’s average of $3.61. It was well below the previous five-year average of $4.43.

The prices gained support as the market shifted its attention to the production of the 2018 U.S. crop. Although, projections from the USDA forecasted higher yields and the second highest production on record for the crop, the numbers tended to be lower than the trade’s expectations.

Similar to Chicago, the average Chatham-Kent high cash price of $4.46 was slightly higher than the previous year ($4.39). But it was below the previous five-year average of $4.83. While a higher dollar pressured the basis, support came from strong export demand for the Ontario crop, particularly from western Europe.

The nearby futures price didn’t spend much time above $4 in 2017-18, only reaching $4 or higher on 18 days. The highest closing price was $4.09 on May 23. The low mark was $3.36 on November 28, 2017.

WHEAT

Wheat prices fared better than the previous year. Market analysts at Agriculture and Agri-Food Canada noted that lower U.S. supplies and stronger demand, especially for high protein wheat, were supportive.

The average Chicago cash price for wheat in 2017-18 was $4.61, which was higher than the 2016-17 average of $4.30 but lower than the previous five-year average of $5.69. The closing high price for the nearby future was $5.54 on July 31, 2018. The low was $4 on August 28, 2017.

As for local prices, the average Grain Farmers of Ontario Wheat Pool cash price for Soft Red Winter Wheat came in at $5.57. This price was up from the previous year’s mark of $5 and lower than the previous five-year average of $6.02.

For Soft White Winter Wheat, the average Wheat Pool price was $5.62 in 2017-18, which was above the average for 2016-17 ($4.98) and below the previous five years ($6.72).

The average cash price for Hard Red Winter during the last marketing year was $5.69. In 2016-17, it was $4.94. The previous five-year average was $6.29.

For Hard Red Spring (HRS), the average Wheat Pool price was $6.47, up from $5.98 in 2016-17, and slightly lower than the previous five-year average of $6.52.

As for the future price for HRS, the average Minneapolis Grain Exchange price in 2017-18 was $6.13, which was higher than the average of $5.61 in 2016-17. The previous five-year average was $6.42. The high for 2017-18 was $7.34 on August 9, 2017. The low was $5.26 on July 11, 2018.

Blair Andrews is the editor of Farm Market News produced at the University of Guelph Ridgetown Campus. •