I have been forward contracting alittle bit of new crop. Main reason is it is sure nice to haul directly off the combine and start some cash flow. Still I don't think a person should intentionally sell below cost of prodution with "potential production" that is just asking for trouble.
Ok, a disclaimer first: I'm a young farmer, and haven't been in the marketing "biz" all that long; I posses an analytical/photographic memory, so this is based off of graphs and the string theory.
This is based on the US economy sinking further into depression, and remaining there for the rest of the year. By 2010 inflation will start to take hold (you can't fix an economy broken by big debt, with more debt)
I fully expect $7.75-$6.75 canola sometime this year. The US is going to put massive acres into soybeans, and that'll put pressure on canola. A lot of guys will switch to flax because it is a lower-input crop; I think flax will bottom out at around $8 - 9 / bu. $10 will be a good price come fall. If less canola than expected is in the Stats Can seeded acres report, expect a rally.
With wheat, I think $6is - 7ish will be about the norm... feed barley at $2.75/bu and oats at $1.80 - $2.20/bu, may see a push upwards in fall if few acres go in. Lots of left over crop though.
Vitera is giving away free oat seed from what I've heard, that should tell you how much oats is going in
As for forward pricing, I'm from a country where 100% inflation was the norm, so no - never forward price if inflation is on the horizon. You may be locked into $11 canola (which is REALLY good right now), and that same canola can depreciate to the point where $11 = $5.50.
On the flip side, this is a really, really good time to buy land!
My parents tell stories of making "hundreds of millions". Putting the money into banks paying 100% interest over night, then grabbing it in the morning to buy food, clothing, what have you because the money would be worthless the next day.
Bills had so many zeroes on them, that they resorted to exponents because there wasn't enough room. Cheques didn't exist anymore. I recall going to a corner store wth Dad (these where European-suburbs, which were very quiet, and peacfull on the outskirts of Buenos Aires) and paying 500 of I don't know what currency for a gatorade, the last year we were there.
Inflation is a very real worry - especially when banks start indexing debt, in addition to just hiking interest rates.
The reason I'm thinking land is a good deal, is because if you're in the market to buy a farm (like we are), you can push prices down a bit more. Europeans aren't coming this year, and liquidity is an issue also.
The commodity boom is far from over methinks... this is a short respite at the beginning of it.
The stock market went from 14,000 to 7,000. That's a 50% drop.
Oil went from $141 to $45.
Canola (as an example) went from barely $14, to $9. that's a much smaller drop.
They don't make more farmland - there's actually less now than there was 50 years ago. They are making more people though.
More people, and more people that want meat. Meat is a very inefficient converter of grain to protein, meaning that the demand for grain is an exponential function of the demand for meat.
Going on the other side,
I don't see Canada's beef sector recovering for quite a while yet. While we can simply store grain then sell it, and ship it by cargo vessel, you can't do that with live animals - and we don't have the packing capacity, or export markets looking for frozen beef to process it here. Until cattle producers realize this, $130/cwt for a feeder will be a good price.
Just my $0.02.
PS: It may not even be worth $0.02. I sold canola at $9.20 ahead of the USDA seeding intentions report, expecting a large increase in soybean acres
My theory is to wait and see what seeding intentions are on yellow peas, then see whats seeded. It is a slippery slope with them, they have room to fall down to their comfort level price ($3.00). I am waiting too see what happens yet...
I think pea acres will be down 35% in the seeding report.. This will help support price IMO. I am no different than anyone else in this area. Peas down lentils way up with the first 600 Ibs contracted with AOG on the lentils