Episode Transcript
[00:00:00] Speaker A: Lots of questions came in this week. Futures moves this morning. We've got canola currently down 490 a ton here. We've got soybeans gaining.
It looks like about two and a half cents here at 11:13. That market's been on fire lately.
Bean oil giving up a little bit of ground as well. Trading at 56.44 on the March contract. Spring wheat is flat this morning at $5.69. Kansas City's up 3 cents and corn's up a penny and a half.
Canadian dollar. I just wrote down 74 cents. I didn't note if that was up or down. But quiet, quiet markets for today because it's USDA day. There is a USDA report coming out here in the next couple of hours and of course trade tends to be a little quiet around that. Now questions for this week. We saw a whole variety of information here come through. Questions come through. We have people asking about can I market my wheat right now if I need to generate cash? Are producer cars still a thing? Can you load a producer car and ship that thing to the coast?
Canola crush margins.
We have questions about next year's barley outlook.
We also have feed wheats.
We've got an interesting question around some Nexera here and if we have time, we did have a question come in about grain marketing advisors and subscriptions. How do farms pick those? So we'll.
Yeah, we'll see if we can get to that one. Let's see if we can bring Mr.
Como in.
Ryan, how's your morning going?
[00:01:45] Speaker B: Going great. Yeah, it's sun shining lots. I love USDA days. It gives me something to do for the rest of the day after it's released.
[00:01:53] Speaker A: So a lot of, a lot of information to run through. Hey, Brian.
[00:01:57] Speaker B: Exactly.
[00:01:58] Speaker A: Good stuff. Now I wanted to just mention some of the headlines here for this week. Of course, the USDA report, Wasi report later today. I'm going to get Brian's insights on that in just a second.
Second thing I wrote down here was the India US trade deal, which that started to take form last week and it has led to bean oil rallying to a pretty impressive number. You know, some folks said six month high. I thought it was a little bit better than that, but we can dive through that as well. Brian, am I missing anything on the headlines this morning? Anything catching your eye?
[00:02:33] Speaker B: Other than the usda, not really. We can talk a little bit about, you know, price spreads on the soybean oil if you want, in relation to the India, India story. Yeah, but that's about it until the USDA comes out. One thing that I've been watching over the last couple of weeks is just how much canola is being pushed into the crush plants. That might be something we want to talk about. But okay, other than that, that's, that's about it until after 11:11 CST.
[00:03:01] Speaker A: Well, let's, let's just talk through Wazi first here and then I'm just going to write down that comment about crush plants and canola because we do have a crush margin question that came in. So that will tie in nicely. Now, you know, I looked at the WASDE numbers and expectations for today.
Nothing jumped out. To me, that was scary. But anything that you're looking for in today's report?
[00:03:29] Speaker B: Yeah, I mean, you know, most analysts are talking that February is the lowest volatility USDA report, generally speaking, and it's hard to argue that. But you know, when everybody's kind of on the same side of the canoe, you know, what happens to the canoe at that point? Not that I'm saying that that's how everybody's positioning, but you know, there's very low expectations for changes. And so as far as USD report, I think a surprise, if, if there were surprises to come down the pipe, I think it would be, you know, on the corn side it might be the exports might get changed from the US that would be something that I think analysts are looking for. Maybe not in this report, but maybe in the long term.
I think wheat and soybeans in the US Are expected to ending. Stocks are expected to fall, I think on the back of exports as well. So if the USDA was going to change the US Balance sheet, which is probably a low probability at this point, that's those areas that I would look for.
The other thing I would look for is changes to South America. I mean, particularly the soybeans. The USDA did raise in January the Brazilian production, you know, 3 million tons from 175 to 178. So they may take a pause because South America is currently in harvest and they don't like to necessarily make changes, you know, while the harvest is ongoing. But those are the areas that I'd be watching.
[00:04:49] Speaker A: Yeah, I think the, the South American one can be a little bit of that wild card because you're, you know, you're, you're in harvest right now, you're maybe not expecting a change in, you know, maybe they surprise us and throw a little more soybean production in Brazil. We'll see.
It looked to me like you know, from a, from a ending stock situation. In both the US and the world, stocks were, are expected to maybe ending stocks to just decline ever so slightly for the most part. Like is that a month over month? Is that an accurate comment or was there one there that stood out opposite that?
[00:05:26] Speaker B: I think, I think that's accurate and you're probably right. It's probably going to be small adjustments and I think most of the expectations, I had them yesterday, don't have them up on the screen right now. But I think most expectations are calling for small reductions in global earning stocks. Yeah.
[00:05:40] Speaker A: Awesome. I wanted to get through to some of these questions. Fairly long list. We're not going to get through them all. I got a question from Claire about canola crush margins. So Claire says, says canola crush margins are strong.
Should farmers be waiting to sell canola due to these margins? So Claire's point on the email was I don't think the basis is reflecting the, the positive crush margin, the great crush margin that's available. So should I be waiting to sell? And so I want to tie that in with your comment about canola being pushed to the crushers here as well.
[00:06:15] Speaker B: I think yeah, crush margins are, are really great, which always does benefit the farmers. As far as the demand then into the crush plant is high all season or at least since, since the new crop, since we got out of August, the crush. The crushers have been on average running at 90%, you know, capacity utilization, which means they're, they're crushing really, really well. We don't often see utilization move above 92%. Sometimes 94, 90 is a very good number, which means that we are crushing as much canola as we possibly can.
And that's a reflection of those crush margins, I think. So you know, if it wasn't for that, we probably would see significantly lower prices. I think that, you know, $200 board crush margins are kind of becoming the new normal. So unless they rallied significantly above that, I don't think that we would in fact that may even affect new crop more because I think more hedging on the crush margins is probably going to be more move to the new crop relatively soon here at some point. Okay, I did note that you know, processor supplies, so every week the CGC tracks like how many, like what the supply is in in process elevators as well as export or process facilities, meaning crush plants and elevators. And right now the, the commercial processor stocks are very high. They might even be record high at about 244,000 tons. So the average is like 188 and I think last year we're at 134.
So the crush plants are flush with product right now. From what I can see on the cash market, most of those crush plants are trying to incentivize sales into the, you know, June period or somewhere around that period.
[00:08:02] Speaker A: Yeah.
[00:08:03] Speaker B: So that's telling me those kind of things are telling me that we probably aren't going to see super aggressive bids from the crusher at this point. Seasonally, of course, basis does tend to improve as this time period goes on. But this year with there being so much product left in the bin, that might be more muted this year.
So I think if you're looking to, and you know, I always ask like if somebody says should I wait, you know, on to sell canola? It depends on how much you have sold too. Right. It's a significant difference between having 80% of your crops sold and having 40% of your crop sold. So yeah, I think if there's any real opportunity, it's going to be in the futures market if, if that can muster some more strength.
[00:08:48] Speaker A: Yeah. So, you know, in the short term the crush plants are, are doing what they have to do there they are for many still a leading delivery point.
They're well supplied.
And so to sit back here, it's early February. You may have to wait a while to get that spring maybe premium or that. Absolute best.
Yeah, best basis. But with all the supply of me may not be as exciting as past years.
One comment I want to make here, Brian. So $200 crush margin, let's say, did that incentivize the expansion we've seen in western Canada over the last couple of years? Like is that, you know, that consistency, is that why Regina's got a new facility? Is that why Yorkton has expanded and, and yeah, added capacity in that area 100%.
[00:09:44] Speaker B: And I mean, you know these, these processors can't necessarily bank on crush margins like this. I think the expansions were largely on the back of, you know, the renewable fuel sector standards here in Canada and the opportunity for 45Z in the US so I think there definitely is a demand shift going from food grade canola oil and export crude oil to, you know, more inter, you know, inter North American trade for, for biofuels. I think that's a very important piece of the puzzle.
[00:10:16] Speaker A: We had a question come in about can I market my wheat to generate cash right now from Robert. So I meaning can I sell now or should I be waiting for something better in this wheat market currently the.
[00:10:27] Speaker B: Prices have come down off, off the highs. The area that you and I kind of work in, you know, being the Alberta kind of Yellowhead corridor, probably is, you know, we've seen bids, you know, kind of scale up to $8 every once in a while and then those targets get hit and it kind of comes back down. The Canadian dollar has been hurting wheat bids, you know, right now as well. So we could see pops into that know, high seven, $7 area or even an eight handle every once in a while. But that gets sold by farmer. So that's probably the opportunity right now. But with big yields, you know, like if it's profitable to sell and you need to generate cash flow. Yeah, I don't, I don't see a problem with it. And you know, especially if you have the ability to, you know, utilize different risk management strategies to keep yourself in the market, if that's what it's going to be. But if you have to sell for cash flow, unfortunately, you know, you're kind of a basis taker at that point and you just kind of have to bank on the futures if that's how it's gonna going to be.
[00:11:21] Speaker A: Pardon me, but the, the thing with wheat is still there's, we've exported like our pace has been phenomenal, but there's still, there's a pile of wheat out there yet too. So it's just, yeah, get, get in line to fill those cars, grab that little premium or opportunity when it arrives and, and keep going and yeah, replace it on paper at some point.
You're Brian, you're the kind of the expert here on spreads and Greg from Southern Alberta writes in and says what are the opportunities in a tight spread market? How much volume can it take? And he's referring to feed wheat.
Now in this scenario, I believe we're looking at the spread between a CPS and a utility wheat and a hard red spring wheat being a little bit more narrow than normal.
Is that what you're seeing, Brian? And is that a signal that growers should look at for the 2026 growing season?
[00:12:15] Speaker B: Yeah, I definitely, I definitely seeing the same thing. I think it is a signal that there is ample supply of high quality wheat out there right now. I think the opportunity in that is, you know, with, with higher feed prices. The opportunity I think is to sell your lower quality wheat and get rid of it. And because you're kind of hedging yourself in case the spread, you know, widens out a little, it probably, you know, won't in the short you're Right. In the short term, our exports are good, so there's possible opportunity that will continue. New crop is always kind of a, you know, a, a big wild guess because we don't know what the quality is going to look like. And that's, you know, whether, you know, into harvest, things like that. In Canada, that tends to be what widens out that spread. If, you know, there's not enough high quality to, to satisfy. Sometimes there's a little bit, you know, that we can get from the US crop, like how big or small the HRW crop is there. But I think by and large it's, you know, our spreads here in Canada on the cash market are determined by weather, next harvest or the quality that comes off next harvest.
[00:13:23] Speaker A: Okay. So it's kind of tough to predict that one or crystal ball that one for next year. Safe.
[00:13:29] Speaker B: Yeah. I mean, spreads are low, so I don't think they're going to get a whole lot worse.
[00:13:32] Speaker A: Yeah.
[00:13:32] Speaker B: So sell your low quality. Yeah.
[00:13:35] Speaker A: All right. I want to throw one last one for you here. So do you want to talk about what you think the barley market looks like next year or how do farms pick a grain marketing advisor or analyst?
[00:13:48] Speaker B: Sure.
[00:13:48] Speaker A: Which one do you want to do?
[00:13:50] Speaker B: I can do both real quick.
[00:13:51] Speaker A: Okay.
[00:13:53] Speaker B: Barley markets are seeing really good exports, but the, the carry out is high, but not necessarily as high as some of the other product or the other grains like canola and wheat.
I think it still looks profitable. So I think that we'll see good acres next year. But, you know, I think, I think the downside in prices is likely limited. So there is some upside if you can get the guild. That would be my assessment.
[00:14:21] Speaker A: All right.
[00:14:21] Speaker B: My quick and dirty one.
[00:14:22] Speaker A: And how about Curtis is asking how do farms pick their grain marketing advisors or analysts?
[00:14:28] Speaker B: Yeah, I mean, I could be biased and say, you know, you should get ICL's information, but I think what it really boils down to is trust. Right. Trust is, is everything in this business. So if you don't trust your great marketing advisor, then, you know, I wouldn't necessarily advocate for using them. I also wouldn't trust anybody that says they pick the market right every time because nobody does that. But, you know, the last point I'll make, I think is if your gray marketing advisor tailors your or their, you know, recommendations to you based on your individual situation. So, you know, if you have cash flow needs in fall and you need to manage that, that's one thing. You know, if.
[00:15:10] Speaker A: Yep.
[00:15:11] Speaker B: If you're, you know, cash flush and you don't you can you have the time to market and. Yeah, and you can wait. I think that's another opportunity. And then there's just the risk tolerance. Right. Some people are adverse to risk and some people like to, to throw chips on the table. So there's a bunch of different ways. And I would just, you know, I would just say pick the advisor that's going to tailor the program to, to your needs.
[00:15:38] Speaker A: Yeah, I like those comments as well. And I wrote in here like from learning from other farmers who's, who they're using, who's been successful for them. That farmer referral, it's not perfect, but it's a starting point, so exactly. All right, Brian, good stuff today, man. Appreciate you being on the show, guys. I just have a couple rapid insights for you now as we wrap up, I want folks to stay close to the soybean oil market here. Take a look at that chart. If you're bored today, have a quick peek at it because it's having a positive influence on canola and it is at what I would consider a crucial spot in the chart. So take a look at it. Keep close on that one.
Second thing today, I know there's a lot of noise out there, folks.
Fertilizer noise, farmland noise, lots of stuff going on. I just want you to remember to circle back, focus on your farm, your cash flow and execute your plan. All right, it's busy out there, it's noisy out there. But don't forget to come back home and execute your Plan.
Price discovery 3rd 1.
Leveraging the information you have this week we saw, you know, one company bidding higher for, for wheat. We took that information, talked to other couple other line companies and ended up getting a much higher price. A 35 cent bump.
And the last one I just wanted to highlight, I've been picking on oats and we did get a four dollar bid in Manitoba for new crop oats and a 445 in northeast Saskatchewan. Apparently I need to confirm that one but where I heard it is a reliable source. I just need to put my eyes on it now. All right folks, the buzzer's gone off.
This week's cup of coffee was brought to you by DG Mobile Seed Cleaning. Contact Dion at 306-321-5411 for your seed cleaning needs.
Again, shouting out Dormy, Saskatchewan local based company. Couple of young fellas just giving her out there. So good job, boys.
Brian, I'm out of coffee, buddy. Thank you for joining the show. That's it for this week, folks.
And I'LL see you on Friday's episode of what the Futures again, folks. Have a great rest of the week.
