Markets and Grain Prices – Could wheat be the new toilet paper?
In these unprecedented times, the international buyers of agricultural products are dealing with two major risks from grain exporting countries infected with COVID:
- Will the supply chains continue to operate so the export of grains can continue?
- Will governments continue to allow the export of grains?
While there are no known issues with supply chains or bans on the exports of wheat at the time of writing, this uncertainty is driving up wheat futures prices as importing countries are increasing buying of supplies to ensure that their immediate domestic needs are met. Further wheat futures changes will depend on if access to grain exports are maintained in the weeks ahead.
Farmgate prices are also improving from the recent devaluation of the Canadian dollar. As wheat is globally traded in US dollars, devaluation leads to farmers being offered higher Canadian dollar values for their wheat. The devaluation of the Canadian dollar combined with an increase in uncertainty in grain markets means farmers are seeing an improvement in farm gate prices for wheat leading up to Spring.
Barley prices have remained stable since harvest due to ample supplies of both malt quality and feed quality grains. Despite the recent uncertainty in the markets, barley prices remain mostly unimpacted.
The uncertainty of supply chain operations is in the front of mind of all members of the Canadian supply chain. Grain elevators, malt houses, grain mills, bakeries, railways, and export ports are concerned about having to reduce their operations should their staff, or the staff of their customers, become ill. All of these operations are taking actions to ensure that they are limiting potential sources of infection, developing protocols to protect staff, and attempting to limit impacts to production should staff become ill.
In the longer term, agricultural commodity prices are going to depend heavily on if the global wheat crop of 2020 has yields impacted by disruptions in the supply chains for agricultural inputs or labour.
One of Alberta’s major maltsters is advising farmers of slackening demand for new crop purchases due to the COVID-19 situation in light of reduced beer consumption, especially in Western US states.