Smaller increments and frequent sales could be the ticket through a volatile commodity market

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Could volatile be the new normal when it comes to commodity markets? With volatility being the only constant over the past while, it is certainly something that farmers and marketers are getting used to as they continue to try and navigate their way through fluctuating prices and variables that seem to be ever increasing.

With no clear path through the market fog — or with no real tell-tale signs signalling to where the market is going — one factor that can act as a compass is actually the recent past. Take what was learned through the onset of the volatility and capitalize where possible, all while mitigating risk the best you can.

Although that is arguably always the name of the game, the players are different now and adjustments need to be made.

Neil Townsend with FarmLink Marketing Solutions, says one thing he has learned and what he would recommend to producers for an ongoing strategy for new crop is to break things up into smaller increments and to have more frequent sales.

“I just think the range of outcomes for any given situation right now are pretty wide. The markets are challenging at the moment. I think it may not sound like they’re being really be precise on the future, when you say, break it up into increments and sell smaller portions, but I think, the crystal ball just isn’t what it was right now. It’s kind of has a cloud in it. So you can’t see a clear path to the future, because there’s just so many variables at play,” says Townsend.

Some of the many variables that he is referring to includes of course the continued war between Russia and Ukraine. Although talks continue of letting grain out of Ukraine, nothing has come into fruition as of yet and Townsend says he’s not necessarily holding his breath on that becoming a reality. Another main player that is and will have a big impact on the markets is canola exports to China.

“If somebody said to me, oh, we’re going to export 2 million tonnes of canola to China in 2022/2023, I’d say yeah. And if somebody said, we’re going to export 6 million tonnes of canola to China in 22/23, I think it’s a little bit more unlikely,” says Townsend. “It’s in the realm of possibility but that’s just the thing, there’s a wide range of outcomes that we really don’t have any particular insight into right now. I think China with a COVID policy with their economy with their housing sector with their money, there’s just a lot of uncertainty there”.

Another topic that continues to be a hot one is the US corn yield. With many predicting and hoping for the yield to be in the 177 range, with some possible drought conditions in northwestern Iowa among other concerns, Townsend says experts are betting below the United States Department of Agriculture (USDA)’s average of 177 into the 174-175 range, however, he says he wouldn’t be surprised if the final numbers dipped down around 172-174.

Listen to the full interview between RealAg Radio’s Shaun Haney and FarmLink’s Neil Townsend, below.

 

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