Commodity markets look to have bottomed out, but don鈥檛 expect a massive price rebound anytime soon.
That was the cautious message agricultural producers heard from John DePutter, founder and President of DePutter Publishing Ltd., speaking at a Farm Credit Canada Ag Knowledge Exchange event held in Yorkton Monday.
鈥淲e鈥檝e seen some pretty decent prices in general,鈥� he said, but added high prices never last. 鈥溾�� What goes boom ultimately goes bust.鈥�
DePutter said agriculture commodities 鈥渨ere surfing a bullish wave鈥� up until 2008, when prices spiked, doing that again in 2012.
The last couple of years prices have tumbled, said DePutter, adding there is some indication the bottom is past. He said there are signs which support 鈥渢hat the worst is over.鈥�
While prices climb for commodities after prices bottom out in a cycle, DePutter said producers should not expect a return to record highs anytime soon. In fact, he said the price levels of 2008 and 2012 may be years in returning.
Looking at a graph of the historic prices for corn, DePutter said there have been four high price spikes, the first two follow the demand following the two world wars, a third was in the 1970s, and the most recent in 2012. With only four spikes in nearly 100-years the expectation of another record anytime soon seems unlikely.
鈥淲e have come through another record boom,鈥� he said. 鈥淲e鈥檙e into a levelling out period that could last a couple of decades.鈥�
DePutter said the situation might be longer in terms of recovery based on the extreme high prices of the recent record high spoke.
鈥淭he bigger the party the longer the hangover,鈥� he said.
DePutter said we seem headed for a period of essentially sideways markets, where there is a remote chance of high spikes, but still a chance prices could dip on occasion.
As an example wheat is likely to fluctuate around $3.75 to $5 per bushels.
鈥淚t could nick below that $3.75 now and then,鈥� offered DePutter.
But to hit the $7 prices of three or four years ago 鈥渨e鈥檇 have to change a lot鈥� in terms of market influences, he said.
While prices have declined, DePutter said Canadian farm producers have fared reasonably well, especially compared to their American counterparts.
鈥淐anadian farm income really hasn鈥檛 dropped like it has in the US,鈥� he said.
The reason for the better response on this side of the border has been the Canadian dollar which has helped in terms of sales.
The Canadian dollar may strengthen though.
鈥淚f the US dollar turns down it should allow the Canadian dollar to float higher,鈥� offered DePutter. 鈥溾�� There is some risk of a higher Canadian dollar.鈥�
DePutter said an 80-to-85 cent Canadian dollar against US currency would start to tighten margins for Canadian producers.
鈥淚 can鈥檛 see a reason it (the Canadian dollar) can鈥檛 get there,鈥� he said.
Of course in crystal balling the commodity prices, there are also unknown influences, one 小蓝视频 American president Donald Trump.
鈥淲e鈥檙e talking about a loose cannon, a wild card,鈥� he said.
DePutter said he has always termed unexpected shocks in terms of price 鈥榖lack swans鈥� adding Trump qualifies as one of those.
While noting he is generally on side with Republican ideals, DePutter said he is not sure Trump was a good choice as leader, He pointed to a general trend away from the concept of free trade.
鈥淭here鈥檚 an antiglobalization trend going on too, which is sad. Agriculture needs exports,鈥� he said. 鈥淭he US and Canada both benefit from an open grain trade.鈥�
The influence of Trump also plays in terms of his view of China, which has been a world market driver in recent years. DePutter says the relationship of China and the US thanks to Trump is somewhat strained, as there is a fear stateside China is an emerging superpower which could impact the hegemony America has enjoyed for decades.
