I have three words for you to describe the current state of the world’s commodity markets: uncertainty, uncertainty, uncertainty. It’s become the one constant. Our recent article, Trump 3.0, could be updated daily with the new policies, policy changes from the US and then the responses from the rest of the world.

So, what do we do about this when making grain marketing decisions?

Firstly, we need to remember that at the end of the day, agricultural commodity markets are driven by Supply & Demand: too much supply and prices go down, stimulating demand and slowing production. Similarly, too much demand and price increases stimulating production and slowing demand. It’s a see saw that’s constantly trying to find balance, but in the longer term, tariffs only affect commodity markets in so far as they affect supply and demand. The problem we have right here, right now, is that we simply don’t know what the tariffs will be as they are constantly changing hence the main driver being uncertainty.

Traditionally, market analysts focused on supply by looking at the weather, acres planted, crop conditions, and the like to work out market direction because it was assumed that demand was relatively constant and trade flows freely available. However, as we have learnt over the last 5 years since COVID, the Russian invasion of Ukraine and now Trump’s Tariff policies, this is not necessarily the case.

A good example that directly affects us here locally is canola. Canadian canola is increasingly being crushed in Canada with the oil exported to biodiesel refiners in the US where mandates and tax advantages for renewables are driving increasing demand. However, the new administration in the US has been anti-renewable energy, including biodiesel, and at the same time, has announced tariffs on anything Canadian coming into the US. In this case, tariffs and government policy acted to reduce demand, and the market fell. Just as we all started to get used to the new reality the US oil industry joined in with the biodiesel industry (there is quite a bit of overlap in ownership) and successfully lobbied for a return of the favorable tax treatments and the mandates and now with no new tariffs on Canadian imports of canola oil into the US we are back to where we started.

So, how do we market and hedge grain in all this upheaval?

At the risk of sounding boring and mundane, you need to develop a grain marketing plan. A well-thought-out plan enables you to duck and weave through all the noise, take advantage of opportunities and minimize problems. Weather can be just as unpredictable, and most producers have an agronomic plan, and a grain marketing plan is no different really.
You don’t need to know what the market will do tomorrow to develop a sound plan yielding good results. A good strategy can guide you through different scenarios at different times of the year without trying to guess the future second.

A plan does not remove all the emotion or uncertainty, especially when things are as extreme as they are now, but it gives a framework to make decisions that can greatly assist. To take the above example in canola, all the uncertainness has made the market volatile. With this has come an opportunity to forward sell, and a plan has enabled targets to be set amongst all this volatility.

Call us to discuss refining your plan or how you can establish your own plan.