Farm Credit Canada suggests, over the long term, the fundamentals of supply and demand tend to be the primary factor that will influence profitability on the farm.
A Farm Credit Canada trade report, which looked at the impact of price volatility over the past 30 years on soybeans, wheat, canola pork and beef indicates, due to an evolving and uncertain international trade environment, Canadian agricultural producers are experiencing commodity price volatility but that shouldn’t significantly impact Canada’s long-term export growth potential.
Craig Klemmer, a Principle Agricultural Economist with Farm Credit Canada, says producers are doing a good job of managing volatility.
Volatility is not new as we can see from our report and producers realize that’s one of the many challenges they face when they’re creating their marketing plans and making decisions about planting intentions or their mix of livestock and crops. This isn’t something new and it’s something they know is part of their operation and something that they’ve got to manage their risks for.
At this point when we look at things, volatility usually comes and goes. If we think about the long term side of commodity prices it’s really going to be driven by those supply demand fundamentals and looking at where we are for over all inventories of crops and inventory levels of livestock out there relative to the demand. It really goes back to that long term.
When we look at these volatilities and these disruptions in the market those are generally more shorter term, one or two years. But when we think about longer term, five to ten years, it really trends back to those market fundamentals of supply and demand that drive commodity markets as they have in the past as well.
~ Craig Klemmer, Farm Credit Canada
Klemmer it’s all about building a solid marketing plan, watching the markets and when there’s opportunity to lock in profits to execute on those plans.