Many of the crops grown in Canada are traded on an active futures market: corn, soybeans, canola, and wheat are the most common.
But many other plants do not trade in futures, instead relying on cash prices, actual deliveries, and contracts for pricing and risk management.
Jon Driedger of LeftField Commodity Research says that with market ramp-ups like we recently saw with durum, peas and canary seeds, it can be more difficult to get an idea of where prices are going and when.
Dredger says that futures markets are actively traded markets that allow speculators, traders, and industry players (read: farmers) to “buy paper” without a physical transaction taking place. This allows the anticipation of weather, world events, trade and more to be built into the price.
This makes futures markets somewhat more predictable, but also a lot more difficult to read because there are so many factors to manipulate, plus the spillover effect of the dominant crop markets: in the case of Canada, it’s corn and soybeans.
However, non-futures markets have far less liquidity on the up and down trend.
Driedger explains that much of the market price and outlook is tied to a physical transaction and is usually centered in one geographic area, creating an environment with less liquidity – greater price swings in both directions.
Keep listening to learn more from Driedger, including insights into the upcoming StatsCan report expected on Monday, production forecasts, and what could hurt corn and soybean markets this winter.