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Earlier this week, I had the opportunity to speak to farmers at a DG Global event near St. Thomas, Ontario. It's not often that I get the opportunity to speak in the warmer weather months simply because as farmers we are just too busy. However, there usually is a period toward the end of June when things get a little easier. It was great to get together with farmers and discuss markets and the general geopolitical situation we find ourselves in as we head toward the end of June.

You know, a very good thing with being asked to speak at DG Global is that we usually hear from the man that created it, Dwight Gerling. He is a great speaker with great knowledge of the global and Canadian cash trade in soybeans and other grains. I only hope I added to the dissertation that night. Of course, part of the discussion in both presentations had to do with the changing geopolitical scenarios we have now that the Americans and the Iranians have signed a memorandum of understanding (MOU) to end the war.

We will see what happens now because apparently the Straits of Hormuz was supposed to be open starting Friday.*

However, I cautioned the farmers present that I was not a military analyst, and I must say that ever since the start of the Russia-Ukraine war it would have been good if I was one. As farmers, we constantly are buffeted by these geopolitical factors, and it just seems natural that they will affect our grain markets and of course we all know that they do. However, we also know that the last three or four months of war over Iran has caused all kinds of uncertain volatility. It is so difficult to know where prices are going to go when bombs and false alarms are the order of the day.

I will leave it up to you to read the fine details of the memorandum of understanding. However, keep in mind that there is supposed to be now 60 days in negotiation to get some type of deeper more satisfactory settlement from both sides. That is a good thing I suppose, but on the other hand it just extends the uncertainty for another 60 days. U.S. President Donald Trump has already said that if he's not satisfied in 60 days, he'll stop dropping bombs on Iran's head.

Of course, I'm just glad that maybe peace is breaking out. It's not that I didn't know, but when I was preparing for my St. Thomas presentation it was so very clear how the war in Iran did represent some opportunity to price grain. Grain prices, to a large extent, were following energy prices and we know that in February we started to see the price of oil go up quickly. Of course, what we've seen in the last little while is just the opposite has happened where trading algorithms believed the war was coming to an end.

Oil prices had been languishing in the $65 a barrel level before the war started. They reached their height on May 18 when West Texas crude hit $105 a barrel. Since then, with a few hiccups, it is ratcheted down to approximately $76 a barrel and of course we all know the grain prices followed. However, during that three-month timeframe we did have some great pricing opportunities we haven't seen in quite some time. Even after all this, prices are still higher than they were a year ago.

As always when I speak to farm groups, I feel quite a bit of camaraderie because I'm a farmer myself. In fact, during the morning of my presentation I sprayed the last 20 acres of corn before what I thought would be a big rain last night. Despite all the weather reports, the rain didn't come and who knows, maybe this week I'll be looking for more rain. Some people in the audience were actually looking for rain to bring their soybeans up. It just goes to show you that we are always facing all kinds of risk that goes unspoken.

To handle that risk, we need healthy grain prices, and some might argue that we still do even at these levels. It is true that we've lost a lot of momentum and I guess the question is how do grain prices get it back heading into late June and July. In days gone by we often looked to the June 30 USDA report to get the actual acreage numbers to offer some explosive price action. Increasingly though, during the last few years we have not seen as much of that. It might be that the USDA is making better use of technology in estimating yield. It might be just one of those things.

We shall see. In the next few weeks, crop weather will be critical to development. This is not a secret to any of you reading this. December corn sits at $4.44 a bushel, November soybeans are sitting at $11.42 a bushel in July wheat is sitting at $6.05 a bushel. Meanwhile, as I said before, the price of a barrel of oil is $76 US; 60 days from now, it might be peaceful, or we might have bombs dropping again. What will the price of oil be then? Whatever it is, during the next two months it should give us clues for where crop prices will go. Hither Aug 18.

*Editor's note: As of Friday noon, AP reported Iran did not travel to Switzerland for an official signing, postponing the event, because of Israeli strikes on Iranian-backed Hezbollah militants in Lebanon. Later on Friday, Israel and Hezbollah agreed to renew their ceasefire. Politico reported that while ships were allowed to pass through the Strait of Hormuz, "the new Iranian authority charged with overseeing the waterway issued guidance Friday calling on ships to register with it -- signaling Tehran likely intends to start charging." However, the Persian Gulf Authority said it wouldn't charge the ships during the 60-day period now open for negotiations.

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Philip Shaw can be reached at philip@philipshaw.ca

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