It has turned quite wet in southwestern Ontario. I hope that this is not a wet spring, but with raindrops falling all around me, it certainly looks that way now. Trying to get crops in the ground amid constant rain showers is always a bit of a tussle. I'm hoping for bright sunshine ahead. A little bit of drought in late April and May always goes a long way to getting crops in the ground.

Pricing those crops is another matter. On these pages during the last 39 years, we have discussed many aspects within the grain markets that affect our cash prices. All of those things continue to be part of the puzzle to the consternation of many of you. Markets can be complex. So, at the end of the day in eastern Canada, many farmers look for a good cash price to lock in. However, knowing what a good cash price is and whether that's being determined fairly is increasingly another matter. The rules of engagement for pricing grain are continually changing.

Cash grain prices are not necessarily transparent everywhere. For instance, I heard the other day that feed barley prices were higher than malt barley prices in Western Canada. I never comment on things I don't know too much about, but I was grasping to understand. For instance, I assumed that it must have to do with specific areas in Western Canada reflecting in a cash basis value that is highly different. I still don't know the answer to that question but it's likely a variation on that theme.

Grain price transparency in many parts of our country is less than it should be. Specifically, parts of Western Canada, Quebec and the Maritime provinces often have cash grain prices that don't make any sense. However, recognizing that is not always apparent. The farther you get away from areas of abundant supply, the less transparent grain prices tend to be.

Unfortunately, it's getting a bit worse but not necessarily in the cash market. I wrote about this briefly a few weeks ago when I talked about "predictive markets" such as Polymarket and Kalshi which let you bet on just about anything. (https://www.dtnpf.com/…) With war raging in the Middle East, predictive traders are more and more interested in commodities such as oil and natural gas. They are also concerned about how all of this is affecting our food supply. This has led to one of the leading U.S. prediction markets Kalshi adding natural gas and wheat to its prediction market lineup.

Think of that for a few minutes. If you are on Kalshi, you can bet on the number of ships stuck in the Strait of Hormuz during the blockade and then bet on the price of wheat at the same time. In essence, these predictive markets are bringing their own traders over into the commodity market, adding to the liquidity as well as the ignorance. It means more and more supply and demand and real fundamentals make less and less difference to grain futures pricing.

It makes you wonder how real agricultural commodity markets will sort things out when we do have a real fundamental change in the market. For instance, how about if the wheat surplus gets even higher than it is now or how about if Russia decides to shut off wheat exports in the name of domestic food security? You would think that the predictive traders, not knowing anything about wheat, would be blasted to the side. However, it's also hard to say how this would be worked out in the grand scheme of things.

You might argue that basis values would take care of this at the farm level. That does make sense because basis reflects local supply and demand that price where grain is moved, bought, or sold. However, futures always act as a benchmark for basis and if the futures are far more volatile because of this infusion of capital, it makes price transparency that much more difficult.

Case in point: Take the wheat market right now. Many of us in southwestern Ontario are wondering about pricing this wheat as we look ahead. At the present time, the cash price for wheat in the United States is about $0.55 under the nearest futures contract. In fact, on the cash index, it is below the previous 5- and 10-year daily average futures prices. In other words, commercial sources aren't breaking the doors down trying to buy it. In fact, when you see big price spikes in the wheat market, you often see a huge divergent in cash prices. In many ways it doesn't make sense and with predicted traders coming into the market from places like Kalshi, it will only be that more volatile.

Let's just say it's setting up a grain pricing environment which will become much more clouded. The new predictive market traders are like hogs to the slaughter. Good luck to them. For the rest of us, the challenge will be understanding cash grain markets and considering the invitation to chase every futures rally that may or may not be tied to reality. Add to that the specter of platforms like Kalshi bringing in a whole new class of traders, many far removed from the day-to-day realities of agriculture and you have even more noise layered onto an already complicated system. Daily market intelligence remains key. Let the chips fall where they may.

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The views expressed are those of the individual author and not necessarily those of DTN, its management or employees.

Philip Shaw can be reached at philip@philipshaw.ca

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