Spring status quo sees setbacks and success

This past week in the ag markets was characterized by the USDA world agricultural supply and demand estimates (WASDE) report

Brennan Taylor, FarmLead Breakfast Brief

This past week in the ag markets was characterized by the USDA world agricultural supply and demand estimates (WASDE) report on March 8. Truth be told, the stocks and acreage USDA report on March 28 is the more significant of the two grain market reports put out by the government agency this month. The WASDE report left things mostly unchanged domestically in the U.S. for corn and soybeans while wheat was bearish as ending stocks were raised 25 million bushels to 716 million bushels. With ending stocks unchanged for corn and soybeans at 632 million bushels and 125M bushels respectively, it’s clear that the USDA feels comfortable with the status quo this spring.

Let’s be clear on one thing though: U.S. soybean exports and crush demand has been anything but the status quo. More specifically, the USDA is suggesting the torrid pace soybeans are being used up or sold internationally will slow as South American supplies come online. However, as we’ve pointed out repeatedly in the daily FarmLead Breakfast Brief, the logistical nightmares in Brazil continue. Case in point, a few recent reports tell us it now takes nine days to get a load of the soybean crop from main-producing region Mato Grosso to ports in the southeast (it was six days just two years ago). The reasons for this include the shortage of trucks, the doubling of freight costs, and rail options being more expensive in terms of time and money.

From a global perspective, oilseed production is expected to increase slightly this year, according to the USDA report on Friday. This bodes well for China, which wants their soybeans and they want them now (think Veruca Salt from the older film version of Willy Wonka and the Chocolate Factory). The Asian supernation has crushing capacity for 136 million tonnes but only did about 61 million tonnes last year, meaning they quickly could become the largest producer of soymeal in Southeast Asia (a market responsible for about 20 per cent of global soymeal trade). With higher worldwide production of soybeans and a record canola crop of 15.5 million tonnes being predicted by the Canadian government, fall 2013 contracts are trading at $2+ per bushel discounts to the current front-month lots.

As for wheat, both ABARES (the Aussie version of the USDA) and the UN’s Food & Agriculture Organization expect worldwide production to increase by more than 4.3 per cent this year. However, as Kansas State University “wheat expert” Jim Shroyer points out, it’s been so dry for so long that in places such as western Kansas, it would take eight feet of snow to bring soil conditions back to normal. From a macro perspective, lower production out of the US could potentially push more foreign buyers to competing lands where production is solid (i.e. Australia, Russia, Europe, and the True North strong and free…that’s Canada if you don’t know your anthem).

Keeping it close to home, a lot of areas within the Canadian Prairies have received more snowfall than normal. That’s great for snowmobiling and all but it could potentially push a lot of seeding intentions back a couple weeks, let alone days, due to a wet landscape (post-thaw). All in all, it’s that time of year to bring out the rubber boots again and it may be for more than a few weeks.

Brennan Turner is originally from Foam Lake, Sask., where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, Mr. Turner spent some time working in finance before starting FarmLead.com, a risk-free, transparent online grain marketplace. His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (b.turner@farmlead.com) or phone (1-855-332-7653).