Wheat and corn may have found a bottom towards the end of January as international buyers look to capitalize on the multi-year lows. One positive for the individual Canadian producer is that a depreciating Loonie ($1 U.S.D. equaled about $1.10 C.A.D. at the time of writing) gives other countries more purchasing power. This means that they can buy more supply with the same amount of their currency. Rains in Argentina and positive harvest numbers coming out of Brazil have pushed the soybean complex lower as expectations for significant production continues to grow. As such, adding the downside risk for soybeans is China potentially cancelling U.S. orders and switching over to Brazilian goods. Rumours are building that Brazilian ports are already booked through February and the ships are starting to line up outside the harbour.
Speaking of logistics, Canadian agriculture continues to get press for its awesome (read: not awesome) movement of grain out of the Vancouver port. With a 96.5 million-tonne crop and 44.6 million tonnes expected to be headed out of the country this year, 2.7 million tonnes are reportedly sitting in limbo as 37 ships are waiting in the British Columbian port. As demurrage costs continue to float between $10,000 and $20,000 a day, I’m sure the international grain buyers are really interested in the recently-announced five-year study of the Canadian logistical system (partially funded by the Canadian federal government and headed up by Pulse Canada). It’s estimated that between C.N. and C.P., there’s 36,660 outstanding grain-railcar orders that have yet to be filled (as of January 17th). Also, keep in mind that Canadian railroads shipped 34 per cent more crude petroleum and fuel oils in October 2013 than a year prior and double the amount in October 2011.
Wheat prices continue to be supported on export sales as prices in Chicago fell in the second last week of January to a 3.5-year low and many countries capitalized on the new bottom. This included Saudi Arabia buying 600,000 tonnes, Iraq buying 350,000 tonnes, and Algeria snapping up 500,000 tonnes as well. The majority of the damage of the cold weather on the U.S. winter wheat crop was likely hardest hit in Kansas and Oklahoma but the extent of the damage is hard to predict until the crop emerges from dormancy. Technicals in the complex continue to suggest that the commodity is still oversold (managed money is holding a very large net short position), especially in the winter wheat markets.
Canada exported 5.72 million tonnes of wheat (excluding durum) between August and November 2013, a 27 per cent increase year-over-year, with the U.S. being the biggest customer (took in 1.13 million tonnes). While grain movement in the Canadian Prairies are at an all-time high (per C.P. and C.N. data), there’s definitely frustration out there. Clearly, transparency has been word du jour for the past couple months and I’m proud that it is the pillar of our business model here at FarmLead. This in mind, while railcars aren’t going west, we’re bringing on more companies to push movement elsewhere (AKA south or to the east). If your grain isn’t available to these companies on the FarmLead Marketplace though, they can’t work with you.
Brennan Turner is originally from Foam Lake, SK, 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 and now mobile grain marketplace (app available for iOS and Android). 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).
— FarmLead Breakfast Brief