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On to the next one

On Monday, March 10th, the U.S.D.A. released the monthly installment of their world agricultural supply and demand estimates

On Monday, March 10th, the U.S.D.A. released the monthly installment of their world agricultural supply and demand estimates and the market sold-off on the report not meeting trader’s expectations. Ending stocks for US corn were lowered by 25M bushels due to an increase in exports by the same amount, leaving the year-end number 1.456B bushels. US soybean inventories were dropped by 5M bushels (pre-market expectations were for 9M) to 145M bushels, the 2nd lowest number since 1976. Wheat ending stocks for the US were unchanged while world inventories rose slightly. Ultimately, the market was in bull mode for a few days leading up to the report but profit-taking started to take over before the release and when expectations weren’t met, the sell-off continued.  In reality, the report told us much of what we already knew so it’s now onto the next report, the 2014/15 acreage estimates on Monday, March 31st.

On Friday, March 7th, Federal Ag Minister Gerry Ritz and Transportation Minister Lisa Raitt announced that, through a federal cabinet order, C.N. and C.P. railways will have to move a combined one million tonnes a week or be fined $100,000 per day. Interestingly enough, the revenue difference between one train of oil and one train of grain would pay for three days-worth of fines. Further, as our friend at the Western Producer, Ed White, mentions, some grain companies are paying one million dollars a week in demurrage costs so $100,000-a-day isn’t too significant. Ultimately, this is a short-term political play – when there’s enough shouting from the public, a publicly-elected politician has to respond somehow. Further, because this is only a temporary mandate from the government, while I don’t doubt that the rail companies will work hard to meet the weekly requirement, I do discount the notion that they’ll maintain the government’s gameplan if they don’t have to. When you compare things to Australia, a lack of investment is limiting the ability for farmers in the Land of Oz to get their own grain to port. Grain railcars in Australia (or as they are called, “wagons”) usually carry only half of what our Canadian 90-tonne railcars can. With the Australian Wheat Board deregulation still fresh in the minds of many (legislation went through in 2008), open market Aussie grain trade is still in its infancy. Yet journalist Chris Cook says the current state of logistics is a “sort of challenge that comes along once in a generation and can determine the future for generations to come.“ I think we should be able to learn a little from our Commonwealth companions in the Land Down Undaa.

Canadian Prime Minister Harper announced overnight that Canada and South Korea successfully concluded negotiations for a free trade agreement. This is big for a few reasons: South Korea is a large potential market for Canadian livestock while the number one consumed vegetable oil in the Asian nation is our favourite to grow, canola. The tariffs that existed on pork, beef, and seafood will be phased out over the next decade or so while Canadian automakers were upset the 6.1 per cent import tariff on Korean cars will be phased out in just two years. Kudos to the Prime Minister’s office though and his team of foreign trade negotiators (I had the pleasure of meeting a few at last month’s Sask Ag Trade Summit) as they continue to expand the Canadian trade network. Food for thought: when Prime Minister Harper came into office eight years ago, there were five free trade agreements and now, there are 43, begging the question, what and/or who’s next?

To growth,

Brennan Turner

President, FarmLead.com

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).