Grain prices headed it March on a lower note as the market takes into account new supply and demand forecasts, 2017/18 acreage estimates, and South American weather.
Winterkill doesn’t seem to be an issue in Europe as crops that have faced the coldest temperatures are also those with decent snow cover. Accordingly, Russian wheat production looks to be fairly large again in 2017/18 while E.U. output should rebound.
Looking more long-term, the U.S.D.A. just suggested that grain area in Russia and Ukraine will likely grow by five to 10 per cent in the next decade, and the crop planted with oilseeds should expand by much more. What we do know is that there’s literally millions of untapped acres in Russia that haven’t been farmed in decades but as trade with Asia becomes more important, it would be dumb of Russia not to develop and push into these areas.
Overall, we’ve seen prices pull back a bit from some of the winter highs and with a fair amount of grain locked up for movement over the next few months, there may be just one rally left in the bag before North American crops emerge from Plant 2017.
On that note, the U.S.D.A. came out this week with their estimates for the 2017/18 U.S. acreage and without disappointment, a lot of soybeans are going in. Last year the American farmer planted 83.6 million acres of soybeans but this coming season, that number is expected to jump 5.5 per cent to 88 million (trade was expecting 88.3 million acres).
Where are those acres coming from? Quite simply, corn and wheat. U.S. corn acreage is expected to drop 4.3 per cent from the 94 million last year to 90 million in 2017/18. For wheat, total acreage is expected to drop significantly by 8.3 per cent year-over-year to 46 million, with most of the decline coming in winter wheat acre reductions.
Societe Generale might have the most stoic perspective on 2017 planting though, in that, “soybeans still makes economic sense, but corn remains the traditional crop for U.S. farmers.” Whether or not you think the lines drawn in the sand by the U.S.D.A. are accurate, that’s what the market will trade.
Speaking of believable forecasts though, A.A.F.C. updated some of their Canadian grains supply and demand numbers this week, raising their domestic canola crush demand by 100,000 to nine million tonnes and exports by 500,000 to 10 million tonnes.
Of note is that Ag Canada figures that whatever’s still in the field that needs to get harvested will wind up as feed or waste and so they dropped their 2016/17 ending stocks number to 1.1M tonnes (was two million previously).
Given the bigger than expected and better than expected quality, durum wheat stocks were raised by 200,000 to 2.8 million tonnes and other wheat carryout was raised by 500,000 to four million tonnes. Finally, the peas carryout number remained flat (and higher than a year ago) while lentil exports were increased by 200,000 to push ending stocks down to 425,000 MT.
It appears that A.A.F.C. is not accounting for the risk of a new Indian fumigation policy exemption for Canada not getting done, which would intuitively push Canadian pulse crop ending stocks much higher.
To growth, Brennan Turner
President & CEO | FarmLead.com