Questioning satisfaction

This week's FarmLead looks at elevated grain market values.

Grains continue to sit around their highs as we get closer to the end of May and the Plant 2016 season. The elevated levels relative to a few months ago continues to be mostly based on managed money building up their long positions in the market and extending their bullish push as El Nino officially ended last week. With the very good spring weather and low amount of winter losses, crops in the Black Sea are looking pretty deluxe. As such, consensus seems to be that Russia will harvest another 100 million tonnes of grain, oilseeds, and pulses this year, including 62 64 million tonnes of wheat. At the global pulse crop convention in Turkey, the consensus seems to be that there will be a tighter pipeline situation for green lentils than for red, due to the large number of increase in acres of the latter. As such, the math suggests the green lentil market may have more upside throughout the 2016/17 marketing year. Finally, the driest of areas in Saskatchewan and Alberta finally got some rain now it’s a question of how long will it satisfy fields until?

In any commodity market downturn, you tend to see an increased level of merger and acquisition activity (M andA). This year is no different for the ag industry with Syngenta-ChemChina, Dow-DuPont, and now Bayer-Monsanto. The $62 Billion USD bid by Bayer for the St. Louis seed company was rejected initially but there’s likely more to that number (rule of thumb in negotiation: the first offer is never the best). While B.A.S.F. could get in the mix (they have a bigger money chest to work with) and make things a bit more hostile, the final number to close a deal will likely be a lot of stacks (and I’m not just talking about the dollar bill kind….). The combining of 2 complimentary businesses Bayer with its chemical game and Monsanto with its seeds has more than a few farmers worried about the resulting pricing of the new company’s products.

The Western half of the Canadian Prairies got a good shot of moisture over the Canadian long weekend, but those in the northern Peace region got snow while the southern and central areas got “A Billion Dollar Rain”. The A.A.F.C. believes that canola acres have been maxed out due to disease and insects building up over the course of consecutive years of no rotation. That being said, the Canadian Ag Ministry is channeling Statistics Canada by calling for 19.3 million acres this year, a significant drop from the A.A.F.C.’s previous estimate of 20.86 million acres of the oilseed. With production now pegged at 15.4 million tonnes, consistent demand both locally and internationally will push ending stocks fdown to 700,000 MT, a 48 per cent decline from this current marketing year’s expected carryout.

However, with the generally drier conditions contrasting a price rally, like soybeans, how many canola acres have been added thanks to the rally of the past few weeks? Again, contrasting weather against a higher number, the market is likely going to be satisfied at current prices.

To growth,

Brennan Turner

President and CEO | 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 mobile grain marketplace (app available) that has moved almost 250,000 MT in the last 2.5 years. 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)