The strong(er) game

This week's FarmLead looks at oats, grains, corn and other grain market prices.

Grains ended the month of November relatively quietly as market players tied up loose ends in their books to make things look decent! As it stands, oats was the big winner for the month, up 7.6 per cent with wheat markets being the worst-performing of the complex, down over 8.5 per cent in November. Corn was another big loser for month, down over 4 per cent while soybeans and canola went neck-and-neck at down -0.45 per cent and -0.8 per cent respectively in November. From a currency perspective, the Canadian Loonie has lost about 2 per cent against the US Dollar (and down 13 per cent year-to-date), while the US Greenback has strengthened about 3.4 per cent. With other European currencies weakening in November (i.e. Eurodollar -4 per cent in November, British Pound -2.4 per cent), international grain buyers are able to effectively strengthen their sourcing game, namely from Europe and Canada.

This is exactly why more analysts are suggesting that Canada could actually move into the #2 position when it comes to the world’s largest wheat exporters, surpassing the US but still behind Russia. US wheat exports are about 16per cent behind the pace needed to reach the 21.8 million tonnes the U.S.D.A. has forecasted, whereas Canada is likely to top the 20 million tonnes estimated (Russia’s wheat exports are pegged at 23.5 million tonnes). Moreover, French wheat has gotten more competitive with the depreciation of the Euro, so much so that 126,000 MT of French wheat has been contracted thus far this marketing year by Mexico! (Yes, the country right across the border from the U.S.) That amount is now greater than the entire volume of French wheat that Mexico has bought in the last 4 years combined.

Questions continue to swirl around the Middle East and whether or not the recent downing of Russian fighter plane by Turkish forces will give some life to the wheat markets.

Last year (the 2014/15 marketing year), Turkey was the biggest buyer of Russian wheat, purchasing 4.1 million tonnes, and this year they have already picked up 1.6 million tonnes through October, making them the 2nd-largest buyer behind Egypt. However, rumours are now making the rounds that Moscow is now suspending wheat exports to Turkey. The market hasn’t really reacted to this news yet mainly because there’s a lot of other options that Turkey has (given the size of available supplies out there – anyone around the Black Sea region could be a good fit, or even possibly Canadian or Australia wheat given the cheap ocean freight).

Finally, the new incoming Argentinian Agricultural Minister recently confirmed that corn, wheat, beef, and sunflower export taxes will be immediately scrapped the day that new President-elect Macri steps into office on December 10th. This would be a sharp decline from the 23 per cent tax on wheat and 20 per cent additional cost on corn exports from the South American country. Add in the lower value of the Argentine peso to the US dollar, this is a significant change. As for soybeans, Macri will drop the export tax on the oilseed by 5 points to 30per cent when he takes office, and then a further 5 points every year for the next 7 years. That’s notable for the world’s #3 grower of the oilseed at 57 million tonnes but will only export (per most recent U.S.D.A. forecasts) 10.75 million tonnes in 2015/16, compared to neighbouring Brazil’s 100 million-tonne crop and 57 million tonnes of exports. All in all, it’s hard not to argue that Argentina’s soybean export game will strengthen.

To growth,

Brennan Turner

President & CEO

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, a risk-free, transparent online and now mobile grain marketplace (app available for iOS & Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email