All about the volumes

Heading past the halfway point of September, the pace of the North American harvest picked up

Farm Lead

Heading past the halfway point of September, the pace of the North American harvest picked up with excellent weather allowing crops to dry out from late growing season rains. That being said, the quality of the crop coming off is quite variable with reports of fields next to each other swaying a few grades one way or the other! As such, we’ve seen prices for higher quality crops spreading higher against their lower grade counterparts. For example, the Saskatchewan Ministry of Agriculture said recently that 79 per cent of the provincial durum crop will fall into the bottom two grades. Thus, from what we’ve seen, prices have already adjusted to the variable quality so further increases may limited based on the fact that there’s record crops coming off across the world, especially (and obviously by now) in corn, wheat, soybeans.

Nonetheless, A.B.A.R.E.S., the Aussie U.S.D.A., trimmed its forecast of wheat and canola exports to five-and four-year lows respectively, on expectations that a smaller crop will be taken off. A.B.A.R.E.S. downsized its forecast for total wheat production last week by 360,000 to 24.23 million tonnes (U.S.D.A.’s at 25.5 million tonnes) and, from that, 18.1 million tonnes of that will get exported this year (U.S.D.A.’s at 19 million tonnes). As for canola, exports are forecasted to fall by 28 per cent year-over-year to 2.3 million tonnes, mostly because 10 per cent less crop is coming off than last year with only 3.39 million tonnes in 2014/15. All of this in mind, some chilly weather (read: frost) in Southern and Eastern Australia aren’t helping much a few weeks before their earliest-seeded stuff gets harvested.

Coming back to North America, recent applicable crop insurance acreage data out from the U.S.D.A.’s Farm Service Agency suggests more acres than previous thought, but also more acres were lost to prevented plantings. It comes as no surprise really that the biggest prevent plant states for corn and soybeans were in the northern U.S. regions, specially North Dakota and Minnesota, which saw a combined 834,000 acres of prevented plant corn (or 53 per cent of the total) and 517,000 acres of soybeans prevented plantings (or 61.5 per cent of the total). One thing to remember though is that the data from the F.S.A. is still incomplete and while the trade reacted strongly to the report, the real numbers to focus on will be out in October.

Finally, In an interesting move, C.P. Rail filed a lawsuit against the Canadian Transportation Agency and the Attorney General of Canada, stating that the new interswitching rules aren’t legitimate as the government “abused its discretion” and exceeded its jurisdiction” in changing things. Ag Minister Gerry Ritz balked at the lawsuit, saying that by extending the interswitching limit to 160km from the previous 30km, shippers have better access to rail competition. C.P. is claiming the new rules will cost them $13 million in additional admin and operations and that it will actually make moving grain harder, not easier. On top of this, C.N. Rail is getting a financial slap on the wrist for not meeting the weekly grain movement mandate. It seems that with most big elevators (read: easy-to reach grain) now serviced, the hard-to-reach business (i.e. producer cars and shortlines) isn’t generating the same volumes.

 

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 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).