Favourable roles

The U.S.D.A. came out with their March installment of the world agricultural supply and demand estimates


The U.S.D.A. came out with their March installment of the world agricultural supply and demand estimates but the event was relatively muted per usual, as the big release to watch is the Grain Stocks and Prospective Plantings report at the end of this month. The report showed corn ending stocks were dropped by 50 million bushels to 1.78 Billion thanks to increased exports and feed use by a combined 100 million bushels (although ethanol use did drop by 50 million bushels). U.S. ending stocks for wheat and soybeans were relatively unchanged at 691 million and 385 million bushels respectively, which was somewhat surprising for the latter given decent exports in February. With the South American harvest picking up steam, more eyes are turning to the northern hemisphere (have you considered taking your drill out yet?) and its generally favourable growing conditions. Accordingly, front month contracts are starting to head towards their fall/winter counterparts, which is why the wheat complex had its largest one-week fall since September to start the month of March.

Globally, the U.N.’s Food and Agriculture Organization came out with its first estimates of the 2015/16 crop year, pegging total global wheat production at 720 million tonnes, the highest out of all the early-year forecasts (A.B.A.R.E.S. at 707, I.G.C. at 705, and A.A.F.C. at 710) and slightly smaller than this year’s crop of about 727M tonnes. In the Black Sea, the F.A.O. expects Russian wheat production to fall 6.8 per cent year-over-year to 55 million tonnes, while Ukrainian output is expected to fall 8.3 per cent to 22 million tonnes. For the rest of the E.U., they also see a slightly smaller crop than last year (147 million tonnes, -5.5 per cent year-over-year), citing some tougher winter weather in Eastern regions, but raised expectations for Turkey, Canada, and Australian production.

One last thing to keep an eye on is the maze of central bank policies and its variable effects on currencies. Currently, the U.S. Dollar is at its strongest level since 2003, making new records against various other currencies, and an interest rate cut expected by the U.S. Federal Reserve this summer could amplify this.  The Bank of England, Canada, Australia, and E.U. have all kept their interest rates steady over the past month but so far in 2015, 25 different countries have seen their central banks cut interest rates as they try to spur demand, including supereconomies China and India. This contrasts their B.R.I.C.-nation brethren Russia and Brazil who have raised rates in attempts to control inflation. In a bit of a surprise move, China lowered its economic growth forecast to seven per cent in 2015, its lowest level in nearly 25 years! With lowered growth expectations amidst its rate cut and monetary easing, we need to keep a close eye on China (if you didn’t already notice, they consume a fair amount of grain). Basically, the focus of the People’s Republic seems to be on short-term growth, rather than long-term reform/restructuring, which in turn raises questions about China’s long-term role as a global economic growth engine.

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).