Losing sucks

As we passed the halfway point of August, the harvest itch started to creep back with equipment (and mentalities)

As we passed the halfway point of August, the harvest itch started to creep back with equipment (and mentalities) getting prepared to “push ‘er til she plugs”. Statistics Canada’s July production estimates peg the Canadian canola crop at 13.9 million tonnes, below pre-report expectations of 14.5 million. The government agency is also suggesting 27.7 million tonnes of total wheat output, including 4.95 million tonnes of durum (Side note: durum prices have been elevated lately because of quality concerns in Europe and northern U.S. states but are due for a pullback soon). Other oilseeds and pulse crops are seen having higher output than even last year’s big crop, including a new record of 5.9 million tonnes of soybeans, but this is more associated with increased acres (versus increased yields). These reports are always taken with a grain of salt though as surveys are compiled towards the end of July (and there’s still a few weeks left before it’s in the bin!). One of the arms of the U.S.D.A., the Farm Service Agency, released data as to what’s been enrolled in government subsidy programs this year, reporting 83.32 million acres of corn, 79.25 million acres of soybeans, and 52.57 million acres of wheat. These numbers are all below the U.S.D.A.’s official forecasts but the F.S.A.’s lost acres ( also known as “prevent plant”) also below that of the U.S.D.A.’s at 1.54 million for corn,  827,000 for soybeans, and 1.36 million of wheat.

Recent rains in eastern Australia will help maintain the size of the winter crop as the region was in need of a good drink, otherwise the 25 million-tonne wheat crop might’ve been scaled down. The big issue in the Land Down Undaa though remains in its transportation infrastructure, as like in Western Canada and northern US states, getting grain to export-ready positions is the biggest hurdle the industry faces. Aussie infrastructure consultants point to our “efficient” railroad and port system here in Canada (You could almost choke on the irony!). The underlying problem will continue to be based around that various industries in resource-rich regions will continue to compete for rail space unless new infrastructure/track is added.

The cost of just being a farmer in Russia is increasing as western economic sanctions are making it difficult to obtain new financing and pay off current debt. Farmers in southern Russia “rushed to sell grain” this harvest as interest rates have risen since the beginning of the year. With a potential 60 million-tonne wheat crop coming off in the Black Sea country, it’s expected that producers will keep selling, in turn pushing down prices, as there’s a lot of grain so it’s not very smart to try to hold on for better prices, especially when loan payments are due. With Russia instituting a food import ban on western countries, it’ll turn to some of its old comrades, such as Kazakhstan, to help supply beef and other fodder crops that Russia is not self-sufficient in (unlike wheat, of which it has a lot). Although reports are growing that disease in wheat are leading to losses are front and center in a few major growing regions in North America (i.e. northern U.S. states and Western Canada). Russia definitely has the ability to move the wheat complex and with seemingly bigger numbers coming out of the Black Sea every day, harvest selling pressure is likely here for the next couple months.

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).