Madness in March

Grain markets continue to trade a little erratically with analysts mostly focused on acreage estimates and weather forecasts

FARMLEAD

Grain markets continue to trade a little erratically with analysts mostly focused on acreage estimates and weather forecasts for the northern hemisphere. The big report to watch is the March 31 USDA Stocks and Acreage report, which will give the USDA’s final pre-seeding forecast for how many acres of what are going into the ground this year. Thus, while the NCAA Final Four Basketball tournament is in full swing, the March Madness seen in the grains market will likely be a result of traders jumping on any headline or weather report that has to do with adverse planting conditions.

There’s growing concern that parts of Oklahoma and Texas could see a big wheat rust problem with both stripe and leaf rust being observed. One specialist made the point that when stripe rust is observed before March (in the area), a large stripe rust epidemic is likely for the Southern Great Plains. The good news is that weather conditions for an exponential growth and spread of the disease have been minimal. Staying in the U.S., there’s chatter that U.S. producers will cut back on their purchase and application of pricey fertilizers this year. Intuitively, this would help lower fertilizer prices (would expect some easing as demand falls) but we might see an average corn yield below trendline (which, conversely, would help support corn prices). Keep in mind that Purdue University estimates that it’ll cost about $446 USD/acre to grow corn this year (on average soil), compared to just $228 USD/acre for soybeans.

If you think crop input costs are high here, then consider the Black Sea where currency devaluations have made said costs about 30 per cent higher year-over-year! For this reason, I’m expecting less production that most analysts are calling for in the region. This is mind, the Russian Hydrometcentre (weather forecaster) is saying that Russian wheat winter crops are in worse conditions than they were last year but matches average characteristics from the last five years. The Russian Ag Ministry is suggesting that about 17 per cent of the winter crop was killed off but still expects 100M tonnes to be produced this year (I disagree, as mentioned). Next door in Ukraine, the Ag Ministry says that spring seeded acres is less than half of what was a year ago at this time (AKA behind schedule).

If you follow any American farmers on Twitter, you know that U.S. producers are hitting the fields already in the Midwest while wet weather has slowed seeding progress in the Southeast (usually about 45% of corn crops planted by now Louisiana, Mississippi, and Arkansas but almost nothing is in the ground). This in mind, the most recent National Oceanic and Atmospheric Administration outlook report says that things will continue to stay dry out on the U.S. west coast in 2015, with some of this arid weather possibly heading east into the Northern Plains and even western Great Lakes area (Some of this drier weather would be welcomed by areas of Eastern Saskatchewan and western Manitoba). What’s for sure is that we’re seeing an early snow melt this March (albeit some areas are still getting a little snowfall here and there). Seeing the black stuff re-appear after a winter is given us the itch to get out there and turn that dirt over. Don’t go mad just yet though – spend some time in the shop and get everything ready to go. Proactiveness pays.

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.)