FARMLEAD
A recent Reuters poll of 12 traders and analysts is showing that Canadian farmers will plant 23.9 million acres of total wheat acres this year, the second-largest area of the cereal planted in Canada in the last six years. This also includes a nine per cent increase year-over-year in durum acres to 5.2 million acres. Comparably, canola acres are seen falling two per cent year-over-year to 19.9 million acres (StatsCan at 20.33 million, A.A.F.C. at 20.76 million). Louis Dreyfus has suggested Canadian canola 2015/16 ending stocks could fall below one million tonnes (A.A.F.C. pegs it at 1.4M tonnes). Other notables from the poll include lentil acres growing to 3.5 million acres (3.1 million last year), land planted with peas up to 3.9 million acres (3.8 million last year), flax acres the same at 1.6 million (although I think they’re low on this one), and barley acreage growing to 6.3 million (5.9 million last year). More Canadian maltsters are also suggesting that global production and ending stocks are on the decline and that the Canadian share of the global export market is getting smaller as new players are emerging.
Clearly it’s a more globalized ag trade game that we’re in than 10 years ago, let alone 25. With lentil prices fairly attractive (namely small reds), you can expect not only more acres here in Canada, but also in other countries like Australia and Turkey. Same thing on the durum side as it’s been suggested that Mexico will harvest more durum this year than the U.S. will! Other market buzz is that the Bank of Canada could drop interest rates again in March or April, which could help push the Loonie well below 80 cents, possibly towards the 75 cent-level that some bearish analysts have been predicting. This would intuitively help Canadian grain exports more competitive with those from other countries who have also seen their currencies depreciate significantly, including, but not limited to, Australia, Ukraine, and Russia. That being said, northeastern Ukraine and southern Russia have been badly affected by severe frosts in mid-January when crops had limited snow cover, significantly raising the level of winterkill in these regions.
The U.S.D.A. in its annual Ag Outlook Forum sees U.S. corn acres dropping to 89 million (90.6 million in 2014), producing 13.6 billion bushels (14.2 billion in 2014) off of an average yield of 166.8 bu/ac (171 in 2014). As for soybeans, the U.S.D.A. is staying conservative compared to most other estimates, pegging 2015 acres at only 84 million, with an average yield of 46 bu/ac for a total output of 3.8 billion bushels (Compared to 2014’s 83.7 million acres, 47.8 bu/ac average yield, and 3.97 billion bushels total production). Finally, 2015 U.S. wheat acres are seen at 55.5 million (56.8 million in 2014), taking off 2.13 billion bushels thanks to a 45.2 bu/ac average yield (2.03 billion and 43.7 bu/ac in 2014, respectively). Corn carryout is forecasted to drop year-over-year from 1.83 billion bushels to 1.687 billion by the end of the 2015/16 marketing year, while soybean stocks are seen growing to 430 million bushels by the end of 2015/16, compared to ending this year at 385 million bushels. Wheat carryout is also seen building from 692 million bushels to 763 million. Historically, the U.S.D.A. tends to be more bearish in their February Forum forecasts, but they admit that over the next 10 years, the world will need an additional 50 million acres of corn, soybeans, and wheat to ensure the demand is met, namely that in Asia (hello China!).
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).