Grains started the month of December with wheat in the driver’s seat thanks to concerns out of Russia and Australia. In the Land Down Unda, A.B.A.R.E.S., the Aussie version of the U.S.D.A., cut its official wheat production estimate by one million tonnes (or about four per cent from its previous estimate) to 23.22 million tonnes, thanks to drier weather in the east and unusually wet conditions in the western part of the country- continent. In Russia, SovEcon says that “winter grains are actually in the worst state on record,” including 2009/10 when an unusually dry summer exacerbated elevated winterkill levels to only produce a 62 Mtonne crop. That being said, SovEcon doesn’t think Russian grain exports will be slowed, which is probably why Russia shipped out 2.71 million tonnes of grain in November (vs 2.55 million in November 2013), including 1.86 million tonnes of wheat. Russia is even looking at making deals with Iran to ship them grain in return for oil, and pay in their respective currencies, not US dollars (which is common practice). One thing supporting the sustained pace of exports is that the U.S. dollar and Euro are both enjoying record spreads against the Russian ruble. Ultimately, any price upgrades in the wheat market is tied to weather, but the exaggeration of the rumour that Russia could ban exports is bringing unwarranted premium to the market that will likely dissipate over the next few weeks/months (Make sales when you can, not when you have to!).
Strong U.S. soybean exports continue to support the oilseed complex as 1.2 million tonnes were sold in the last week of November, well above market expectations. Volumes have slowed down though over the past few weeks but still well above the five-year average of 582 million bushels. The reason for the slowdown versus last year is that more buyers might have increased confidence in South America’s ability to ship product more efficiently. That being said, the U.S.D.A.’s Buenos Aires office lifted its estimate or the Argentine soybean harvest to a record 57 million tonnes, two million higher than the official U.S.D.A. forecast. However, the bureau said that given the Argentine government’s position in the market and current economic environment, “many farmers’ sole aim is to survive the production cycle.” To be honest, there may be a few producers in other major growing regions who will feel the same way over the next year should the supply and demand fundamentals remain in place and grain prices remain low.
Speaking of keeping things in place, the Canadian government extended its order for the two Canadian railroads, C.P. and C.N., to ship Canadian grain but the level was dropped from a combined one million tonnes weekly to a variance of tonnage, depending on the week, through the end of March (or another four months).
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 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).