Brennan Taylor, FarmLead Breakfast Brief
Much of last week was categorized by winter storms around the U.S. and on the weekend, it apparently was the Canadian Prairies’ turn.
That being said, the wet/snowy weather is welcome in places like Iowa where 90 per cent of the state is still considered in a severe drought situation. One foot of snow equals about an inch of rain and with some places short 20 inches of moisture, you get the picture. In Canada, many farmers (especially in southern Manitoba) remember a few wet springs over the last couple of years and the more snow we get, the more concern builds for a wet repeat.
All in all, Chicago wheat continues to hover around the $7/bushel mark, basically on par with corn now. US farmers are expected to plant less spring wheat, including durum, as a result of a better profit margin on corn and soybeans. With that in mind, should this recent string of wet/snowy weather help replenish the ground, farmers may be more inclined to plow up their winter wheat crops and re-plant it with something more profitable. In the Prairies, the expectation is for more wheat and less canola to be planted as there are better margins in the former.
On that note, some analysts have suggested that anywhere between five to 10 per cent fewer canola acres will be planted this spring in Canada. It’s estimated that Canada will have 15 million tonnes of wheat to export in 2013 and less than half of that will be bought by the top-paying countries (i.e. China, US and Europe). More or less, that means there’s eight million tonnes of wheat that has to be sold into markets that will see increased competition as a result of better production from countries that experienced a drought last year (i.e. Russia, the Ukraine and Australia).
Specifically, in Europe, wheat export are running four million tonnes ahead of last year’s pace but big player France seems to just be walking as they’re actually behind last year’s pace. Should French wheat ending stocks be revised higher and North American prices increase, international buyers may head back to Europe for cheaper grain. Adding to this is the fact that the Eurodollar is expected to depreciate further due to political and economic stress. I like to call this the “European Gongshow” because there seems to be problems popping up everywhere.
Case in point, Italy’s most recent elections were basically a wash as no government was formed and another election will have to take place in a few months. Interesting fact about Italy’s political system: since the end of the Second World War II, Italy has had 62 governments formed. Canada’s currently on number 22. More simply put, the devaluation of the euro (some analysts have estimated a drop to $1.20 USD from previous January highs near $1.37) makes it harder for European buyers to purchase North American grains as their currency is worth less. On the flipside, international buyers would then have more purchasing power when converting their currencies into the euro and buying grains from there.
Brennan Turner is originally from Foam Lake, Sask., 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 grain marketplace. 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).