Grrrrr … really long and loudly. Grains are mixed this morning but since a bearish report from the USDA on Friday, the only place you would’ve seen bulls roaming around recently was at the Calgary Stampede. Managed money continues to be net sellers of all grains, except for corn surprisingly as it’s been suggested that unless average U.S. corn yields hit 170 bushels an acres, prices are justifying current estimates of supply and demand. One area that is seen possible production drop is India where late/minimal monsoon rains are delaying summer seeding. Thus far, only 5.2 million acres of corn have been planted, compared to the long-term average of 9.14 million. Further, soybean planting is 90 per cent behind schedule with only 1.95 million acres seeded. While concern is building for inflation in India due to lower production leading to higher food costs, the Indian government is saying that there’s enough grain being produced this year to add to the “huge stocks” already available. Further, with El Nino forecasts getting pushed back, significant & sustained bullish sentiment may not creep back into the market until late 2014/early 2015.
On Friday, July 11th we got the U.S.D.A’s monthly installment of the world agricultural supply and demand estimates and it was the same-old bear-paw punch square to the market’s jaw. The entire complex headed lower based on a large crop expected to come off in various parts of the world this year, adding to both domestic U.S. and global ending stocks. Specifically, global soybean stocks are seen climbing to 85.3 million tonnes which would be a record, while in the U.S., it’s seen at 415 million bushels, the highest carryout since 2006/07. However, a tight balance sheet for the 2013/14 year has left the U.S. to have record imports of soybeans with Canadian canola being sent south to fill the gap left by a low carryout number of 140 million bushels.
U.S. corn production this year is expected to be almost 13.9 billion bushels and if crop conditions are maintained through the crucial pollination phase, it could easily surpass the 2003 record year of 13.925 billion bushels. As a result, U.S. 14/15 ending stocks will climb by almost 50 per cent year-over-year to 1.8 billion bushels, and also padding the 188 million tonnes of global supplies available at the end of the season. Not helping the supply/demand equation is the fact that feed numbers were also reduced for both old and new crop. As for wheat, supplies are seen growing with good production numbers worldwide including Australia, whose production estimate was raised by 500,000 tonnes to a 26 million-tonne crop. Overall, the trend looks to continue to be bearish – in weather, crop conditions, fundamentals, demand, etc.
Here in the Canadian Prairies, estimates of unseeded and flooded acre losses continue to build, mostly in western Manitoba. Forecasts range from four million acres total to nine million acres – we’re pegging things around the five million-acre level. All the aforementioned in mind, now’s a good of time as ever to be re-evaluating your marketing strategy, given what you have in the bin, what it’s looking like in the field, and what your cash needs will be like over the next six-to-twelve 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 now mobile grain marketplace (app available for iOS & 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).