FARMLEAD
The U.S.D.A. came out with their latest winter crop conditions, showing good-to-excellent (G/E) ratings that were mostly the same as January in major growing states, despite a fairly cold February. Kansas, the biggest wheat grower in the U.S., saw G/E levels drop by two points from January to 44 per cent, but that’s still 10 points better than the same period last year. Most analysts agreed that it was a pretty wild ride for winter crops in February with sharp changes in weather throughout the month, also causing slowdown in fieldwork for those in very southern states. Overall, most eyes are on Eastern Europe when it comes to winterkill as tougher January weather is setting up for a crop with the worst conditions in a few decades in northeastern Ukraine and southern Russia. Between this and where basis levels are currently at in Western Canada, locking in a basis and selling cash on the rallies continues to be a recommended strategy.
More producers are asking about the durum price outlook as values have fallen significantly from their mid-winter highs. What we can expect is more acres going in this year everywhere, including Mexico, where it’s speculated that U.S. millers will source from when high quality stocks get a little tighter in the late spring-early summer months. That being said, there’s a small chance (less than 20 per cent in my opinion) we could see a bounce at that time but it’s more likely that prices will continue to trend downwards to new crop levels, which we’re currently seeing around $7.50/bu for a #3 or better contract (area-dependent).
The first estimates from A.B.A.R.E.S, the Aussie U.S.D.A., suggest farmers in the Land Down Undaa will take off a bigger crop in 2015/16, despite drier conditions persisting. 24.4 million tonnes are expected to get harvested, a three per cent increase from past year’s 23.6 million-tonne crop but the growth is mainly due to a four-year high in seeded acres, at 34.3 million. As a result, exports could increase to almost 18 million tonnes, a fair improvement from 2014/15’s 16.9 million tonnes. Comparably, Aussie canola production is seen falling by four per cent year-over-year to 3.26 million tonnes.
Staying in oilseeds, the International Grains Council recently decreased their expectations for the E.U.’s rapeseed crop to 21.2 million tonnes (-11.7 per cent from last year’s record crop). In turn, the price ratio between wheat and canola is starting to swing in favour of more canola acres this spring. While the U.S. and South American crops are putting significant bearish pressure on the global oilseed complex, canola has been saved by the sinking Loonie. Soybean prices did see a rally thanks to Brazilian truck drivers protesting high diesel prices for a second straight week. Ironically, diesel wasn’t getting delivered to farms, which would slow the harvest pace but the government has stepped in, fining some truck drivers thousands of dollars for every hour their rig stays idled on the road in addition to relaxing tolls and other fees truckers were paying to move goods. Overall, with movement of commodities worsening in Brazil, major soybean and corn buyers are likely looking to where more reliable service is available, like the U.S., although strong Greenback remains a bit of a deterrent.
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).