Although most science is pointing to warm waters in the Pacific bringing on an El Nino event with wetter conditions in the US Midwest, ironically it is weather from the East Coast – Tropical Storm Bill – that’s actually created headaches for farmers from the Delta up through the Midwest. With all the wet weather, there is more than enough consensus that some acres won’t get planted this year, but the bigger effect will be the number of acres that don’t get harvested thanks to higher abandonment rates. However, there is the chance that with the significant amount of moisture falling on fields that yields could turn out higher than expected. The old saying goes, rain makes grain – what usually follows (and is often left unsaid) is the opportunity for a beer and a chance to slow down for second.
Accordingly, looking at the U.S.D.A.’s acreage report set to come out June 30th, there’s a lot of questions as to whether or not all intended acres will get in. As managed money has built up bigger short positions over the past month, short-covering strength has been the name of the game for any rallies on the futures board, especially in soybeans, which has obviously supported canola prices.
Across the pond, forecasts for European rapeseed yields have also declined a little, as some areas are also dry but estimates are still relatively within the range of the average of the last few years so we need to be mindful of that. Nonethless, temperatures for the first week of July look pretty warm. In the Land Down Under, Australian acres have gotten some useful rains that will help yields, but the reality is acreage is down significantly for wheat and canola. Where did all those acres go? Barley, oats, and chickpeas according to A.B.A.R.E.S., (the Aussie version of the U.S.D.A.). Further, 70 per cent of chickpea acres are seen having adequate moisture to help get them through to the winter months. Of course, the chances of an El Nino event bringing drier weather to the Southeast Asian region remain high, creating more volatility in the markets and opportunities to make sales into any rallies. Nonetheless, the Canadian Ag Ministry, A.A.F.C. says that pulse prices will remain strong this year with smaller discounts for lower grades, thanks to significant Indian demand
Coming back to Canada, the reality is that drier weather in Western Canada is catching a lot of eyes. Aggregately, through late June, the Canadian Prairies have received less than half of the average amount of rainfall (in some areas more, in some areas less than that). Further, the first few days of July are looking really hot and with no significant rains to help alleviate temperature stress, there is more threat to production levels. Currently the market seems to be pricing in a low-to-mid 13 million tonne range. This is why I’ve been saying $13/bu is possible but it’ll likely come with a production number that’s below 12.8-12.9 million tonnes. Getting a pulse on these numbers is more than difficult though and it’ll be at least a few more weeks before price volatility starts to subside. Aggregately, the market is mostly concerned about European, Australian, & Canadian dry weather, and ironically, American wetness. Hey America – send some of those beer clouds our way.
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 (email@example.com) or phone (1-855-332-7653).