As we start to pull out the seeding equipment, grains continue to trade off of weather, the geopolitical situation in Eastern Europe, and when those headlines are quiet, the trade reverts to market technicals. Speaking of Ukraine, C.W.B. Director of Market Research Neil Townsend says that after doing a four-day tour of the country, the crops are looking good and that yields could actually be better than last year. While overall acres in Ukraine are likely down a little bit (especially for corn), agronomy-wise, it’s a good season. Conversely, politically & economics-wise, it’s not a good season and so while grain will continue to get sown, grown, & harvested, its ability to get into the world pipeline will add uncertainty to the market (AKA volatility as premiums get built up and sold off erratically).
On April 24th, Statistics Canada released its acreage estimates for Plant 2014 and according to the survey of 11,500 Canadian farmers, we will see more pulse crops get planted but less canola and other coarse grains. Total wheat acres for this year are seen at 24.77 million (-4.8 per cent year-over-year) while canola acres are seen dropping slightly from last year to 19.8 million. Corn and barley acres are also seen dropping to 3.67 million (-8.6 per cent) and 6.3 million (-11 per cent) respectively. Basically, these acreage declines will go to pulse crops and non-canola oilseeds. Specifically, pea acres are seen growing 21 per cent to almost four million and lentils acres are expected to increase by 19.5 per cent to 2.86 million. Soybean acres are seen rising 16.5 per cent to 5.26 million, most significantly in Ontario & Manitoba with 1.3 million and 2.8 million acres respectively). Flax acres are expected to steal the show with a 66 per cent increase over last year’s share to 1.72 million acres. Ultimately, this survey was taken over a month ago and while I expect non-canola oilseed and pulse acres to stay close to StatsCan’s initial estimates, it’s likely we’ll see a change in canola & wheat numbers by the end of the year.
Finally, a lot of the market is watching the planting pace of U.S. crops and any weather events that can slow the seeding speed down is usually considered bullish. However, if last year was any indication when over 40 per cent of the U.S. corn crop got planted in one week, sporadic rains slowing field activity shouldn’t really be of too much concern until early-to-mid May. Staying in weather, agencies around the world are increasing their estimates of an El Nino event occurring this year, with the Australian Bureau of Meteorology being the most bullish, saying the extreme weather pattern may develop by July. The regions that’ll be most affected are in Southeast Asia & Australia as the drier conditions can adversely affect crop production. Of significance for India is oilseed and lentils production potentially falling but the India Weather Department is expecting monsoon rains to be just 88 per cent of the normal long-term average (India gets about 70 per cent of their annual rainfall during the monsoon season). Keep in mind that while lower global production premiums can get built into the market over time, it only takes a bearish report or two from the likes of the U.S.D.A. to erase those grains rather quickly.
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 Farm- Lead.com, a risk-free, transparent online and now mobile 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).