Bearish hope for better cereal prices

The grain and oilseed market started the month of November the opposite of how it ended October as the market dropped lower

AG MARKET UPDATE

The grain and oilseed market started the month of November the opposite of how it ended October as the market dropped lower on the U.S. harvest catching up to its historical average pace and a stronger U.S. dollar (which can help Canadian exports, hence basis in Western Canada narrowing recently). Oil prices have fallen to their lowest levels in three years thanks to Saudi Arabia dropping its prices for oil bound for America. The move is likely designed to offset the increasing amount of American energy production, could possibly adversely affect oil-by-train movement, and it comes ahead of an O.P.E.C. meeting at the end of November. Speaking of trains, service in northern U.S. states continues to be poor and with grain elevators are already full, basis levels are starting to widen across the Northern Plains (sound familiar to any of you Western Canadian farmers?). This lack of consistent rail service was just one of the catalysts that helped grain prices rebound over the month of October. Of significance, soymeal was up over 30 per cent for the month , followed by corn up 17.2 per cent, canola up 14.4 per cent, soybeans +13.4 per cent, and Minneapolis (HRS) wheat up 8 per cent month-over-month. Keep in mind that the U.S.D.A.’s November W.A.S.D.E. report comes out on Monday, November 10th , and early indications are that the numbers will generally be unchanged from the October report, if not more bearish.

For the pulse markets, expectations are that seasonal strength will return in January/February 2015 ahead of the Indian harvest and, per Chuck Penner of Leftfield Commodity Research, “if there’s any production problems there, prices will climb further.” In Europe, Strategie Grains increased their estimate of the 2014 E.U. rapeseed crop yet again, tacking on another 200,000 tonnes for a nice even (and record) 24 million tonnes on the year, a 4.8 per cent increase from last year’s production. Conversely, C.N.G.O.I.C., China’s grain think tank is estimating China’s rapeseed imports in 2014 to be a record five million tonnes, thanks to lower domestic production and favourable crush margins. Adding to canola market optimism is that 2015 rapeseed acres are surely lower in Europe as growing cereals appear to be more attractive and the two-year insecticide ban creating problems for the fall-seeded land. Even further east, investment bank Macquarie says that weakening currencies in the Black Sea and poor fall seeding conditions will drop 2015 wheat production between the Ukraine and Russia countries by more than 10 million tonnes year-over-year (IKAR is even more bullish, saying Russian 2015 wheat production will be 46.5 million tonnes, well below Macquarie’s 54 million-tonne forecast). That bodes well for other players in the market as it’s true that we’re really only one harvest away from a big problem. That being said, proactively managing your marketing options in the game that’s currently being played, and hoping that somebody else is going to have a poor crop are two completely different things. Simply put, hope is not a risk management process so play the game in front of you this November and considering In your marketing game plan that you should make sales when you can, not when you have to it.

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 mobile grain marketplace.