Good planting conditions and favourable weather in the U.S. has led to corn prices dipping slightly over the last week joining wheat prices on the downtrend, thanks to a more bearish global picture. Old crop soybean prices have popped recently, hitting 11-month highs as crush margins and meat prices in China are improving while the balance sheet in the U.S. is still fairly tight. Domestic Chinese prices for soymeal, corn, wheat, and pork have all rallied in the last month, with pork prices leading the way, up 20 per cent. With this move to the upside in soybeans and to the downside in corn the last few days, it is thought that more acres that have yet to be planted (AKA swing acres) could be seeded with soybeans instead of corn. However, there’s still a two dollar spread between July and September contracts (and a $2.50 spread to November from July!). The main reason for the large difference is the expectations for a huge U.S. crop coming off in three-to-four months. Still, at these prices, some producers are getting a better margin than planting corn. The soybean market seems to have little effect on the canola trade currently though as the Canadian oilseed staple is slightly lower and relatively quiet amidst seeding.
The canola trade has seen brief moments of strength on thoughts of delayed seeding in the Canadian Prairies, a new crusher in Quebec needing 500,000 tonnes a year, and upgrades to Richardson’s Yorkton, SK bringing their total annual crush capacity to 1.5 million tonnes. However, it’s speculated that there’s still a fair amount of the oilseed available in Western Canada and more analysts are expecting a record E.U. rapeseed crop this year. Further, some good sunshine and warmer temperatures have increased seeding completion percentages. That being said, there’s more than a few producers saying the extra shot of moisture is good for the soil but I would say there’s a few areas who are hoping for less beer clouds so the drill can be put away for the year (worth the precaution to have tow straps on standby!).
It’s been in negotiations for the last decade, but China and Russia have appeared to have finally become best friends and agreed to a natural gas deal worth nearly $400 Billion over 30 years. While this is nothing short of a landmark agreement, the interesting piece is that the deal won’t rely on western banking for financing as both countries look to veer away from doing business in U.S. dollars. This in mind, is this an opportunity lost by the Canadian energy sector? Quite possibly. With all the nit-picking over TransCanada’s XL pipeline, the company is now considering to ship crude by rail from Hardisty, AB to the main storage site in Steele City, Nebraska (and you thought this year’s rail movement of oil over grain was bad…). Nonetheless, it appears that Ceres Global Ag Corp.’s Northgate, SK rail hub will begin operations later this year and has befriended the BNSF network, a big plus as it connects to 28 different states, multiple Gulf and Pacific ports, and Mexico. Certainly, the open market is creating new opportunities, but one should consider hedging price risk proactively – – it’s easier to make sales when you can, not when you have to.
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 (firstname.lastname@example.org) or phone (1-855-332-7653).