Keep it in focus

Following a Canadian long weekend, the grain markets tried to bounce a bit on some weather concerns after a tumultuous July.

Following a Canadian long weekend, the grain markets tried to bounce a bit on some weather concerns after a tumultuous July. For the month, canola dropped 2.4 per cent, Chicago wheat was down 6.7 per cent, Minneapolis wheat was down 7.6 per cent, Kansas wheat dropped 8.4 per cent, corn dropped 14.6 per cent (the biggest one-month drops since 2011), soybeans fell 18 per cent, and oats were the only part of the complex that went higher, up 5.2 per cent. Although crop ratings remain above the average, August is a crucial month for soybeans for crop development. Further, there various reports of corn tip back occurring in a few major U.S. corn growing regions, which could adversely affect the average yield and total production numbers (Tip back is where the corn ear does not fill all the way to the end). Thus, while axles are getting greased up for Harvest 2014, the next two-to-four weeks will be a crucial period to watch for.

That’s not just for weather though as Russia recently launched a one-year ban on the import of food including fruit, vegetables, meat, fish, milk and dairy products, and nuts from the U.S., E.U., Australia, Canada, and Norway! (Side note: there is also a proposed airspace ban for E.U. and U.S. airlines being tabled by the Kremlin). This is fairly significant as ag imports in 2013 from the E.U. totaled $15.8 billion and $1.3 billion from the US. For Canada, the pork sector looks to be the one taking the biggest hit as from January to May, Canadian pork exports to Russia equaled $207 million, an increase of 103 per cent of the same period in 2013. Ironically, while Russia was the second largest buyer of American chicken last year, they are now playing political chicken with the Americans. Accordingly, the ban on agricultural trade could send food prices inside of Russia higher, given the fact that they import about one-third of their food consumption needs and are the fight-largest food importer in the world! So who benefits? The immediate recipients will likely be Latin and South America (especially the Brazilian meat sector), as well as other former Soviet Union states like Kazakhstan and Belarus. Moving forward, both new and old trade partners watch Russia earnestly as the situation continues to unfold.

Coming back to North America, the forecast for U.S. yields continue to tick up with average estimates for soybean and corn around 45.5 bu/ac and 170 bu/ac, the latter of which is well above the USDA’s forecast of 165.3 bu/ac and the previous record of 164.7 bu/ac set in 2009. Wheat prices are starting to see a bit of a rally thanks to some drier conditions in the northern U.S. states, quality concerns in Europe (average estimate from analysts are that wheat protein levels in Germany will fall by 0.5-1 percentage points), and the situation in Ukraine (specifically Russia has doubled its military force on the eastern Ukrainian border). Ultimately, crop development here in Western Canada is fairly variable but generally positive, with yields for spring wheat, canola, and durum reported to be all above their five-year averages. As your crop starts to come off, it’s important to keep focused on the realities. There’s still a lot of grain coming off in a lot of places so when there are some bounces in the market (i.e. durum looks “toppy” right now), make sales when you can, not when have to.

To growth,

Brennan Turner


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, 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 ( or phone (1-855-332-7653).


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