A conundrum. A quagmire. An imbroglio. Quite simply put, we’re in a bit of a predicament between some very wet conditions creating production concerns in Western Canada and northern U.S. states but also because we just got neutral-to-bearish reports from Statistics Canada on Friday, June 27 and the U.S.D.A. on Monday, June 30, 2014. It’s wet in a lot of areas across Western Canada thanks to the persistent rains the last few weeks. As we look to celebrate Canada Day amidst the rainfall, it’s pretty to look up into the sky at fireworks than it is to look into some of the fields out there, especially in southeastern Saskatchewan and southwestern Manitoba. In the latter alone, 25 rural municipalities have declared states of local emergency, including the city of Brandon where sewers are backing up. The same thing is happened around major oat-producing areas of Melville and Yorkton. Not only is it wet, but it’s been windy too, potentially hurting those crops that have survived the rains.
However, the U.S.D.A.’s world agricultural supply and demand estimates released on the last day of June (and the trading month and trading quarter) created quite a stir as U.S. soybean acres were pegged at 84.8 million. This is up 11 per cent from 2013’s area well above the average trade guess of 82.15M acres. Further, this is a new record, surpassing the previous mark by more than 7.4 million acres! As for corn, pre-trade estimates were for 91.725 million acres but the U.S.D.A. said that the figure is actually closer to 91.6 million acres. Accordingly, this is the lowest acreage number for U.S. corn since 2010 but still the fifth-largest amount of land since 1944. While total wheat acres were up slightly from a year ago, the market focused on the big acreage numbers for corn and soybeans and accordingly, the expected large production, leading to a fall in market prices across the board.
On Friday, June 27, Statistics Canada came out with their acreage estimates for what Canadian farmers put in this spring and there weren’t too many surprises. As expected, pulse and soybean acres have increased considerably from last year and lower cash prices are leading to a more diversified and calculated approach to get a return on investment. Specifically, soybean acres are up a total of 23.5per cent to 5.58 million acres, lentils acreage is up by 35.4 per cent to 3.24 million, and peas saw an aggregate increase of 21 per cent to 3.975 million acres planted. Total wheat plantings were lower by 7.4 per cent to 24.1 million while canola land planted barely increased over last year to 20.23 million acres. Overall, harvested numbers will likely drop with the last few weeks of wet weather and other general issues. While I still expect some weather premium to get priced in over the next few weeks, there will definitely be some levels to take advantage of – hoping for the worst crop conditions isn’t the best risk management strategy for your grain sales.
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 and 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).
AG MARKET UPDATE