Market Insider

Getting Directions

Grain markets headed towards the end of March with their eyes clearly focused on the March 31st United States Department of Agriculture (USDA) stocks and acreage reports. A recent poll of analysts by Reuters puts the average trade guesstimate at 88.2 million acres of soybeans, just under 91 million acres of corn, and 46.14 million acres of wheat (U.S.D.A. previous estimate in their 10-year outlook in February was for 88, 90, and 46 million acres, respectively). On the inventory front, the market is thinking that 1.63 Billion bushels of wheat are still available in the United States (U.S.), which would be +18.5 per cent year-over-year), there is still 8.53 Billion bushels of corn (+4 per cent YoY), and another 1.68 Billion bushels of soybeans still in the U.S (+3.5 per cent YoY). The report will set the direction for the next few weeks before Plant 2017 hits full tilt.

Cash grain markets in Western Canada have been trending sideways with the only bullish winds to latch on to really being found in the pulse markets on speculation from AGT Foods that India was going to grant Canada another exemption for port of origin fumigation. Wheat markets generally trended lower across the Canadian Prairies, although hard red spring wheat did see a decent 1.25 per cent improvement week-over-week, mainly thanks to concerns over dry conditions for U.S. winter wheat. Canola continues to languish alongside other oilseeds as the market starts to price in South American crop and expected North American production and potential exports. Speaking of which, Canadian canola exports in 2017/18 are being pegged at 9.5 million tonnes by the U.S.D.A.’s attaché in Ottawa, with domestic crush forecasted at 8.6 million tonnes. With 21 million acres of canola likely getting seeded this spring in Canada, trendline yields would put production at 18.5 million tonnes.

Something we have been harping in conversations with FarmLead users since September 2016 (yes the last seven months) is if you have any feed grains, it is probably not worthwhile to hold onto it in hopes you will be able to take advantage of a spring rally. One of the reasons for this is because of road bans that tend to cut into any of those additional cents/bushel you see in the usual seasonal spring rally, but the second is the bearish pressure from the amount of feed grains out there that will be compounded by anything that got left out in the fall that still needs to be harvested. Even going back to September 2016 when it was very apparent there was some disease issues, we made the call then that it was not worth holding onto poor quality grains because we anticipated feed markets being more than well supplied.

Another factor that has some indirect competition is the thought that the American farmer still owns about 50 per cent of their old crop corn, mainly due to the lack of attractive pricing opportunities once the crop started to come off last fall. Accordingly, forward contracts were filled but there was not a lot more sales made and without a weather scare to help the market pull up its pants a bit. Some analysts think that there could be more than a few producers who are “trapped” with having too much old crop and being forced into making a sale down the road at an unattractive level. This means less feed grains could be exported across the border into the U.S. from Canada and instead there could be more coming up (we definitely know of corn coming to Manitoba).  Across the pond in Europe, the winter wheat crop there is coming out of dormancy and things continue to look promising according to the European Commission. France continues to get good rains, there are only minor losses expected from winterkill in Russia, and Ukraine is starting to see “slightly negative conditions,” but the coming weeks should be a key determinant in the crop’s direction. 

To growth,

Brennan Turner
President & CEO | FarmLead.com