Brennan Taylor
FarmLead Breakfast Brief
Grains are significantly lower to start the month of April and the second quarter, following the USDA’s bearish stocks report on March 28. Corn stocks were more than 400 million bushels higher than expected, pushing the grain limit down minutes after the report. Within the subsequent two trading sessions, corn dropped about 90 cents. With the bearish stocks report, the grain complex is at or close to their pre-drought levels. While weather is likely to be the focus for the next few weeks in the markets, this report undoubtedly forced many to re-evaluate their price levels.
Despite a stronger U.S. dollar, at these lower prices, international demand will likely pick up. Notably in China, increasing consumption and decreasing production and/or quality of both corn and wheat are unbalancing supply and demand. For wheat, India would seem like a logical choice to import from but the quality is questionable and India refuses to drop their prices to where the global marketplace is at. Wet conditions in northeastern China have affected the quality of the corn crop there, leading to suggestions China will have to import a record amount of corn. While new corn supplies are becoming available via South America, I wish anyone luck getting any grain out of there in under two months.
Specifically, Bunge’s CEO, Alberto Weisser, expects it to take over six more months to get Brazil’s soybean crops to point. Add in the fact the corn harvest is about halfway done, the infusion of new grain into the port/logistical quagmire is a new nightmare in itself. Nonetheless, in what some are calling a rare move, the first shipment of Argentine corn arrived in the U.S. last week and may not be the last. It’s also reported close to one million tonnes of Canadian corn has been shipped into the U.S. this year, the large majority of it from Ontario. However, lower U.S. domestic prices may lead to ethanol plants and other end-users staying in their own yard to find supplies.
Undoubtedly, there will be more supplies come fall as the USDA is predicting near-record crops for both corn and soybeans on 97.3 million acres and 77.1 million acres respectively. While total wheat acres are expected to decline, planted spring wheat land will increase. Two camps here though: bulls kicking dust saying colder spring temperatures could negatively impact the U.S. winter wheat crop as it comes out of dormancy; bears growling pretty loudly on positive rains throughout the U.S. wheat belt (i.e. larger crop = lower prices).
With these colder spring temperatures though, planting intentions come into question, specifically, whether it’s possible to get in a soybean or canola crop. While most are hoping to get into the field in the next few weeks here in Western Canada, the slow, agonizing snowmelt (and subsequent wet land) will definitely postpone things. This in mind, cold temperatures are expected to finally ease by mid-April as the atmospheric roadblock that has kept the door open for cold air to drain from the Artic and into Canada and the US, is closing.
Good to have your game plan ready once it’s go-time (including a Plan B).
Brennan Turner can be reached via email (b.turner@farmlead.com) or phone (1-855-332-7653).