Looks like we’ve completely skipped spring this year with temperatures this week around the Canadian Prairies shooting up from around freezing to into the 20s. Our counterparts in the United States have also enjoyed some warmer weather that has allowed farmers both here and there get into the fields and break some dirt. The scattered opportunities to get into the field still has U.S. corn plantings at their slowest pace from 1984, but the pace increased seven points to 12 per cent complete as of May 5.
On May 10 we were to get the USDA’s May world agricultural supply and demand estimates that may show how a stronger US dollar is possibly making international buyers less inclined to by US commodities (it becomes more expensive for investors who use other currencies). With potential supplies this fall arriving “late” due to current planting delays, there may be more cookie-jar dipping from other places such as Brazil (soybeans) and the Black Sea region (wheat). This is possible, regardless of whether or not we see trendline yields — it’s all about timing and price.
Specifically, soybean exports out of South America in the month of April were estimated at a record high of 9.3 million tonnes with estimates for May nearing 10 million tonnes. This is a result of logistical traffic jams easing and drier weather accelerating the speed of the harvest. With more access to supplies, over the next three months China is expected to import more than 19 million tonnes of the oilseed. Even as a record crop of soybeans was produced in Brazil this year, farmers there are estimated to be increasing their acreage by 4.3 per cent to 71.9 million acres. Combine that with the 70 million acres of soybeans going into U.S. soil, there will likely be a significant amount of supply come this time next year.
While global soybean supplies increase, an estimated 43-per-cent increase in Ukrainian wheat production (to 22.6 million tonnes) may offset dry, persistent conditions in Australia. In some regions, canola acres are being switched out for wheat as the planting window closes, but even at that, western Australia will need some significant rains in the next two weeks or many acres will be at risk for some serious yield loss. On the loss of canola acres, Rabobank is suggesting it will be a drop of 30 per cent, likely putting production closer to two million tonnes than the 2.9 million tonnes currently forecasted by ABARES (the Aussie equivalent to the USDA).
Ultimately, as we see more drills in the field and finally some crop emergence, it’s more than likely we’ll see some softening in the market, especially on the back-end contracts. The only major factor that is practically impossible to factor in, per usual, is the weather. Regardless of the planting date though, as long as temperatures gradually trend warmer, the recent abundance of moisture could prove very positive for a good growing season.
Brennan Turner is originally from Foam Lake, Sask., 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, he spent some time working in finance before starting FarmLead.com, a risk-free, transparent online grain marketplace. His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (b.turner@farmlead.com) or phone (1-855-332-7653).
— FarmLead