An Elevating CWB, Fair Rail and the Threat of War in Russia

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The grain trade this week was mostly higher as solid export numbers and lingering concerns over dryness and the political state of Eastern Europe hung over market. With Russian troop numbers building at the Russian-Ukrainian border, more than a few intelligence analysts are reminded of a similar series of events leading up to Russia’s incursions/clashes with Georgia & Chechnya. With companies like Visa and Mastercard pulling out of Russia (significant in its own right), Ukraine’s top diplomat recently said that the threat of war with Russia is increasing. Further, world leaders decided to kick Russia out of the G-8, as the group is supposed to have “shared beliefs & shared responsibilities” and “Russia’s actions in recent weeks are not consistent with them.”

Strong red lentil export demand, coupled with weather concerns in India & Turkey, are leading to talk of more acres of the pulse crop getting planted across the Canadian Prairies this year. Another factor to keep in mind though is that India’s population can be fairly price sensitive & will substitute pulse crops for other options it they get too expensive. While I doubt estimates of 3 million acres of JUST red lentils will be realized, it’s certain acres will be higher than years past, especially with margins fairly tight this year amongst most crops. That in mind, there’s more interest (and R&D investment) building in Western Canada for corn and soybeans. Simply put, versus planting just 2 or 3 crops, your market risk is spread over more options when there is more variety in your crop rotation (that’s usually a good thing for agronomy purposes too).

On Monday, March 31st, the USDA will release its much-anticipated Stocks And Acreage report, which some regard as the most important report of the year as it contains old crop, new crop, quarterly inventories, and acreage data (holy information overload!). The Reuters average US acreage estimates are for 92.75 million acres of corn (-2.75% from the 95.365 million acres last year) with March 1st stocks estimated to be 7.1 billion bushels (+31.5% from the 5.4 billion bushels at the same time a year ago). As for soybeans, the average market estimate is for 81.075 million acres (+6% from 76.533 million last year) while available supply as of March 1st is seen at 989 million bushels (-1% from the 998 million bushels available a year ago on March 1, 2013). Finally, for wheat, expectations are for 56.28 million acres, up slightly from the 56.156 million acres last year but, more specifically, durum acres are seen increasing 22% year-over-year to 1.794 million acres.

The Canadian Wheat Board recently announced that they’re building a brand new elevator just west of Portage la Prairie, MB in Bloom. The facility, expected to be completed and accepting grain by harvest 2015 will have about 34,000 tonnes of storage capacity and a 130-railcar loop track (serviced by CN Railway) with a loading capacity of up to 60,000 bushels an hour. This move adds to the CWB’s recent acquisition of a few other facilities including Mission Terminal in Thunder Bay & another elevator in Trois-Rivieres, QC. In my opinion, this a welcome move for the industry as the CWB continues to diversify the landscape as they head down the road of being fully privatized. Simply put, the CWB is moving their chess pieces to diversify their procurement strategy. On the flipside, what are you doing with your chess pieces to diversify your marketing strategy?

And finally, the Canadian federal government announced Bill C-30 (Fair Rail for Grain Farmers Act) to put some more pressure on the railroads to improve their service. Included in the bill are requirements for the railroads to move 500,000 tonnes a week through August 3rd, 2014, inter-switching distances increased to 160 kilometres (one railroad picks up cars for another) which expands this option to 150 elevators from the current 14, and the Canada Grain Commission now being able to regulate compensation for farmers if delivery dates aren’t honoured in a grain company contract.  According to the CGC, more than halfway through the 2013/14 marketing year, total producer cars being ordered are “basically double last year” and that the number processed is 80 per cent higher. It’s clear that producer cars are one way to diversify a marketing strategy.

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, he spent some time working in finance before starting FarmLead.com, a risk-free, transparent online and mobile grain marketplace (app available for iOS & Android). 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

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