This Week in the Markets: Friendly News for Corn & Managing Pulse Price Risk


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As we ended the month of March and shovelled our way through “spring” weather in to April, the grain markets were hit with a fairly uneventful Stocks and Acreage report from the USDA. The biggest shock came in the form of planted corn intentions coming in at a lowly 91.7 million acres, the lowest in 4 years and down significantly from the 95.37 million acres planted last year. U.S. corn inventories as of March 1st were also below market expectations, implying more demand. Ultimately, with acres and inventory lower, the corn market saw a lift and it’s more than likely we’ll see actual corn acres be above the number that the USDA initially implied. Other notable metrics included soybean area up 6.5 per cent year-over-year to 81.5 million acres but inventories didn’t move too much but still remain tight. Total wheat acres came in almost 800,000 acres below expectations but were outdone by durum land increasing 22 per cent from last year to 1.8 million acres. Ultimately, this report was another repositioning of the so-called goalposts. As we head into April, the sense of optimism is ringing everywhere – online, on the phone, print publications, etc.. Of course, #plant14 is just around the corner so it’s hard not to get excited (no other smell like fresh soil getting turned over)!

Speaking of planting, with other crops under some price pressure, interest in growing pulses is growing (pun intended). 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 three 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. As Economics 101 goes, when supply goes up more than demand, prices find a equilibrium at a lower level. Case in point: mustard prices across the Canadian Prairies have been falling as more acres are expected in 2014/15. It’s definitely worth locking in some price risk in with a new crop contract – post your offer on the FarmLead Marketplace in addition to calling around.

C.O.F.C.O., the Chinese state grain-buying agency, closed a deal with Noble Energy, paying $1.5 Billion to buy 51 per cent of the commodities giant’s agribusiness. The acquisition, C.O.F.C.O.’s 2nd in as many months after buying a 51% stake in Dutch trader Nidera in February, fuels their ambition to “own high-quality assets in the world’s top grain & vegetable oil-producing regions.” Ultimately, the goal is provide the homeland (China) with a secure food value chain as it’s becoming clearer every day that China will not be self-sufficient when it comes to food production. This in mind, it’s a new field we’re playing on and I wouldn’t be surprised if China has its eye on a few Canadian assets in the near future (take a look at their involvement in the Canadian energy industry if you don’t agree).

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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