Corn & Wheat Prices Dip as Soybeans Make a Run at Highs — This Week in Markets

Good planting conditions and favourable weather in the U.S. has led to corn prices dipping slightly over the last week. Corn joins wheat prices on the downtrend all thanks to a bearish global picture. Old crop soybean prices have popped recently, hitting 11-month highs as crush margins and meat prices in China are improving while the balance sheet in the U.S. is still fairly tight. Domestic Chinese prices for soymeal, corn, wheat, and pork have all rallied in the last month, with pork prices leading the way and up 20 per cent.

With this move to the upside in soybeans and to the downside in corn the last few days, it is thought that more acres that have yet to be planted (AKA swing acres) could be seeded with soybeans instead of corn. However, there’s still a two dollar spread between July and September contracts (and a $2.50 spread to November from July!). The main reason for the large difference is the expectations for a huge U.S. crop coming off in three to four months. Still, at these prices, some producers are getting a better margin than planting corn. The soybean market seems to have little effect on the canola trade currently though as the Canadian oilseed staple is slightly lower and relatively quiet amidst seeding.

The canola trade did see a little push to the upside, though, on thoughts of delayed seeding in the Canadian Prairies and a new crusher in Quebec demanding 500,000 tonnes a year. However, it’s speculated that there’s still a fair amount of the oilseed available in Western Canada and more analysts are expecting a record E.U. rapeseed crop this year.

Ultimately, things are starting to warm up (finally) and crops are getting into the ground offsetting negative thoughts about a late start. All in all, some good sunshine and warmer temperatures are forecast for most of Western Canada over the next week or so, and that should certainly increase seeding completion percentages. That being said, there’s more than a few producers are saying that the extra shot of moisture is good for the soil but I would say there are a few areas (i.e. Southeastern Saskatchewan & Southwestern Manitoba) who are hoping for some sunshine in order to dry out fields from last year! We’ll get the crop in but it’s worth the precaution to have tow straps on standby.

Moving across the Atlantic, there’s increasing concerns that the southern region of Russia could see poorer yields this year due to dry, hot conditions. On the political front, Russian president Vladimir Putin says that he will respect “the will of the Ukrainian people” following the Ukrainian presidential election on Sunday May 25th and will work with whomever is elected. Nonetheless, the country is seemingly closer to civil war than ever before as clashes between Ukrainian soldiers & pro-Russian separatists in eastern regions seem to be intensifying.

It’s been in negotiations for the last decade, but China and Russia have appeared to have finally become best friends and agreed to a natural gas deal worth nearly $400 billion over 30 years. While this is nothing short of a landmark agreement, the interesting piece is that the deal won’t rely on western banking for financing as both countries look to veer away from doing business in U.S. dollars.

This in mind, is this an opportunity lost by the Canadian energy sector? Quite possibly. With all the nit-picking over TransCanada’s XL pipeline, the company is now considering to ship crude by rail from Hardisty, Alta., to the main storage site in Steele City, Nebraska (and you thought this year’s rail movement of oil over grain was bad…).

Nonetheless, it appears that Ceres Global Ag Corp.’s Northgate, Sask., rail hub will begin operations later this year and has befriended the BNSF network, a big plus as it connects to 28 different states, multiple Gulf and Pacific ports, and Mexico. Certainly, the open market is creating new opportunities, but one should consider hedging price risk proactively — it’s easier to make sales when you can, not when you have to.

 

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 ([email protected]) or phone (1-855-332-7653).

@FarmLead

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