While some were thinking of turkey and pumpkin pie ahead of the Canadian Thanksgiving long weekend, the grain market got a hold of the USDA’s October WASDE report. The report pushed some volatility in trading and wheat and canola closed in the red for the week, despite their hot start and trend to the upside just 5 days earlier. While pre-report expectations were some higher yield and production numbers for corn and soybeans, ending stocks for all the major crops came in under those forecasts. New average yield expectations from the USDA for corn came in at 174.2 bushels per acre (171.7 previously, 174.7 average trade guess) while it’s seen at 47.1 bpa for American soybean fields (46.6, 47.6). Offsetting the higher revised yields, harvested acres dropped to 83.1 million for corn and 83.4 million acres for soybeans. Overall, this translates to 14.475 billion bushels and 2014/15 ending stocks of 2.08 billion bushels for corn and soybean output of 3.93 billion bushels but record consumption has ending stocks dropping 25 million bushels from last month to 450 million bushels. As for wheat, increased feed, exports, and residual demand dropped 2014/15 ending stocks by 44 million bushels to 654 million. Globally, corn and soybean 2014/15 ending stocks barely moved higher but wheat stocks dropped by almost five million tonnes to 192.6 million as a result of lower production than previously expected here in Canada, as well as Australia, South America, and the Former Soviet Union areas.
The U.N.’s Food & Agriculture Organization expects world stocks of coarse grains (i.e. barley, corn, & sorghum) to reach 257.4 million tonnes by the end of the 2014/15 marketing year, the highest they’ve been since 1986-87. The rise is mostly attributed to increased global corn production, and combined with wheat stocks pegged by the FAO at 192.4 million tonnes, it’s the main reason the U.N. says food prices have dropped to their lowest since August 2010. With six straight months of decline of the UN’s food price index, “it’s the longest period of continuous decline…since the late 1990s.”
Speaking of prices, Japan’s largest supermarket chain, Aeon, is getting into the business of farming with plan’s to become the country’s largest rice grower in order to provide a cheaper product. The Japanese government is creating a business environment for large corporations to rent farmland from producers. In fact, “the government wants 80% of farmland to be cultivated by large-scale farms to make it competitive” with other free trade countries and revitalize the economy. Can you imagine if Safeway, Sobeys, or Costco got into the farming game? I can’t.
While we thought things were improving when it came to rail logistics, more data coming out shows that the railroad companies went for the easy-to-access grain first. CP Rail and CN Rail are suggesting that farmers aren’t delivering to the elevators in less-regular movement corridors such as northern or southwestern areas of Saskatchewan. However, it’s more than likely that in some of these areas, full 100-car loads aren’t available so the companies are less inclined to make these areas a priority. Why would they do this? Probably the best example is the recent rhetoric being put out by railroads about focusing on efficiency and profitability (which is in question with yet another rail derailment this past week by Wadena, Sask.). When you’re using the same amount of locomotives to get less grain in an area farther out from final destinations, this will certainly affect the bottom line. Ultimately, it’s still not a perfect marriage. More conversations need to be had between the various levels of the value chain to figure out what’s not working, why it’s not working, and how to fix it.