By Brennan Turner
As we near the end of April, there’s certainly a lot of bearishness in the grain markets.
Between the trade spats and grain supply, we know there are some macroeconomic components that are keeping the bulls from engaging aggressively.
But there’s also the factor of weather and the potential impact on Plant 2019.
Intuitively, one must ask if the market is expecting above-average yields? Or is all this precipitation being interpreted as a good thing? Rain does make grain, right?
Indeed, as the calendar flips into May, the focus is wholly on Plant 2019 prospects. Where a lot of the weather premium originates is on the most liquid of all the ag markets, corn.
The University of Illinois reminds us that farmers in the Cornbelt (IN, IL, and IA) need about two weeks to plant their entire corn crop.
Ironically, their research suggests that investment in bigger/more precise planting equipment has not actually sped up the planting timeframe when weather allows farmers to get into the field.
That being said, last year’s start to the U.S. corn planting campaign was also a bit delayed but the crop still mostly got in before May 20, the date after which the U of I considers any fields seeded to be defined as “late”.
Heading north, on Wednesday, April 24, Statistics Canada told us that Canadian farmers will plant 21.3 million acres of canola and 19.4 million acres of spring wheat for Plant 2019.
Compared to last year, this is a seven per cent drop for canola and a 12 per cent increase for spring wheat.
Also of note is barley acres climbing 10 per cent year-over-year to 7.15 million acres, a number I think could still increase in subsequent acreage reports at the expense of canola or pulses.
That said, pea acres in Canada will be greater than lentils for the first time since 2014, with just over four million acres expected to get planted, an increase of 12 per cent year-over-year. Comparably, 3.4 million acres of lentils are expected to get seeded, a drop of 10 per cent year-over-year.
Calling a spade, a spade, every year is different and markets will move based on speculation of rumours, momentum of said rumours, and reversion due to facts coming out.
When planting or crop conditions change abruptly, this will intuitively result in a similar reaction in the markets.
Put another way, to jumpstart grain prices to move higher, we likely need prolonged challenges to Plant 2019.
But keep in mind that those rallies can easily be reined in by the large grain stocks that still exist not only in the U.S., but also around the rest of the world.
As such, any rallies should not be ignored.