CROP REPORT UPDATE: North American grain/oilseeds review: canola, soybeans down sharply after bearish USDA report

North American grain/oilseeds review: canola, soybeans down sharply after bearish USDA report

Posted Jun. 30th, 2014 by CNS Canada

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By Terryn Shiells and Dave Sims, Commodity News Service Canada

WINNIPEG – ICE Futures Canada canola contracts ended sharply lower on Monday, following the losses in Chicago soybeans and soyoil after the release of a bearish USDA report on Monday morning, analysts said.

The USDA said that farmers planted a record amount of 84.8 million acres of soybeans this spring, which was above last year’s 76.5 million and average trade guess of 82.2 million acres. Stockpiles as of June 1, 2014 were also higher than expected at 405 million bushels.

Recent strength in the value of the Canadian dollar and reports of good growing conditions for the US soybean crop added to the bearish tone.

However, slow farmer selling, paired with steady demand helped to limit the losses.

Concerns about flood damage seen in parts of Western Canada over the weekend were also supportive. One broker estimated that 12 to 15 per cent of total Prairie production has been lost to unseeded and flooded acres because of excess moisture this spring.

About 25,393 contracts traded on Monday, which compares with Friday when 16,712 contracts changed hands. Spreading accounted for 10,042 of the trades made.

Milling wheat, durum and barley futures were untraded, though the Exchange moved wheat prices lower after Monday’s close.

CORN futures in Chicago sank to a four-month low on government estimates that domestic corn stockpiles were nearly 40 percent higher than last year at the same time.

Prices were down anywhere from 15 to 23 cents per bushel on the Chicago Board of Trade.

According to the USDA report, domestic corn supplies totalled 3.85 billion bushels as of June 1. This exceeds initial forecasts of 3.71 billion bushels.

Farmers are estimated to have planted 91.6 million acres of corn this spring which is lower than the previous four years. However, favourable weather conditions are leading analysts to believe production could surpass last year’s.

SOYBEAN futures at the Chicago Board of Trade plummeted Monday, falling 31 to 72 cents per bushel, after the USDA released its acreage report which showed larger estimated supplies of soybeans than initially thought.

According to the report, farmers in the US will plant a record 85 million acres this year, higher than previous estimates of 82 million acres.

Planting conditions were said to be “much improved” compared to a year earlier.

Soybean stocks from last year’s harvest were pegged at 405 million bushels as of June 1, which exceeded expectations.

SOYOIL futures were sharply lower following soybeans.

SOYMEAL futures were lower after the bearish USDA report.

WHEAT futures in Chicago also fell sharply Monday, falling 12 to 20 cents per bushel and 15 to 21 cents per bushel on the Kansas City Board of Trade as the USDA’s estimates for planted acres exceeded previous projections.

The USDA estimates US farmers planted 56.47 million acres, topping previous estimates of 55.82 million acres.

However, inventories of US wheat in storage were pegged at around 590 million bushels, this is less than the 603 million bushels analysts had previously estimated, giving values some support.

• Wheat purchases on Egypt’s domestic market were extended by 10 days, according to the country’s agricultural wing. The government intends to purchase 4 million tonnes.

• China is planning to develop 53.3 million hectares of drought/flood resistant farmland in a bid to protect domestic wheat crops and other supplies, according to a report.

• Indonesia is moving forward with a plan to cut its 20 percent import tariff on wheat flour next month in favour of a quota system, an analyst said.

ICE Futures Canada settlement prices are in Canadian dollars per metric ton.

How Canadian canola is helping educate India’s poor

IAIN MARLOW - ASIA-PACIFIC CORRESPONDENT

BARU SAHIB, INDIA — The Globe and Mail

Published Sunday, Jun. 08 2014, 5:23 PM EDT

Last updated Monday, Jun. 09 2014, 1:47 AM EDT

Iqbal Singh Kingra, once a director of agriculture for the Indian state government of Himachal Pradesh, is the spiritual leader of a foundation that builds high-tech schools for India’s rural poor. What’s unusual is one of the ways he funds the effort: By selling canola oil harvested and ground on the Canadian Prairies.

His ardent belief in the health benefits of canola oil – a Canadian innovation – have made Mr. Kingra and his followers an unlikely bridge between farms in Western Canada and the immense edible oil market in India that Canadian canola farmers have never been able to crack. It’s a market where 1.2 billion people fry almost everything they eat, but do so mainly with palm oil.

For Mr. Kingra and the philanthropic Sikhs who work tirelessly for him, canola oil is simply a means to an end.

Angered by alarming levels of substance abuse and widespread illiteracy in their native Punjab, Mr. Kingra and his Kalgidhar Society want to construct schools as fast as they can – and donations simply can’t keep up. Mr. Kingra, whose followers refer to him by the spiritual title baba ji, turned to canola and decided to start a social business that would import Canadian canola oil to India.

Canola – a contraction of “Canadian” and “oil” – was engineered in the 1970s after concern over the high erucic acid content of other rapeseed oils. It is generally considered to be healthier than other oils because it has lower levels of saturated fats.

The society’s members first tried growing the yellow-flowering plant in Punjab, where the Green Revolution started in the 1960s. But despite farmers’ solid reputations in the grain-basket of India, it was still much cheaper to import the oil from Canada. And so the disciples of Mr. Kingra got on planes bound for the Canadian prairies, where they toured farms outside Saskatoon and found the October air unpleasantly chilly.

The first few years weren’t profitable for the business, which operates as Jivo, but has grown steadily. From early losses, the company is set to make $500,000 (U.S.) in profits this year and roughly $1-million next year – which could fund the sustainable construction of eight schools per year. Simultaneously, Canadian canola oil exports to India have jumped from just 82 tons in 2009 to around 1,600 tons in 2013.

Jivo estimates they now import about 300 tons of canola oil each month. Hudson, another canola oil company in India, also imports its canola oil from the Canadian prairies. But these numbers are tiny compared to India’s palm oil imports, which regularly exceed 800,000 tons each month, as well as Canada’s existing exports to India of peas and lentils. Oil importers face additional challenges because of tariffs designed to protect Indian oil producers.

Mr. Kingra’s vision is bold: With 129 modern schools built and 60,000 students already studying on high-tech digital smart boards – Mr. Kingra and his foundation want to expand to 500 schools by 2020.

In a tiny village called Balbehra, a gleaming, three-storey school rises from the surrounding wheat fields.

“This is a very backward part of Punjab,” says principal Rajinder Kaur Virk, as she strolls past students dressed in clean, plain blue and white uniforms switched everyday between boys and girls to encourage gender neutrality in an area where many fathers don’t send their girls to school. “The school has been a revolution.”

It seems to be working. “Sir, I want to become an engineer, a mechanical engineer,” says one 14-year-old girl, Arshbreet Kaur. “And my parents support me.”

The schools instill student leadership in their impoverished communities, as well as sometimes in their homes. Kaka Singh, a middle-aged farmer whose son attends the school, says he used to drink alcohol every night after working the fields, but gradually stopped, as he felt increasingly awkward drinking near his studying son. “My son is getting such a good education,” he says. “I run the risk of inspiring him also to drink. And I can’t do that.”

The society’s headquarters, where “Baba ji” lies in his hut, is not some premodern village. It is a 400-acre campus that includes schools, a university (where all undergraduates are women), a 300-bed hospital, a training centre for nurses with connections to U.S. universities, towering dormitories and a majestic Sikh Gurduwara. The schools even attract foreign students. “I know the education is really good here, especially compared to Ontario,” says Canadian Gurveen Cheema, 16, whose mother was a volunteer teacher here years ago.

Because the campus is remote, it needs to be self-reliant: there is a separate building for cleaning uniforms, a mechanic to repair their fleet of vehicles and a kitchen with huge vats of simmering Punjabi beans and lentils. A nearby mountainside is covered in solar panels.

“Have you seen my hut? It is symbolic,” says Mr. Kingra, or Baba ji, gesturing around him. “I could have retired and built a bungalow in Delhi or Chandigarh (Punjab’s capital) and read newspapers.”

Community members volunteer their time for the cause. “This is a battle we cannot afford to lose,” says Amandeep Singh, the founder of an advertising firm, as his driver pilots between the cattle-drawn bullock carts and grain-laden trucks of Punjab’s hectic harvest season.

“There’s so much to do,” he says. “And so much to lose if it’s not done.”

Canada's grain backlog leaves farmers in cash pinch

Grain backlog leaves farmers in cash pinch

ERIC ATKINS

The Globe and Mail

Published Monday, Mar. 03 2014, 5:00 AM EST

Last updated Monday, Mar. 03 2014, 9:24 AM EST

The backlog of grain shipments that has left sellers with unfilled orders and stuffed storage bins has many Western farmers facing a cash shortfall just weeks ahead of planting season.

The number of farmers seeking cash advances through a federal government program has risen by 35 to 40 per cent as growers look for ways to pay for seed and fertilizer, while much of last year’s record crop sits unsold in grain bins amid a shortage of rail cars.

Under the program, growers can borrow up to $400,000 – the first $100,000 interest free – secured by the value of crops they have seeded or stored and guaranteed by Ottawa. More than 12,000 farmers this year have applied for an average of $130,000, an increase of 30 per cent over last year in cash terms.“Farmers are really cash-strapped this year because of the transportation backlog that they’re facing,” said Rick White, head of the Canadian Canola Growers Association, which administers the Department of Agriculture’s $1.5-billion advance payments program for western growers of wheat, oil seeds, pulses and livestock.

There are about 5.5 million tonnes of grain – enough to fill 60,000 rail cars – sitting in prairie elevators and farmers’ storage bins awaiting delivery to customers, said Wade Sobkowich of the Western Grain Elevator Association, which represents six grain companies includingViterra Inc.

Growers’ associations are telling farmers who can’t sell their grain to talk to their banks or credit unions about loan extensions, such as the one offered by Farm Credit Canada, a Crown corporation which has offered to extend yearly payments by a month.

“We were concerned about the timing of the [grain] movements and the payments,” said Rémi Lemoine, chief operating officer of Farm Credit Canada.

It costs $150 to $200 to plant an acre, including the price of seeds, fertilizers, fuel and labour, Mr. White said. So a grower with 1,300 acres needs $200,000 to get started in the spring, but won’t see any cash flow until the crop is sold.

“There is a lot of urgency,” said Mr. White, who farms in southeastern Saskatchewan. “They’ve got to get seeding in April and May, and they’ve got to go out and buy all new inputs for the new crop, and they’ve got the old crop still in the bin and haven’t cashed it in yet.”

Doug Chorney is head of Keystone Agricultural Producers, which represents Manitoba farmers. He said he gets calls every day from growers who can’t sell their grain. “They don’t know what they’re going to do. They don’t know how they’re going to pay their bills,” said Mr. Chorney, who estimates about half of last year’s crop is in storage and at risk of spoiling due to insects, weather and wildlife.

Wheat prices in Chicago have fallen by 15 per cent over the past 12 months, and much more at elevators in the Canadian Prairies, where the shipping backlog has caused a glut.

Like a growing number of farmers, Mr. Chorney didn’t wait for the local elevators to make room for his grain. He ordered five so-called producer rail cars from the Canadian Grain Commission and sold 17,000 barrels of wheat to a grain company in the United States that paid him 32-per-cent more ($19,000) than the price offered at local elevators.

Canadian National Railway Co. and Canadian Pacific Railway Ltd. say they have responded well to the record grain crop, which is about 30 per cent bigger than the previous year’s. But the harsh winter caused them to run shorter trains at lower speeds for safety reasons, and backlogs have been inevitable, the railways say.

“From August to December, CN grain-car unloads at port terminal elevators were 9.5 per cent higher than the five-year average at the West Coast, and 22 per cent higher at Prince Rupert [B.C.],” said CN spokesman Mark Hallman.

Mr. Sobkowich said traders are losing sales from international buyers wary of sending ships that will sit at anchor in West Coast harbours waiting for grain.

“Companies are holding back on tendering to anywhere until we see this backlog clear,” said Mr. Sobkowich, who said that blaming weather for rail delays is like building a house without insulation, then blaming winter when the house gets cold.

“The railways are blaming the weather, but it’s because they didn’t invest in advance to account for the weather,” he said.