What should worry us about the low grain harvest this year? (Tony Hatch - ABH Consulting)

20161212 Tonyhatch (Cropped)

Grain – waiting on the harvests….Tomorrow and tomorrow and tomorrow….Everyone’s wondering what the immediate future will be after a tough crop year in the US for rails (versus comparisons) and a disastrous one for Canada.  August AAR/RTI data showed the broader Ag/Food category up almost 5% in North America, and Grain itself 5.3%. That reflects two things – a narrowing of the YOY declines in Canada (A/F – 4%; Grain -7% - and that’s a good number of late) and a comparison flattering number (A/F +11%; Grain +14%) in the US.  Mexican grain was off 30% (que?!?).

  • Every new data point from the USDA takes the US harvest numbers down, bit by bit – but the DoA still expects a 62% improvement in Canadian wheat. Recent crop tours suggest the USDA is still too optimistic on the US side.
  • The $. Good for IM, bad for grain?
  • Concerns – the National Grain Car Council meeting last month brought out all 5 STB members and showed the level of concern in the grain belt about rail service – will the new crews come in on time?  To be in the ever-fascinating grain business seems to make one permanently concerned – the more data, the more not less worry. If you watch the weekly “US Farm Report” they covered the impending rail strike like it was a meteor headed to earth…Farmers make day traders seem like Ben Graham…
  • The Canadians say they’re ready, and the metrics support that; the worries come from the US west.
  • Also from the AAR’s RTI – “US grain exports running approximately half of what they were earlier in 2022”…