Agronomist Notes
I’ve spent the week on the south island of New Zealand traveling from farm to farm through some of the most beautiful countryside I’ve ever seen. Rolling hills, winding roads, aqua-green lakes, snow covered mountains and sheep covered pastures as far as the eye can see! I’ve really enjoyed my stay so far and the weather has cooperated for the most part.
In this week’s newsletter, we’ll take a quick look at New Zealand agriculture and I’ll share a few details of the biggest wheat harvest I’ve ever experienced. Next, I’ll point out some of the common production practices of former and current wheat yield record holders that I’ve noticed while interviewing them. The other day I attended a local field day and heard a Russian agronomist speak about the credit crisis in Russia. He had some interesting things to say that will affect us here so I’ve passed along two key points from his presentation. We’ll also look at a CPO carbon pricing order soon to be offered through Preferred Carbon. This new tool was modeled after the grain pricing order to help provide new pricing mechanisms for your carbon offsets. Finally, we’ll finish with fundamental and technical grain market news and international crop weather.
Agronomy
New Zealand agriculture at a glance
New Zealand agriculture consists of approximately 80,000 farms covering 16.5 million hectares (40 million acres). Pastoral agriculture, sheep and beef provides more than 40% of the country's export earnings. Dairy farming accounts for roughly 18% of the total number of farms and is the major activity in wetter areas. Sheep account for roughly 20% of the total number of farms and dominate the hilly and drier areas of the country. Beef cattle account for 20% as well and are widely distributed.
Map of New Zealand Agriculture
http://www.stats.govt.nz/NR/rdonlyres/7796CC4E-AE8C-46BA-AD23-CE4A7655CBE9/5025/FarmingAndForestryInNewZealand.jpg
2009 Wheat Harvest in New Zealand
I had the opportunity to jump in the combine with Craige Mackenzie last Sunday. We started harvesting the first of his wheat which was sown about 10 months ago. You might be able to see in yield monitor pictured below parts of the field were running up to 17.5 T/ha, which is roughly 260 bushels an acre. When the dust settled, the field averaged 13 T/ha (193 bu/ac) after 30 to 40% frost damage. Not bad!!!
I’ve been told that wheat agronomy is pretty simple and prescriptive here in New Zealand. They seem to have their fertilizer, fungicide and growth regulator timing down to the exact growth stage. It’s all very simple really. Pre-apply phosphate and potash before you seed. Apply nitrogen at three growth stages through the season. Apply fungicides at the three-leaf, flag leaf and head emergence stages and apply a growth regulator at stem elongation and voila! Bob’s your uncle and 15 T/ha (220 bu/ac) of wheat is in the bin. I’d be looking for a day job if I lived with the Kiwis! SL
Common threads in world record wheat crops
After interviewing Mike Solari and Chris Dennison, the two Guinness world record holders for wheat yield in 2003 and 2007, respectively, I’ve found several common threads in their production practices:
- Crops were sown into pea stubble.
- Crops had a deep ripping application down to 15 inches within two years of planting.
- Nitrogen application, growth regulators and fungicides were applied at the same growth stages in a very prescriptive manner.
- Crops had a history of “grass break” crops (ie. grass rotation) within two years.
- No micronutrients were applied.
- Soil fertility levels were unexpectedly low in calcium, magnesium, potassium and phosphorus.
- Soil organic carbon or organic matter was around 3% in the top six inches.
What I find the most shocking on this list is the low fertility levels in these soils according to soil tests. My philosophy has been high nutrient levels equal high yield potential. That’s obviously not the case and I’m now forced back to the drawing board to help explain what other soil characteristics are involved in producing high yields. Could it be that our soil tests really don’t reflect the true nutrient status of our soils? This needs further investigation.
Both record yielding crops were grown within two years of grass breaking- this intrigues me. I wonder what kind of soil quality improvements we receive with grass breaks. At first blush, I believe it’s improved soil structure and moisture holding capacity. Also, I believe it’s the large amounts of carbon that are added to the soil. After harvesting the grass for seed, the Kiwis plow the all the residue under. Naturally, this hastens break down and adds a significant carbon pool to draw from by the second and third year.
It’s really interesting to see soil test results, production practices and actual yields recorded from these 15.363 T/ha (228 bu/ac) and 15.015 T/ha (223 bu/ac) world record crops. As a side note, Chris Dennison recorded a 16.2 T/ha (240 bu/ac) crop in one field but had to harvest another field as part of the rules of Guinness that states you must harvest more than 20 acres to qualify. Looking at the field and soil tests I never would have guessed these fields have produced what they did. Once again, I now have more questions than what I started with! SL
Pictured is Mike Solari, right, current world record holder for wheat and his agronomist Graeme Jones.
Russian acreage could drop by one third in 2009
I attended a Foundation for Arable Research field day last week and they had a guest speaker over from Russia. This young gentleman was the agronomy manager for a German and Russian corporation that farmed 35,000 hectares (86,000 acres). The corporation also owned the largest John Deere dealership in Russia. The two most important points I took from his talk were Russia’s production potential which will impact us in the future and their credit situation that will affect us in the short term.
Many areas of southern Russia receive roughly 500 mm or 20 inches of precipitation annually yet they only produce 3.5 T/ha (50 bu/ac) wheat, 2 T/ha (35 bu/ac) canola and 4.5 T/ha (80 bu/ac) barley. They have a very similar growing season to us in Western Canada. Think of the production potential they have if they choose to take farming seriously! The speaker mentioned most corporate farms are interested in land and not the production that comes from it. This will have serious supply implications to wheat, canola and barley growers worldwide when Russia wakes up. I predict they could double yields quite easily if they chose to.
The short term implication of the financial crisis or credit crunch may force Russians to plant about one third less crop in 2009. They have sown their winter wheat with what credit they have and will have little to plant their spring crops in 2009. The implications of the Russian’s planting one third less wheat, barley and canola would be very positive for grain prices once their seeded acreage is announced in the spring. The biggest price increases would come from decreased spring wheat and feed barley acres of which Russia is a large player on the world market. SL
Preferred Carbon announces Carbon Pricing Order (CPO)
February 2, 2009- The CPO allows clients of Preferred Carbon (PC) up to one (1) year to price their verified offsets. Please note that the CPO being offered to agricultural clients is currently under legal and regulatory review and should be available in the coming weeks. Once a Preferred Carbon client’s offsets have been aggregated and a verification report has been completed, the quantity of marketable offsets is known. The client’s portion of the offsets is then available for sale following one of a number of alternatives. Clients can specify quantities with corresponding prices that result in a sale if the price(s) is reached, or they can leave their offsets un-priced and respond to one or more of the alternative pricing offered over time to complete the sale of the offsets.
The proposed CPO is in response to the anticipated price volatility in the GHG offset market and the needs of Preferred Carbon clients. As seen in last week’s column “The Bull case for GHG offsets in Alberta,” the next year may prove to be very interesting for GHG offset pricing. Even with several months before the true-up period ends for Large Final Emitters (LFEs), the offset market has seen a significant pick up in interest by potential buyers and the discount of offsets to the $15 price cap appears to be narrowing. Given all this, offset sellers should be patient and be positioned to take advantage of pricing opportunities as the Alberta GHG offset market evolves.
Reference: Bruce Love, Preferred Carbon
Disclaimer: The views expressed in this article are those of the author only and are not intended to represent financial advice.
Market News
Fundamental Analysis
Updated USDA report January 12th, 2009.
Technical Indicators
I have set up these weekly updates to include market entry indicators to help you improve the timing of your grain marketing. Also, I added market trend indicators to give you a sense of the short and long term market trends.
Canola http://futures.tradingcharts.com/chart.php?cbase=CA&market=RS&cterm=39
Support: $410.03
Resistance 1: $420.53
Resistance 2: $431.03
Market Entry
The Bollinger Bands are indicating an oversold market. The market is oversold and appears to be finding some support. Look for a bottom in this area.
Market Trend
The Relative Strength Index is somewhat overbought at 46.55. However, this by itself isn't a strong enough indication to signal a trade. Look for additional evidence before getting too bearish here.
MACD is in bearish territory, but has not issued a signal here. The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is DOWN. MACD is in bearish territory.
Feed Barley http://futures.tradingcharts.com/chart.php?cbase=BA&market=AB&cterm=39
Support: $135.97
Resistance 1: $139.97
Resistance 2: $143.97
Market Entry
The Bollinger Bands are indicating an oversold market. The market appears oversold, but may continue to become more oversold before reversing. Look for some price strength before taking any bullish positions based on this indicator.
Market Trend
The Relative Strength Index is somewhat oversold at 35.96, but given the 45 bar new low here, greater oversold levels are likely. The MACD has issued a bearish signal. The long term trend, based on a 45 bar moving average, is DOWN. The short term trend, based on a 9 bar moving average, is DOWN. With the current trend to the downside, this suggests that prices will continue to decline for a time.
Hard Red Spring Wheat http://futures.tradingcharts.com/chart.php?cbase=MW&market=MW&cterm=39
Support: $6.41-4
Resistance 1: $6.56-4
Resistance 2: $6.71-4
Market Entry
The Bollinger Bands are indicating an oversold condition.
Market Trend
The Relative Strength Indicator is in neutral territory at 52.40. Look for additional evidence before getting too bearish here.
The MACD is in bearish territory. The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is DOWN. MACD has issued a bearish signal, suggesting that the short term downward trend may continue, and may indicate a pending reversal in the long term trend.
Canadian Dollar http://futures.tradingcharts.com/chart.php?cbase=CD&market=CD&cterm=39
Support: $0.795
Resistance 1: $0.811
Resistance 2: $0.827
Market Entry
The Bollinger Bands are indicating an overbought market. Based on conventional interpretation the market is technically bullish.
Market Trend
The Relative Strength Index is somewhat oversold at 49.15. However, this by itself isn't a strong enough indication to signal a trade. Look for additional evidence here before getting too bullish here.
The MACD is in bearish territory, but has not issued a signal here. The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is UP. MACD is in bullish territory. However, the recent downturn in the MacdMA may indicate a short term decline within the next few bars.
Glossary of Technical Terms http://www2.barchart.com/education/learning.asp
International Crop Weather News
United States: On the Plains, unusually warm weather is maintaining stress on overwintering small grains across southern portions of the region. Meanwhile, winter wheat’s protective snow cover has eroded across the northern High Plains. In the Corn Belt, snow showers associated with a fast-moving disturbance are primarily affecting eastern portions of the region.
Europe: Widespread rain returns to western and southern Europe, slowing citrus harvesting but boosting moisture reserves for dormant to semi-dormant winter crops. Light showers and above-normal temperatures melt most of the remaining snowpack in eastern Europe, exposing winter wheat and rapeseed to potential bitter cold.
Former Soviet Union: Above-normal temperatures provide favorable overwintering conditions for winter grains but melt some of the protective snow cover in Belarus, Ukraine, and southern Russia. Light to moderate snow increases the depth of snow cover across most of northern Russia.
Southeast Asia: In Indonesia, monsoon rains continue to provide abundant soil moisture for rice in Java. In the Philippines, somewhat drier weather eases wetness across flooded areas in the southeast, allowing corn replanting activities to proceed.
South Asia: Showers subside over northern portions of India and Pakistan, promoting winter wheat development. Dry weather across central and southern India favors summer crop harvesting.
Middle East: Above-normal temperatures melt much of the region’s protective snow cover, exposing dormant winter grains to potential bitter cold. Light to moderate showers in western and southern Turkey maintain favorable soil moisture for winter wheat.
Northwest Africa: Showers continue, maintaining abundant topsoil moisture for vegetative winter wheat and barley.
Australia: In eastern Australia, widespread, soaking rains benefit reproductive summer crops, boosting moisture supplies following three weeks of relatively dry weather.
South America: Recent rain in central Argentina ends a heat wave and brings limited relief to drought-stressed summer grains and oilseeds. Beneficial rain continues throughout much of southern Brazil, improving conditions for reproductive to filling corn and soybeans.
South Africa: Locally heavy showers boost moisture reserves for corn and other summer crops in western and northern growing areas. A few dry pockets linger in white corn areas of central Free State.
