Canadian Crop Upgraded by AAFC (+ve for AFN) Today, the AAFC (Agriculture and Agri-Food Canada) posted its updated crop production estimates for Canada. Overall, it boosted its crop forecast to 88.6M tonnes from 83.8M tonnes in its Sept. report. This increase of 6% is due to higher avg. yields. Dry conditions in parts of the Prairies did not have the negative impact on yields that growers had previously expected. Higher production is of course positive for AFN.
But, even more interesting, is the forecast increase in corn and soybeans. The big trend in Western Canada we are currently seeing is growers dedicating more acres to corn and particularly soybeans. For 2017, AAFC forecasts corn and soybean production to increase by 8% and 27% (!) YoY. The Street seems to be ignoring this positive trend for AFN. One of the reasons AFN is so successful in selling its grain augers and belt conveyors in the US Corn Belt is because corn and soybeans are way more abrasive than other crops such as wheat and canola and wears down the equipment faster - meaning shorter replacement cycle.
AFN's shares are down almost 15% from its May high. I'm expecting a good 2H2017 and outlook for beyond. Seems like a good buying opp sub-$52.
AAFC Crop Reports