August 24 – Any More Surprises?

 In today’s Breakfast Brief we look at Pro Farmer Crop Tour results, new estimates on Canadian crop production, and weather affecting harvest

“One of the greatest discoveries a man makes, one of his great surprises, is to find he can do what he was afraid he couldn’t do.”
– Henry Ford (US industrialist)

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Good Morning!

Grains this morning are mostly lower as the market is taking in more Pro Farmer Crop Tour results, new estimates on Canadian crop production, and weather affecting harvest.

New Estimates

Yesterday’s Statistics Canada report ended up showing a bigger-than-expected wheat crop (helped a wheat sell-off yesterday) and a smaller-than-expected canola crop, which helped pump prices up a bit yesterday and into today (more on this later). Using some historical analysis, Todd Hultman from DTN estimates that there is some upside to corn prices from here, especially with some commercial interest demand ticking up recently. After wetter weather has ruined some of the wheat crop in France, a dry spell is now taking a toll on French corn fields, things are slowing in the west with some rains shutting combines down. The further we get into the harvest, there have been some surprises for both yield (yellow peas) and disease though (canola).

Digging into the StatsCan report, the biggest surprise came in the form of the canola estimate of only 17 million tonnes in production, which would be a 1.2% drop from last year but still 5% above the 5-year average. In the past 7 years though, StatsCan has underestimated their August canola production number versus the final they give out in December so most of the trade doesn’t believe this 17 million number to be accurate.

Manitoba is expected to see its canola production drop about 8% from last year to 2.6 million metric tonnes (but still up 7% from the 5-year average), with Alberta at 5.4 million (-1% from 2015, -3.4% from 5-year average), and Saskatchewan taking off 8.9 million metric tonnes (+1% year-over-year, +10% from 5-year average). For wheat, total Canadian production is seen up 10.5% from 2015 with 2.9 million more tonnes produced for a total number of 30.5 million metric tonnes as a result of average yields up more than 14% from last year. This is mainly thanks to a massive jump in winter wheat production (+53% YoY or +1.2 million metric tonnes from 2015, with Ontario owning 1.1 million of that) and an even more impressive 1.4 million metric tonne increase in durum production to 6.8 million metric tonnes (+26% YoY, +24% from 5-year average) with even some analysts thinking this number could top 7 million metric tonnes (we’ve already seen $5 handles for Canadian #2 quality durum bids…).

Looking at some of the other numbers, total Canadian flax production is pegged at 576,000 metric tonnes (-39% YoY, -19% from 5-year average), the Canadian oats crop is estimated at 3.26 million metric tonnes (-12%, -8%), total soybean production in the Great White North is estimated at 5.44 million metric tonnes (-6.5% YoY but 6.7% from the 5-year average) and corn output is expected to come in at 12.7 million metric tonnes (-9%, -3%) because of the drier weather in Ontario. Canadian barley production is estimated to come in at large 8.7 million metric tonnes, up 6% from 2015 (and 4.7% from the 5-year average), mainly thanks to Alberta and Saskatchewan producing about 500,000 metric tonnes more than they did last year. We continue to be bearish on mustard, field peas, and rye (and as such, you should be posting a block or a couple blocks on FarmLead ASAP) as these crops are all seeing some big production increases year-over-year, at 44%, 103%, and 69% more respectively (or 250,000 metric tonnes of mustard, 4.6 million metric tonnes of peas, and 382,000 of rye). Lentils continue to be a question mark on the quality front, and we have seen some decent low-to-mid 30s (per lbs) getting traded on FarmLead, but with a 3.2 million tonne crop coming off, that’s a 36% increase from last year and 40% above the 5-year average.

Pro Farmer Crop Tour, Varying

On the 2nd day of the Pro Farmer Crop Tour, variability was again the theme of the day as things started out well in Nebraska before numbers started pulling back the further east people went, while the further west people went in Indiana, the more things improved. For the Hoosier State (Indiana), the estimated corn yield came in at 173.4 bu/ac, which is still technically 12 bushels behind what the USDA is currently estimating, but still much better than last year’s 150 bu/ac and the 3-year average of 155. For Nebraska, when all the estimates piled in, 158.6 bu/ac was the average corn yield, a significant difference from the USDA’s current forecast of 187 bu/ac for the Cornhusker state. When it comes to soybean pod counts, in Indiana, 1,178 per 3’x3’ area is still better than last year but not a massive jump, while Nebraska estimates were 1,223, nearly identical to last year. Overall though, disease pressure continues to be noted and given the variability in the crop, the final number that the USDA produces in January 2017 could yield a few surprises.

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
1-306-665-8740 (Office)
www.FarmLead.com
@FarmLead (on Twitter)
At 6:20 AM CDT in the North American futures markets:

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.2927 CAD, $1 CAD = $0.7736 USD)

Dec Corn: -2.8¢ (-0.8%) to $3.345 USD or $4.324 CAD
Nov Soybeans: -7.5¢ (-0.75%) to $10.06 USD or $13.005 CAD
Oct Soybean Meal (per short ton): -$2.20 (-0.65%) to $328.30 USD or $424.39 CAD 
Oct Soybean Oil (cents per lbs): +0.01¢ (+0.05%) to 34.05¢ USD or 44.02¢ CAD 
Dec
 Oats: -0.3¢ (-0.15%) to $1.86 USD or $2.404 CAD

Dec Wheat (Chicago): -3.3¢ (-0.75%) to $4.243 USD or $5.484 CAD
Dec Wheat (Kansas City): -4.5¢ (-1.05%) to $4.29 USD or $5.546 CAD
Dec Wheat (Minneapolis): -2.8¢ (-0.55%) to $5.13 USD or $6.632 CAD
Nov Canola: +4.3¢ / +$1.90/MT (+0.4%) to $8.318/bu / $369.40/MT USD or $10.752/bu / $474.10/MT CAD

Yesterday’s Winnipeg ICE Close

Oct Barley: unchanged at $2.324 USD or $3.005 CAD
Oct Durum Wheat: unchanged at $5.495 USD or $7.103 CAD
Oct Milling Wheat: -8.2¢ (-1.4%) to $4.506 USD or $5.824 CAD

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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