“Greatness is a road leading towards the unknown.”
– Charles de Gaulle (Former President of France)
Apologies but due to travel constraints, there’s no listing of the grain markets’ futures price data in today’s Breakfast Brief but you can click here to see their values.
Estimating The Unknown
Grains this morning trying to stretch into the green to close the week for a positive gain, continuing to be led by debatable weather and geopolitical risk. While wet conditions continue to grab headlines, a bearish counter has come from the N.O.A.A.’s Climate Prediction Center with stated that it’s not expecting significant drought conditions throughout much of the central U.S. for the next 3 months. The Buenos Aires Grain Exchange is estimating that the Argentinian soybean harvest is about 16% complete, well behind the 5-year average of 40% for this time of year. While the harvest is a bit behind, the good news is that Argentina is expected to have a new trade deal with Mexico for cars and agricultural products by the end of the year (aligns with Mexico’s promise to diversify from American ag imports, especially corn)! Canola continues to be the star of the show as it’s gained every day this week and hit a one-month high yesterday as concerns mount of spring snowfall not helping getting the crop off that’s still sitting in the field but today’s acreage report may stall is rise. That being said, there’s buzz that any canola combined won’t be food quality, meaning it’ll go into the feed or bio-diesel market. If you do have crop still left to combine, I vehemently recommend you post it on FarmLead to ensure you’re getting the best possible price, either on our platform or compare it to what you’re being bid locally.
This morning we got Statistics Canada’s 2017 acreage estimates which showed a whopping 22.3M acres of canola are expected to get planted in Canada this year, which would be a 10% jump from last year! Total wheat acreage is expected to come in at 23.2M acres (barely unchanged) with a 17% drop in durum area to 5.15M acres being made up for by a 8.2% increase in spring wheat acres of 16.7M. Rounding out the cereals, oats acreage is expected climb 20.6% from last year to 3.42M acres while the area getting planted into barley is expected to drop 8% year-over-year to 5.9M acres. For corn and soybeans, acreage is seen climbing 13% to 3.75M acres and 27% to nearly 7M acres respectively! Elsewhere in the oilseeds, flax is expected to rebound back above 1M acres to 1.115M while mustard should drop almost 26% from last year to 390,000 according to StatsCan. In the pulses, Canadian lentil acreage is estimated this year to be 4.4M acres (-25% from last year’s 5.96M) while total pea acreage is seen at dropping down to 4M, a 6% drop year-over-year. Worth noting though is that Statistics Canada increased total acreage over last year by 2.4M acres!
Wheat exports in Australia haven’t been as strong as everyone was originally thinking as competition for boats and containers at the port with canola and pulses crops has led the U.S.D.A.’s attaché in the Land Down Undaa to downgrade outbound shipments of the cereal to 22M tonnes for 2016/17 and 18M in 2017/18. After a bumper/record crop of over 35M tonnes produced, the aforementioned competition and challenges around loading more 40-foot containers than the ideal 20-foot ones, simply means less wheat can go out and that Aussie wheat stocks carryover will be greater than everyone was expecting. Looking ahead the Australian U.S.D.A. office believes that Australia will produce 24M tonnes of wheat in 2017/18 (technically -31% year-over-year) with the I.G.C. being the most bearish at 25.6M tonnes. A similar rise in wheat ending stocks is also expected in the Black Sea as Russian wheat exports didn’t hit the numbers the Kremlin was originally hoping for while Ukraine’s production is likely to dip a bit in 2017/18 (less acres got seeded with wheat), which means wheat exports from there are also expected to be a bit lower year-over-year at 12.9M tonnes.
On the planting front, Karen Braun of Reuters points out that in the last 20 years of seeding, corn planting in the U.S. saw a slow start similar to this year 12 times, and of those 12, there were 6 years when final acres came in below the March acreage forecast from the U.S.D.A. With so many people wailing about more soybean acres going in because of the wet/slow start for corn planting, Braun points out that the best historical reference point to get a solid understanding of this is actually the 3rdweek of May. Further, trying to understand yield prospects at this date is no more definitive as it is in late May when the large majority of the crop should be in the ground. Overall, if you’re watching U.S. corn planting progress as closely as some other market players, in exactly 1 month from now, the U.S.D.A.’s crop progress report will come out on Monday, May 22nd. The 20-year average of corn seeded by this date is 86% but if we can reference history at all, it always will come down to the growing conditions (2012 was one of the fastest seeded crops but drought conditions led to one of the worst harvests).
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