Grain markets this morning are in the green following the updated Harvest 2019 estimates from both the USDA and StatsCan yesterday.
“I’m glad I don’t have to make a living farming. Too much hard work. Too many variables you don’t have control over, like, is it going to rain? All I can say is, god bless the real farmers out there.” – Fuzzy Zoeller (former PGA golfer)
Bigger Harvest 2019 in Canada, Smaller in U.S.
Grain markets this morning are in the green following the updated Harvest 2019 estimates from both the USDA and StatsCan yesterday. Soybean prices in Chicago were buoyed by a drop of yields, production, and ending stocks by the USDA in their September WASDE report. This helped canola prices climb a bit as well, although the recent strength of the Loonie has kept the pressure on the Canadian oilseed.
Wet and cold conditions continue to plague Harvest 2019 progress in Western Canada and the U.S. Northern Plains. As I mentioned in Wednesday’s FarmLead Breakfast Brief, this will likely create some quantity and quality issues for wheat production in the region.
Harvest 2019 Silver Lining?
Getting into trade, China has clearly hedged their bets by striking a deal this week with Argentina to allow the import of soymeal from the South American country.  As I mentioned a few weeks ago, China is looking to diversify its options when it comes to soybean and feedstuff trade. This deal would be the first for the two nations and would intuitively match up the world’s largest soymeal producer/exporter (Argentina) and the world’s largest importer/consumer (China).
This is mainly because Chinese officials are trying to figure out how to stem the rise of food prices in the People’s Republic, especially after pork prices soared 50% in August.  On the flipside, with the African Swine Fever not yet under control, Chinese farmers are having a hard time re-investing in their hog herds and building the supply back up.  While the Chinese government has offered financing to do so, it can easily be viewed as wasted money if those new animals contract the disease again and have just be culled. Put another way, it’s not worth the effort for many.
The above in mind, it was suggested this week that both Beijing and the White House have taken lighter stances to one another. This includes President Trump has okayed the delay of an increase in tariffs that are set to increase in a few weeks.  It also involves China suggesting they might buy more the U.S. agricultural goods while, albeit have not relaxed tariffs on U.S. pork or soybeans, but they did say they won’t raise tariffs further.  Despite that, it was announced yesterday in the weekly export sales report from the USDA that China bought at least 600,000 MT off American soybeans for Oct-Dec movement. 
USDA Provides Small Harvest 2019 Reduction
Yesterday, the USDA gave us their September WASDE report, and they didn’t really disappoint too much in terms of lowering yields for U.S. corn and soybeans.  Accordingly, American soybean and corn production volumes were reduced as well, but it wasn’t as much as investors were expected, as per average pre-report estimates. From a corn demand perspective, the stocks-to-use ratio is looking like 2016/17. 
The USDA kept its estimate for corn harvested for grain at 82 MMT in the September WASDE, which, if realized, would be up less than 1% from last year. Similarly, the USDA also kept the soybean area harvested at 75.9M acres, which would be a 14% reduction from 2018’s area. That said, 8% of the U.S. corn crop still in dough stage as of this Monday, and 8% of the soybean crop not yet even setting pods.
Accordingly, there’s a significant likelihood that these yield and production numbers will continue to fall. Compounding the reduction in soybean and corn production could certainly be lower harvested acres as the threat of normal frost dates put quite a few acres at risk.  Put another way, the U.S. soybean Harvest 2019 could fall by another 200M bushels, while the USDA’s corn production estimate could drop by possibly another 500M bushels by their final numbers in the January 2020 WASDE report.
Harvest 2019 Jumps in StatsCan’s Data Estimate
Yesterday morning, Statistics Canada came out with their data-driven estimates of what the Canadian Harvest 2019 will turn out to be.  Compared to the survey-based Harvest 2019 production forecast that StatsCan released just 2 weeks ago, this new estimate was pretty bearish. Of note, was barley production being raised by nearly 350,000 MT from the last estimate, the canola Harvest 2019 being pushed higher by nearly 905,000 MT, and durum and spring wheat output increasing nearly 580,000 and 645,000 MT, respectively.
as I mentioned a few weeks ago, this significant bump in the Harvest 2019 estimates from StatsCan was somewhat expected. That said, if history is any benchmark, it’s likely that Statistics Canada will increase its expectation of this year’s harvest yet again, something that they’ve done consistently since they started their model-based estimates back in 2015. For some of the major Canadian Prairies crops, this means that barley production could, theoretically, climb above 10 MMT while spring wheat could top 27 MMT.
Ultimately, I view these reports as a blip in the road, mainly because we’re already at the seasonal point in the calendar where lows are seen, something I mentioned in a recent Alberta Express article.  More concretely, I’m expecting Harvest 2019 estimates for American soybean and corn production to continue to fall, while the Canadian output numbers should rise. The problem, however, is that the market is trading mainly on the numbers that the government agencies are reporting today. Put another way, the only focus for the next few weeks should be on getting Harvest 2019 in the bin and filling forward contracts.
Have a great weekend!
At 7:05 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3228 CAD, $1 CAD = $0.756 USD)
Dec Corn: +2.3¢ (+0.6%) to $3.695 USD or $4.888 CAD
Nov Soybeans: +1.3¢ (+0.15%) to $8.968 USD or $11.862 CAD
Oct Soybean Meal (per short ton): +$0.70 (+0.25%) to $298.30 USD or $384.58 CAD
Oct Soybean Oil (cents per lbs): +0.02¢ (+0.07%) to 29.03¢ USD or 38.40¢ CAD
Dec Oats: +1.5¢ (+0.55%) to $2.845 USD or $3.763 CAD
Dec Wheat (Chicago): +5¢ (+1.05%) to $4.888 USD or $6.465 CAD
Dec Wheat (Kansas City): +4.3¢ (+1.05%) to $4.078 USD or $5.394 CAD
Dec Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.078 USD or $6.716 CAD
Nov Canola: +0.2¢ (+0.021%) to $10.142/bu / $447.20/MT CAD or $7.668/bu / $338.08/MT USD
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.