Grain markets are mixed as the complex continues to digest wheat yields, grain exports activity, and weather over the next few weeks.
“The beauty is that through disappointment you can gain clarity, and with clarity comes conviction and true originality.” – Conan O’Brien (American comedian)
July 26 – As U.S. Spring Wheat Yields Disappoint, Will Canada Surprise?
Grain markets are mixed as the complex continues to digest wheat yields, grain exports activity, and weather over the next few weeks. For Mother Nature, expectations are that August weather will be more hot, dry conditions, which should certainly get the attention of the bulls.  With the late crop, the heat stress during pollination could be very detrimental to yield potential.
Gro Intelligence has a multi-factor crop yield prediction equation, that’s mainly rooted in NDVI maps to measure vegetative state. That said, this year, the data firm is estimating that average U.S. corn yields will come in at 159.6 bushels per acre as of Wednesday, July 24th.  Compare this to the USDA’s current estimate from the July WASDE report of 166 bushels per acre. Gro notes that, while there were 180 counties across the United States last year that saw corn yields average more than 200 bushels per acre, this year there will be fewer than 10. Specific to the Corn Belt, they mentioned that vegetative health is the lowest it’s ever been for this time of year in Illinois, Indiana, and Ohio.
For other crops, soybean prices are also following weather forecasts, but it’s expected that we’ll find a low before the next WASDE report on Monday, August 12th.  With crop development a bit behind in Western Canada, canola prices will also follow the weather, but should track alongside soybean prices as the oilseed complex remains rangebound (much like other grain prices) until said WASDE report.  I mentioned in Monday’s FarmLead Breakfast Brief that canola prices are having a tough time getting off its downward trend, but recent heat in Europe putting stress on the rapeseed crop there has helped a bit.  The Canadian dollar dropping below 76¢ USD this morning is also helping.
Variable Wheat Yields Seen on U.S. Crop Tour
Last week, I talked about the volatility of wheat prices, but this might be a function of the volatility in the estimates of wheat yields. The U.S. Wheat Quality Council’s crop tour wrapped up yesterday across North Dakota and Minnesota, with the goal of understanding what durum and wheat yields are going to be. The crop tour took scouts through 356 spring wheat fields and consensus was the early-planted stuff looks okay, whereas the late-planted fields have the most potential, but they also face a higher risk of getting hit by frost.  With the final counts put together, the Wheat Quality Council says that this year’s average hard red spring wheat yields should come in at 43.1 bushels per acre. That’s up from last year’s crop tour average of 41.1 bushels per acre, but below the five-year average of 44.7 bpa.
For comparison, North Dakota’s Agricultural Statistics office said in a July 11 report that spring wheat yields would average 47 bushels per acre this year, down 2 bushels from last year.  With 6.4M acres of spring wheat seeded in North Dakota in 2019 (down 1% from last year), expectations are that farmers in the state will harvest 301M bushels ( or 8.19 MMT if converting bushels into metric tonnes), down 5% year-over-year. In Minnesota, the local statistics office says that average wheat yields, as of their July 11 report, are looking closer to 62 bushels per acre, up 3 bushels from last year. With spring wheat acreage down 6% in the Gopher state year-over-year to 1.48M acres, 2019 wheat production should come in 1% lower from 2018 at 91.8M bushels (or 2.5 MMT).
The crop tour also took the scouts through 15 durum fields, which isn’t all that statistically significant, but one should remember that North Dakota farmers seeded a record-low 700,000 acres of durum this year. For average durum yields, the crop tour says that it’s looking like 32 bushels per acre, which is well below the five-year average of 40 bpa and last year’s results of 39.3 bpa.
Canadian Wheat Yields, Crop Look Decent
In their updated forecast last week, Agriculture Canada dropped their estimates for Canadian wheat production by 1.85 MMT to 32 MMT. This matches what the International Grains Council just lowered its estimate of Canadian wheat production to, down from 33.6 MMT.  However, the IGC and AAFC’s estimates are below what the USDA said in their July WASDE report of 33.3 MMT (albeit that was lowered from 34.5 MMT in the June WASDE).
While Ag Canada’s average non-durum wheat yields includes data for both winter and spring wheat yields, they’re estimating things will come in slightly above average. Further, total non-durum wheat production in the Great White North of 27 MMT, down 1.7 MMT from the June estimate but still nearly 1 MMT larger than last year and 2.6 MMT or nearly 11% larger than the five-year average. This is really a function of acreage climbing 1.4M acres, or 7.5% year-over-year.
For durum yields, AAFC is estimating things to come in at 38.36 bushels per acre, slightly below the five-year average of 39 bpa. However, because seeded acreage of durum in Canada is down 21% or nearly 1.3M acres from last year, total Canadian durum production is expected to come in at 5MMT, down 13% or 745,000 MT from 2018. This is mainly because last year’s durum yields were well-below average at just 34.8 bushels per acre.
In Saskatchewan, nearly half of the oilseeds and about a third of all spring-seeded cereals are behind their normal crop development timeliness.  This week’s crop progress report from the provincial government notes that, “Some crops are one to two weeks behind in development, which may be of significance depending on the weather during harvest and when the first fall frost occurs.”  Conversely, Manitoba’s spring cereals and oilseeds are looking good after rains last week and the recent hot and humid weather.  In Alberta, we know from last week’s crop progress report that most crops are in pretty good condition, it remains dry in the southern and eastern areas of the province. 
Overall, weather continues to be the name of the game in the short-term, but in the grander scheme of things, it seems more and more than production shortfalls in certain areas are being made up elsewhere. Further, it’s likely that some of those production shortfalls should create opportunity from an exportability standpoint, something I hope to dig more into next week!
Have a great weekend!
At 8:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.313 CAD, $1 CAD = $0.7616 USD)
Sept Corn: -1.5¢ (-0.35%) to $4.17 USD or $5.496 CAD
Sept Soybeans: +0.5¢ (+0.05%) to $8.83 USD or $11.638 CAD
Sept Soybean Meal (per short ton): +0.10¢ (+0.05%) to $305.60 USD or $402.79 CAD
Sept Soybean Oil (cents per lbs): +0.01¢ (+0.05%) to 28.44¢ USD or 37.49¢ CAD
Sept Oats: +0.3¢ (+0.1%) to $2.638 USD or $3.476 CAD
Sept Wheat (Chicago): -3.5¢ (-0.7%) to $4.96 USD or $6.537 CAD
Sept Wheat (Kansas City): -4.3¢ (-0.95%) to $4.333 USD or $5.71 CAD
Sept Wheat (Minneapolis): unchanged at $5.23 USD or $6.893 CAD
Nov Canola: +3.6¢ (+0.35%) to $10.217/bu / $450.50/MT CAD or $7.752/bu / $341.79/MT USD
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