Grain markets are mostly in the red this morning, notably canola after Statistics Canada said that there were about 400,000 more acres planted this year in Canada than the market was expecting.
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June 26 – Statistics Canada Says Less Canola, More Cereals & Pulses
Grain markets are mostly in the red this morning, notably canola after Statistics Canada said that there were about 400,000 more acres planted this year in Canada than the market was expecting.  StatsCan also noted the significant divergence in weather between the dry western provinces and west eastern regions, albeit we know that the former has started to finally get some moisture. In addition to today’s Statistics Canada acreage report, the grain markets complex got some bullish news in Monday’s crop progress report, but is now gearing up for a big release on Friday at 11AM CST in terms of the U.S. quarterly stocks and acreage report. You might say that the USDA will have the last word for grain markets this week, month, and the calendar quarter.
In their June acreage report, Statistics Canada says that 20.95M acres of canola has been seeded for the 2019/20 crop year in the Great White North, and while that’s down 8% year-over-year (or nearly 2M acres) and almost 400,000 less than the March estimate, it’s still more than the 20.575M that the market was looking for. Hard red spring wheat acres were also lowered by about 500,000 from the March estimate to 18.77M acres. More cereals and pulses rounded out today’s StatsCan acreage report as pea acreage is up ~300,000 from the March estimate, lentils gained about 375,000 acres (surprising to me), oats added more than 300,000 acres, and barley gained, almost 350,000 acres from March. We’ll dig into more of the details from Statistics Canada acreage report later in today’s FarmLead Breakfast Brief.
While we tend to focus on grain markets in the FarmLead Breakfast Brief, but I need to note some interesting dynamics in the meat market this morning. First, the U.S. Justice Department has opened a criminal investigation into the country’s poultry industry, specifically looking at possible collusion amongst major processors in order to fix prices. 
The second major headline is that China has accused the Canadian government and its pork industry of forging 188 veterinary certificates which supported the shipment of meat that contained traces of the feed additive ractopamine.  As a result, starting today, China is stopping the import of meat products from Canada and the Chinese embassy is saying this hardline action is being taken “in order to protect the safety of Chinese consumers.” To make sure you have both sides of the story, AgCanada has confirmed that were some “inauthentic certificates” but they referred to said incorrect paperwork as a “technical issue”.
USDA Crop Progress Report Shows Bullish Lag
Monday afternoon’s crop progress report showed that corn and soybean acres planted, the percentage of crops emerged, and the quality of those crops are all behind their usual places for this time of year.  Seeded acres in the U.S. is at 96% for corn (100% is the average for this time of year) and 85% of soybeans (97% average). Of that corn planted, 89% has emerged (99% average), while just 71% of soybean fields seeded have popped out of the ground (91% average). From a crop rating standpoint, 54% of the U.S. soybean crop is in good-to-excellent shape, which is down nearly 20 points from the first soybean rating at this time last year of 73% G/E! Corn G/E ratings fell 3 points on the week to 56 G/E.
One of the (possible) bright spots in the lower acres likely going in this year is that the USDA has given the go-ahead to be able to graze or hay/silage cover crops after September 1st.  This means that those acres that didn’t get seeded because of the wetness throughout the preferred planting period are able to still get planted. Add this up with Prevent Plant insurance and the trade war payments from Washington, there is a bit of a silver lining in the worst planting campaign ever that was Plant 2019.
Winter wheat prices also have found some support this week thanks to ongoing dryness lingering in the Black Sea and throughout the rest of Europe. For the Black Sea, it presents some slightly warmer-than-ideal combining conditions for their winter wheat crop, but the heat could be detrimental to the spring wheat acres seeded. Moving west, a heatwave this week is hitting European countries, with some forecasts pegging the forecast for cities in France as high as 47 degrees Celsius or 117 degrees Fahrenheit!  On that note, there is some warmer weather also expected for most of North America, which will be especially welcomed in those lingering wet areas across the American Corn Belt and Southern Plains. 
That being said, Monday’s crop progress report said that just 15% of the U.S. winter wheat crop was combined through Sunday, significantly behind the five-year average of 34% for the last week of June. Further, the quality rating for the crop dropped 3 points on the week to 61% G/E. For spring wheat, only Washington’s crop is developing at its normal rate, while everyone else is way behind as just 7% of the U.S. crop has headed, compared to the five-year average of 29% for this week in June. However, the American spring wheat’s crop rating is still relatively decent at 75% G/E, down just 2 points from this time a year ago.
Are Statistics Canada Numbers Believable?
Going into this morning’s Statistics Canada acreage report, expectations were that we were going to see less canola and more barley.  Other than that though, there wasn’t too much that the market was expecting Statistics Canada to change in their June acreage report.
As you can tell from the table above, Statistics Canada is suggesting that Canadian farmers took some risk off the table this year by planting less canola and instead more cereals and pulses. Ultimately, I think that this acreage report from StatsCan is a bit on the safe side with no real, major changes in it. As mentioned, I found the lentils number a bit surprising, as well as oats acres climbing as much as they did.
Cliff Jamieson from DTN noted earlier this week that Statistics Canada, over the past few years, has increased their numbers between today’s June acreage report and the final figures in December.  Flax is the one anomaly, seeing lower numbers between the June StatsCan acreage report and the one in December. Mr. Jamieson also points out that canola might be the anomaly this year, given the dry spring, and the geopolitical spat with China pushing canola prices lower.
While there’s certainly been some weather premium added to canola prices over the past month, the cash market for spot movement has started to pull back. Given the recent spat that China has over Canadian meat, I remain pessimistic that Beijing and Ottawa will solve their differences any time soon and, accordingly, canola prices will remain dejected.
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 = $1.3175 CAD, $1 CAD = $0.7591 USD)
Sept Corn: -3.8¢ (-0.85%) to $4.505 USD or $6.023 CAD
Aug Soybeans: -4¢ (-0.4%) to $9.048 USD or $12.096 CAD
Aug Soybean Meal (per short ton): -$0.80 (-0.25%) to $316.20 USD or $422.73 CAD
Aug Soybean Oil (cents per lbs): +0.01¢ (+0.05%) to 28.15¢ USD or 37.63¢ CAD
Sept Oats: +0.8¢ (+0.25%) to $2.738 USD or $3.66 CAD
Sept Wheat (Chicago): -1.5¢ (-0.35%) to $5.385 USD or $7.199 CAD
Sept Wheat (Kansas City): -3.5¢ (-0.75%) to $4.748 USD or $6.347 CAD
Sept Wheat (Minneapolis): +2¢ (+0.35%) to $5.59 USD or $7.473 CAD
Nov Canola: -6.8¢ (-0.65%) to $10.274/bu / $453/MT CAD or $7.685/bu / $338.84/MT USD
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