Grain markets this morning are mostly green as we dig into oats prices and Statistics Canada production estimates to end the first week of trading in December.
“I only move forwards, never backwards, darling.” – Grace Jones (American-Jamaican model)
“Darling” Oats Prices and Updated StatsCan Harvest 2019
Grain markets this morning are mostly green as we dig into oats prices and Statistics Canada production estimates to end the first week of trading in December. Also moving markets is positioning ahead of Tuesday’s December WASDE report and export data from other the Thanksgiving holiday week. Supporting soybean prices a bit is China saying that they’ll remove tariffs on some purchases of the oilseed, as well as some pork, in order to propel negotiations forward for a Phase One deal before the end of 2019. 
StatsCan Says Less Oilseeds & Pulses, More Cereals
This morning, Statistics Canada came out with their final estimate of Harvest 2019 for the Great White North, and StatsCan seemed to buck their historical trend of seeing Canadian crops get bigger from their summer estimates.  At a high level, StatsCan did say that cereal crops got bigger, but almost everything else saw production totals lowered, including canola, corn, flax, lentils, peas, and soybeans. Statistics Canada admitted that Harvest 2019 was an above-average challenge, given the above-average rainfall that both Eastern and Western Canada saw in the fall months.
Higher wheat yields in Saskatchewan and Alberta helped push total wheat production to just under 32.3 MMT, despite harvested acres dropping 2.3% year-over-year to 23.9M acres. Thanks to acres climbing 14% and yields up 9%f from 2018 to an average of nearly 71 bushels per acre, the Canadian barley harvest this year was pegged at 10.4 MMT. This would be up 24% year-over-year, as well as nearly 750,000 MT more than the initial estimate form StatsCan back in August. In Monday’s FarmLead Breakfast Brief, I suggested that feed barley prices seemed like they were getting a bit top-heavy and this new production number will likely confirm more sideways-to-slightly lower trading for the next little while. For oats, harvest 2019 is said to bring 4.16 MMT to market, up 21% year-over-year (as well as about 200,000 MT more than the initial estimate in August).
We already knew soybean production in Canada was going to drop (mainly thanks to substantially lower acres in Manitoba, down 25% year-over-year) but the final haul is estimating at just over 6 MMT. The smaller peas and lentils harvest should continue to support the recent price trend that we’ve seen for pulses, albeit some better prices is mainly a demand function, as mentioned about 3 weeks ago.
On the bullish side of things, canola production is down 8% year-over-year to 18.65 MMT. This number is actually pretty close to what StatsCan said in August but also more than 700,000 MT below their satellite-based estimate in September. This will likely bring canola ending stocks down closer to 4 MMT, if not below it, versus the 4.7 MMT that AAFC is currently forecasting the 2019/20 crop year will end with. As mentioned last Friday, If domestic demand for Canadian canola remains strong, then we might see 2019/20 carryout drop closer to 3.7 MMT, which should intuitively support better canola prices. That said, I’m not expecting canola prices to jump too significantly in one day, but rather will likely see a slow climb of about $10 – $30 CAD / MT over the next 2 months (which would also coincide with some seasonality).
Oats Prices A Bright Spot in Cash Market
Yesterday I spoke at the Prairie Oats Growers Association’s AGM in Winnipeg and in the group there were a lot of FarmLead Breakfast Brief readers. That said, I received some feedback that I haven’t talked about their crop enough lately, despite it being a bit of the “darling” of the markets in terms of how oats prices have performed (well, at least for old crop)! While oats prices have pulled back a bit in the past week, this correction was largely expected by the industry given that oats prices on the board in Chicago seemed to be overbought.
That said, oats prices for nearby movement had a positive number on the futures board, albeit, 2020 new crop oats prices have dropped, likely because good oats prices today are buying acres for Plant 2020. In the chart below, these are average oats prices delivered into Saskatchewan have rallied nicely and I’d expect this to continue into January. Thereafter though, I’m expecting to see oats prices start to pull back, mirroring what we saw at this time a year ago.
While we talked about Australia’s drought-riddled Harvest 2019 in Wednesday’s FarmLead Breakfast Brief, one of the most significant categories was the oats production. While the oats harvest in the Land Down Undaa was up 5% from last year’s low, production is about one-third below the five-year average. This is significant to really one country: China. The People’s Republic imports more than 95% of their oats from Australia, and don’t bring in anything from Canada for phytosanitary reasons (or you could potentially read between the lines here and suggest that it’s politics).
That said, there are plenty of other countries in Asia (i.e. Japan and South Korea) and Latin America (I.e. Ecuador) who are increasing their oats imports. By far though, the U.S. remains the largest customer for Canadian oats and the world, buying about 72% of all global imports. Given some of their production issues this year thanks to the late spring and early fall/winter, there are rumours buzzing around that the U.S. is importing more oats from Canada for both cover crop and conventional seed. This is positive for oats prices but also will likely drive Canadian oats ending stocks down closer to 400,000 MT, versus the 500,000 MT that Agriculture Canada is currently estimating. If realized this would have an impact globally as ending stocks to likely drop below last year’s record low, versus the second-lowest ever that the USDA is currently forecasting.
One of the interesting demand functions that we’re seeing more headlines about is oat milk.  The problem is, from a demand function, it’s not a huge amount: about 500 MT (about 1.1M pounds) of oats can be used produce about 5M litres of oat milk. Right now, I’m estimating that oat milk accounts for about 100,000 MT of total raw oats demand, but if it does take market share away from almond and soy milk (which own about 64% and 13% of the alternative/non-dairy ”milk” market), then this demand function could rise. I think however, it’ll be a slow-moving growth train so don’t expect it to add a dollar a bushel to your oats prices tomorrow! Keeping this in mind, oats prices today have been strong and locking up some old crop, or even new crop oats prices is a good plan before you see some seasonal decline in the coming months.
Have a great weekend!
At 8:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3258 CAD, $1 CAD = $0.7543 USD)
Mar Corn: +1.5¢ (+0.4%) to $3.783 USD or $5.015 CAD
Jan Soybeans: +5.8¢ (+0.75%) to $8.91 USD or $11.813 CAD
Jan Soybean Meal (per short ton): +$1.20 (+0.4%) to $302.70 USD or $401.33 CAD
Jan Soybean Oil (cents per lbs): +0.28¢ (+0.9%) to 30.78¢ USD or 40.81¢ CAD
Mar Oats: +0.3¢ (+0.1%) to $2.955 USD or $3.918 CAD
Mar Wheat (Chicago): +1.3¢ (+0.25%) to $5.25 USD or $6.961 CAD
Mar Wheat (Kansas City): +1.8¢ (+0.4%) at $4.373 USD or $5.797 CAD
Mar Wheat (Minneapolis): +3.3¢ (+0.65%) to $5.17 USD or $6.854 CAD
Jan Canola: +7.9¢ (+0.75%) to $10.387/bu / $458/MT CAD or $7.835/bu / $345.45/MT USD
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