Grain prices this morning are mostly in the red as the complex prepares for more reports this week from the likes of Statistics Canada, ABARES, and, of course, the USDA.
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Statistics Canada Notes Big Canola Stocks as Corn Prices Drop
Grain prices this morning are mostly in the red as the complex prepares for more reports this week from the likes of Statistics Canada, ABARES, and, of course, the USDA. ABARES is set to come out tomorrow with their update estimates of production in the Land Down Undaa, while Statistics Canada will provide its data-model estimates of the Canadian Harvest 2019 on Thursday. Finally, the USDA will share its updated forecasts in the September WASDE report, also out on Thursday.
The big debate heading into the September WASDE is certainly Harvest 2019 yields, namely that of corn and soybeans in the United States. Informa added its updated estimate to the fold late last week, suggesting average U.S. corn yields of 169.9 bushels per acre (bpa) and 48.4 bpa for soybeans. Comparably, the USDA, in their August WASDE report, pegged average yields at 169.5 and 48.5 bpa respectively. On the bearish estimates from private forecasters, December corn prices made new contract lows on Friday to their weakest position in four months. The move in corn prices prompted wheat prices to follow corn lower. 
Weather and Trade Questions
This week it looks like there will be some good rains in the Midwest to help crops that were planted both on time in May and late in June. On the temperature side of things, there’s frost on the horizon per se, but we know that these forecasts can easily change. In Western Canada, according to AccuWeather, average temperatures are expected through the end of September, but as we flip into October, Saskatchewan and Manitoba could get a cold snap. 
Flipping continents, INTL FC Stone is estimating the 2019/20 Brazilian soybean harvest at a record 121.4 MMT. That would be a 5.5% jump over last year’s 115.07 MMT harvest, albeit smaller than the USDA’s current forecast of 123 MMT. On the flipside, China’s soybean imports in August of 9.48 MMT were the largest in the last 18 months and slightly beat out last August’s volumes of 9.15 MMT. 
A couple of weeks ago, I asked, “How long can China last without U.S. soybeans” and if August is any indication, there may be more volume expected in the coming months. That said, a recent conversation by the Wall Street Journal with U.S. farmers from various industries yield the reminder that the situation in China with the tariffs in not just a “chess match”.  Similarly, Jeff Nielsen, chair of the Grain Growers of Canada and the co-chair of the new organization, AgGrowth Coalition, says that Canada farmers need trade partners from the Canadian government, not a blank cheque 
Statistics Canada: Weak Canola Exports = Huge Stocks
On Friday, Statistics Canada came out with their survey-based stocks report, after questioning more than 13,100 farmers throughout July and the early part of August. Statistics Canada reported that total wheat stocks held in Canada at the end of the 2018/19 crop year sat at 6.2 MMT, down 4.6% year-over-year.  The majority of the decline was attributed to the smaller amount of wheat held on-farm, down 40% year-over-year to 1.9 MMT, whereas commercial inventories jumped by 30%. The decline was helped though by a great year of exports, which StatsCan pegged at 23 MMT, thanks to higher shipments to Indonesia and China. As we think about Harvest 2019, those with protein might find some premiums in a few months as the quality of the U.S. HRW wheat harvest hasn’t been all that great. 
Similar to wheat, Canadian barley exports had a good run in 2018/19, up 12% year-over-year to 3.2 MMT and the highest volume in more than a decade. The combination of strong international and domestic demand has pushed Canadian barley stocks to new record lows of 893,000 MT (also down 28% year-over-year). On-farm stocks fell nearly 40% to 636,000 MT while commercial stocks are up 16% to 257,000 MT.
Rounding out the cereals, oats inventories also tightened up pretty good in 2018/19, as total stocks in the Great White North fell 47% year-over-year to 414,000 MT. This is the third-lowest on record and also more than half of the five-year average. Conversely, Canadian durum inventories this July climbed 14% from July 2018 to 1.62 MMT, which is also 15% about the 5-year average. For the pulses, inventories of Canadian peas dropped 40% year-over-year to 388,000 MT while lentils fell 25% to 654,000 MT. For the latter though, this is still 36% above the five-year average.
Finally, Canadian canola stocks climbed a significant 55% from the end of the 2017/18 to 3.873 MMT to end the 2018/19 crop year.  This is a new record high and also a jump of nearly 70% above the five-year average. This shouldn’t come as a surprise though as record supply combined with weaker canola exports to China meant inventories had to climb. StatsCan is estimating that total canola shipments to the People’s Republic fell by 1MMT in 2018/19 compared to the previous year. That said, last week, the Canadian government took its first formal step at the World Trade Organization to challenge China’s blocking of Canadian canola exports by a few companies.  It’s worth noting though that Canadian canola exports continue to cruise to start the 2019/20 crop year, with volumes up more than 50% year-over-year to 803,100 MT through Week 4.
Due to some early morning travel today, we don’t have grain futures prices in this morning’s FarmLead Breakfast Brief but you can review them here.
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