Grain markets are still green as Statistics Canada updated its Harvest 2020 forecasts and we start getting corn & soybean yield numbers from U.S. combines.
“People should think things out fresh and not just accept conventional terms and the conventional way of doing things.” – Buckminster Fuller (American architect)
Statistics Canada Gives Another Harvest 2020 Update
Grain markets are mixed, as this morning, we look into the updated Harvest 2020 forecast from Statistics Canada and demand of U.S. crops, notably for oilseeds. We continue to get reports of China buying U.S. corn and soybeans, which continues to support the futures board. Through yesterday’s export sales report, China is estimated to have bought about 11.6 MMT of new crop U.S. corn and 27.4 MMT of new crop soybeans (NOTE: 2.2 MMT of the corn and 9.6 MMT of the soybeans are attributed to “Unknown Destination” which, today, most analysts consider to be China).
Obviously, China is looking to meet its Phase One trade deal purchasing targets with the U.S., but state grain buying agencies are also contending with a smaller domestic harvest, meaning they have to import more.  More specifically, three back-to-back-to-back typhoons brought heavy rains and strong winds into northeastern growing regions over the last few weeks, and likely erased 10 MMT of corn production from the balance sheet!
Statistics Canada Lowers Wheat, Barley, Peas Harvest
On Monday morning, just as you were reading my Breakfast Brief recap of the September WASDE report, Statistics Canada came out with their 2nd Harvest 2020 production estimate in as many weeks.  While that production estimate from StatsCan on August 31st was for data accumulated through the end of July, this updated number is model-based and through the end of August. At face value (and as shown in the table below), the biggest changes brought forth by Statistics Canada was both spring wheat and durum output falling by nearly 800,000 MT each to 25.2 MMT and 6.13 MMT, respectively.
The drop in spring wheat was largely attributed to a 750,000 MT decline in Alberta’s harvest 2020 results, while the 600,000 MT drop in Saskatchewan was the main reason behind the pullback in durum production. Arguably, this is somewhat supportive of spring wheat and durum prices, at least compared to the 25.94 MMT and 6.93 MMT prints that Statistics Canada gave us 2 weeks ago! That said, the unseasonal strength continues to have been a bit concerned about the usual fall/winter upside not being as realized this year. I talk about this in more detail in this week’s Alberta Wheat Commission’s Market Insider column, notably nailing down your cashflow needs through the end of the 2020 calendar year.
In other crops, Statistics Canada increased the Canadian lentil harvest by about 260,000 MT to now sit at 3.06 MMT, which is still the largest crop since 2016/17’s 3.2 MMT haul. As I mentioned a few weeks ago, lentil prices have been trending sideways but bids are creeping lower as quantity and quality of Harvest 2020 becomes more apparent. Comparably, Statistics Canada lowered the pea harvest by 640,000 MT to 4.36 MMT, which kills any idea of a new record harvest, but, like lentils, it is the largest crop since 2016/17. This somewhat offset the USDA’s estimate last Friday of the American pea harvest of nearly 844,000 MT, which was about 100,000 larger than what the market was expecting. 
On the bullish side of things for pulses, India’s monsoon season is ending on a strong note, with heavy rains forecasted across most of key western and central agricultural production regions through the end of September.  As most of our readers now, any quality issues with India’s pulses harvest might lead to more buying from Canada and the U.S.. That said, China continues to be a big buyer of Canadian peas, accounting for most of their more than 1 MMT shipped in so far in the 2020 calendar year. 
Finally, the Canadian barley harvest was lowered by about 290,000 MT to now sit at 10.25 MMT, making it slightly smaller than a year ago. Like spring wheat and durum, this could be seen as a bit of a positive for barley prices, but I’m also cognizant of the increased export competition as China is buying more barley from the Black Sea, namely Ukraine.  In fact, through 2 months of the Ukraine’s 2020/21 crop year, China has bought 1.3 MMT of Ukrainian barley, nearly double what it purchased over the same time frame a year ago! Coming back home though, barley prices have been fairly resilient, with some healthy trading on the Combyne Marketplace for both malt and feed barley. For the latter, we might be near the seasonal lows as this past week, we’ve seen prices turn up again, mirroring similar moves around this time the last two years.
Soybean, Canola Prices Continue to Impress
Canola prices have been more than resilient, continuing to their unseasonal strength, although the market did pull back a bit yesterday on profit-taking amidst some overbought sentiment.  This morning, canola prices on the futures board are sitting close to $520 CAD/MT (or $11.79 CAD/bushel if converting canola prices from metric tonne into bushels), but on the cash market, values are averaging $11/bushel across the Canadian Prairies. Almost every region has seen this bid on the text messages they’re getting, and something that I predicted would happen to canola prices over 3 weeks ago, albeit I, and most of the market, have been impressed by the quick climb in canola prices. In that vein, here’s an $11.50 canola bid for central Alberta on the Combyne marketplace!
It’s a similar dynamic for soybean prices in the U.S., as farmers are making cash sales at levels they haven’t seen for a couple of years. The combination of weather (and thus, supply concerns) and strong demand continues to help soybean prices play around that $10 handles.  Most analysts continue to downgrade average soybean yield expectations, creating an unusually excellent selling opportunity off the combine. 
Weighing on soybean prices yesterday though, was a NOPA crush report for August of 165.055 MMT bushels (or 4.492 MMT), well below the 169.47M bushels that the market was expecting to see. Combined with the non-NOPA members, Allendale estimates that we’ll miss the USDA’s current 2019/20 crush estimate of 2.17 Billion bushels by just 3 million bushels!  Overall though, oilseeds continue to show their strength, and that’s something that shouldn’t be ignored.
At 7:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3177 CAD, $1 CAD = $0.7589 USD)
Dec Corn: -1.3¢ (-0.35%) to $3.648 USD or $4.806 CAD
Nov Soybeans: +5.3¢ (+0.55%) to $9.968 USD or $13.134 CAD
Oct Soybean Meal (per short ton): +$3 (+0.95%) to $322.20 USD or $424.56 CAD
Oct Soybean Oil (cents per lbs): +0.09¢ (+0.25%) to 34.24¢ USD or 45.12¢ CAD
Dec Oats: unchanged at $2.693 USD or $3.548 CAD
Dec Wheat (Chicago): -2¢ (-0.35%) to $5.363 USD or $7.066 CAD
Dec Wheat (Kansas City): -0.8¢ (-0.5%) to $4.673 USD or $6.157 CAD
Dec Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.248 USD or $6.915 CAD
Nov Canola: -1.6¢ (-0.15%) at $11.798/bu / $520.20/MT CAD or $8.953/bu / $394.78/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.