Going into May, the percentage of acres planted is usually what the market is focusing on but the numbers are there today, so grain prices are in the green.
“If you just focus on the smallest details, you never get the big picture right.” – Leroy Hood (American biologist)
Acres Planted (or Not Planted) Becoming Grain Markets Focus
Grain markets are all in the green this morning as the complex looks at the acres, or rather lack thereof that haven’t been planted as we head into May.
This was highlighted on Friday by the acres estimate from Statistic Canada (StatsCan) which showed some significant surprises.  However, the market didn’t act too surprised to the news that a record canola crop would NOT be planted in Canada, in addition to a five-year high for wheat acres. The latter was highlighted by a major expansion of spring wheat and durum acres. More on this later.
CNGOIC says that Chinese soybean buyers are completely booked for May, 70% for June delivery, and 50% for July movement. Expectations are that 8.5 million tonnes of soybeans will be imported by China in May and 9.5 million tonnes in June. The question is, will it come from the US or Brazil?
This week, we’ll see the Wheat Quality Council tour of the US hard red winter wheat crop start up. During last year’s tour, a lot of fields were still covered in snow, and while that’s not necessarily the case this year, the effects of Old Man Winter sticking around are likely to be more apparent.
Ultimately, this is the time of year where the percentage of acres planted seem to matter most. We know that the American farmer can plant a lot of corn very quickly, but the benchmark is to see 85% of the US crop planted by the third week of May. In Canada, a lot of people are geared up for Plant 2018 to start, but fields are still drying out, so we’re likely a bit behind.
I will say one thing though: there’s nothing like to the smell of some freshly turned soil in the spring to get you excited about the coming growing season.
A Quick Look at European Grain Markets
Weather in the Black Sea is also getting a closer look. Winter wheat harvests in Ukraine and Russia have become a major driver of global wheat prices of lower protein, and it’s looking a little dry in some places there. That being said, the USDA’s Moscow attaché just put out their 2018/19 Russian wheat production estimate of 74 million tonnes. 
Compare this with SovEcon’s estimate of 77.4 MMT and IGC’s expectations of a 74.5 MMT crop. This would be the first decline in production since 2012, dropping 11 million tonnes year-over-year. The decline is mainly attributed to acres falling to a three-year low, down 3.2 million acres year-over-year.
In the current 2017/18 crop year, Russia has exported nearly 33 million tonnes of wheat. This is up 43% year-over-year. Looking next door, EU wheat exports are tracking 22% behind last year’s pace, with just 16.3 million tonnes shipped out thus far.
In other crops, EU barley exports are tracking 3% ahead of last year, with 4.7 million tonnes shipped out. Conversely, EU corn imports are 48% higher than this time year ago with 14.1 million tonnes brought in thus far. The significant increase is due to higher dairy prices and tougher weather which has driven increased demand for animal feed.
In France, soft winter wheat rated good-to-excellent fell by 1 point week-over-week to 77% but the same as last year. Durum G/E ratings were up 1 point to 79%, and well above the 63% G/E rating we saw at this time a year ago.
StatsCan Acres Report Surprises, Then Ignored
On Friday, after StatsCan’s report was published, we dug into all the numbers for our GrainCents readers for the 12 major crops that we cover. This included the breakdown of province-by-province acreage expansions and reductions.
Generally-speaking, the market was surprised by the bullishness of the canola acres number, and the bearishness of acreage estimates for spring wheat and pulses. The price reaction hasn’t been too strong yet. For example, canola prices, while up more than $2 CAD /MT in Winnipeg this morning, only gained 0.2% on Friday. This despite the acreage estimate coming in 2 million acres below expectations!
The key thing to understand is that this survey was taken back in March and thing could’ve easily changed since then. One could argue that rotations and the risk of dry soil beds are the main factors when it comes what gets planted on how many acres.  Also, the acres estimates ignore some of the trade risks in the market, including durum issues in Italy and the trade of pulses with India. 
Moving forward, we provided some context of what these Canadian acres potentially mean for grain prices in our Sunday morning GrainCents digest. This weekend recap email covers what happened in the previous week and what we’re watching for going forward.
Here’s a breakdown of the numbers, with a link to this Sunday’s digest:
Corn: a new record of 3.76 million acres (+5% year-over-year, +8% from 5-year average)
Soybeans: 6.45 million acres (-11% from last year’s record acres, +13% from 5-year average)
Canola: 21.38 million acres (-7%, +1%)
Flax: 989,200 acres (-5%, -21%)
Spring Wheat: 18.24 million acres (+15%, +7%)
Winter Wheat: 1.38 million acres (-11%, -24%)
Durum: 5.78 million acres (+11%, +8%)
All Wheat: 25.26 million acres (+13%, +4%)
Barley: 6.06 million acres (+5%, -6%)
Oats: 3.15 million acres (-2%, unchanged)
Peas: 3.87 million acres (-5%, -1%)
Lentils: 4.05 million acres (-8%, +2%)
Chickpeas: 346,200 acres (+116%, +125%)
Argentina’s Soybeans, Brazil’s Corn Concerns
In Brazil, the lack of rainfall in major second-crop corn growing areas is starting to attract more attention from the markets. More talking heads are pointing to this factor and the potential delay in US corn planting that could help push corn prices higher.  One thing to keep in mind is that Mother Nature always holds the upper hand though when it comes to pollination success and final yields. 
AgRural is noting that April has been significantly dry for many areas of Brazil, including the states of Mato Grosso and Parana. Specifically, the safrinha crop in Brazil is starting to hit their pollination phase, but with the lack of rain, yield loss is more likely.
Next door in Argentina, the soybean harvest is picking up steam, passing the halfway point last week according to the Buenos Aires Grain Exchange (BAGE). This puts the total Argentine soybean harvest, as per BAGE, at 22 million tonnes, with their final expectations still landing on a 38-million-tonne soybean crop. Compare this to the USDA’s most recent estimate of 40 million tonnes.
Average soybean yields are still sitting at 38 bushels per acre. This is down notably from last year’s 47.4 bushel-per-acre average yield and the five-year average of 44 bushels per acre.
For the Argentine corn crop, 1/3 of fields have not been harvested with average yields sitting at nearly 116 bushels per acre. However, this is below expectations which means that another downgrade might be possible.