Sept 20 – StatsCan Gives (Usual) Bearish Surprise

Good Morning!

Grain markets this morning are mostly down after yesterday’s day in the green; a bright spot amongst the bearish seasonality and ongoing trade battles.

“Discourage litigation. Persuade your neighbors to compromise whenever you can.”  – Abraham Lincoln (Former US President)

 

Get Your Grain Tested Today

 

StatsCan Gives (Usual) Bearish Surprise

Grain markets this morning are mostly down after yesterday’s day in the green; a bright spot amongst the bearish seasonality and ongoing trade battles.

It seems that China and the US are going to play an endless game of tariffs, which only will negatively impact consumers more than anything. To be clear, trade wars don’t happen between countries; they happen between consumers.

China has told its consumers that “what China really should do is focus on doing its own thing well.” [1] This means that the Chinese government is looking to promote localization (as a means to replace imports).

In North America, the U.S. wants the text of an updated NAFTA completed by October 1 to help get it passed by Mexican legislators before their new incoming administration takes over in December. Disagreements between Canada and the U.S. over dairy, dispute resolution, and cultural protections continue.

 In his regular Grain Markets Today column, Garrett talked through how grain prices rallied yesterday on technical buying. Also, being suppressed fundamentally by North American harvest progress, grain markets are also pricing in Brazil soybean Plant 2018 that’s just starting up. It’s expected that farmers there will increase their acres yet again to another new record.

This despite a fairly bearish StatsCan production report that came out at 8:30 AM EST. The bearishness was offset though by the slow harvest progress in Western Canada, thanks to the old wet weather. Very simply, it doesn’t necessarily seem like the market believed StatsCan (again).

Does StatsCan’s Numbers Add Up?

It’s important to first understand the methodology behind the satellite-based production estimates from Statscan.

Very concretely, StatsCan is using the Canadian harvested acreage number from August report (based off a July farmer-survey) and then are multiplied by corn yields derived by satellite data taken on August 31. Digging deeper, as per the methodology description available to us from StatsCan, yields and production estimates are the based off coarse resolution satellite data, StatsCan’s previous August estimates, and agroclimatic data.

Take a look at how much bigger yields got from the August StatsCan report to this one.

StatsCan 2018 Satellite-based yield estimates

We recapped the entirety of the StatsCan satellite-based production estimates for our GrainCents readers, as well as Agriculture Canada’s most recent update to supply and demand tables.

These numbers from StatsCan though are a bit suspicious. It is possible that canola yields could jump 3.6 bushels per acre, and durum and spring wheat could improve by 4 and 3 bushels per acre respectively. Indeed certainly questionable.

I’m also incredibly biased (like everyone else) to recent weather events, with the knowledge that the Aug 31 harvested acreage number is quite unlikely. Considering that StatsCan uses the number from the July-based survey results is a bit odd.

It seems that StatsCan came up with their production number, and then just did the math, dividing production by harvested acres to get their yield numbers.

What do you think about this StatsCan report? Add your voice to our Twitter conversation here.

To growth,

Brennan Turner

President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

At 7:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2898 
CAD, $1 CAD = $0.7753 USD)

Dec Corn: 0.5¢ (0.14%) to $3.460 USD or $4.463 CAD
Nov Soybeans: -2.3¢ (-0.28%) to $8.278 USD or $10.677 CAD
Dec Soybean Meal (per short ton): -$0.70 (-0.23%) to $308.50 USD or $397.91 CAD

Dec Soybean Oil (cents per lbs): -0.90¢ (-0.33%) at 27.41¢ USD or 35.35¢ CAD  
Dec Oats: -0.5¢ (-0.20%) to $2.503 USD or $3.228 CAD
Dec Wheat (Chicago): -4.0¢ (-0.77%) to $5.185 USD or $6.688 CAD
Dec Wheat (Kansas City): -2.5¢ (-0.48%) to $5.238 USD or $6.756 CAD

Dec Wheat (Minneapolis): -2.3¢ (-0.39%) to $5.858 USD or $7.556 CAD
Nov Canola: -$1.40 (-0.29%) to $11.013/bu / $485.60/MT CAD or $8.539/bu / $376.49/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.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

Most Recent Posts
Dec. 10 - Grain Markets Reverse Ahead of WASDE
December 10, 2018 Brennan Turner
Grain markets this morning are mostly lower ahead of tomorrow’s December WASDE report, with wheat prices the most notable, pulling back from its significant gains on Friday.
October 4: Corn Prices Edge Higher With October WASDE in Focus
October 04, 2018 Garrett Baldwin
Corn prices ticked higher Thursday as traders and analysts began to speculate on next week’s release of the October WASDE report.