Sept 6 – Much Debate Left for Wheat Harvest, Soybean Yields?

Grain prices this morning are mixed with a big 2019 global wheat harvest pressuring prices while oilseeds are trying to rebound from yesterday.

“It is better to debate a question without settling it than to settle a question without debating it.” – Joseph Joubert (French author)

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Much Debate Left for Wheat Harvest, Soybean Yields?

Grain prices this morning are mixed with a big 2019 global wheat harvest pressuring prices while oilseeds are trying to rebound from yesterday. Markets are continuing to look at crop development versus what the weather maps are saying. That said, while the weather is looking supportive for late-planted crops in the Midwest, temperatures are expected to be a little below average around the 49th Parallel according to the latest forecast from DTN. [1]

DTN's temperature forecast suggests cooler conditions at the U.S.-Canada border

New Month, New Politics?

On the geopolitical front, I’m not going to get into all the details that are happening in the United Kingdom regarding new Prime Minster Boris Johnson and the Brexit situation because it’s categorically a gongshow. [2] Separately, the U.S. and China have agreed that, after a recent phonecall, they will resume face-to-face trade talks in early October in Washington, DC. [3]

As for Canada, on Wednesday, the former global managing partner of premiere consulting firm McKinsey, Dominic Barton, was named Canada’s new ambassador to China. [4] The government there was quick to remind the new ambassador and Ottawa to “reflect on its mistakes” before heading to Beijing. [5] Put another way, China has offered no sign of new warmth towards Canada on the political front.

While businesspeople often have a tough time transitioning into politics, Mr. Barton is well-versed with China’s elite and politics, after spending many years working with companies and leaders there. That said, my business partner and FarmLead COO/co-founder, Alain Goubau, was at McKinsey for a few years before we teamed up, and based on my conversations with him, this is a good move for Canada and, more specifically, Canadian agriculture. This is because Mr. Barton chaired the Canadian Advisory Council, which had suggested in literally the report named after Dominic Barton, that Canada could move from fifth to second in terms of the world’s largest agricultural exporters. [6]

International Wheat Harvest 2019 Update

Next week, we’re going to get a heavy dose of new production estimates. On Tuesday, September 10th, we’ll get a fresh production forecast update from ABARES (the Australian version of the USDA). Then, on Thursday, September 12th, we’ll get both the September WASDE report and Statistics Canada’s data-driven crop production estimates.  Last week, StatsCan said that the Canadian 2019/20 canola and wheat harvest would be smaller, but they were expecting more production of barley, oats, and pulses.

Ahead of ABARES’ new numbers, Australian brokerage firm IKON Commodities estimates that the Land Down Undaa will produce 19 MMT for their 2019/20 wheat harvest. [7] Back in June, ABARES (the Australian version of the USDA) pegged this year’s wheat harvest there at 21.2 MMT while the USDA’s most recent estimate in the August WASDE was 21 MMT. The smaller wheat harvest in the Land Down Undaa has undoubtedly opened the door for more Black Sea wheat to find homes in southeast Asia. [8]

Recently, Argentina’s Ag Ministry came out with their estimate for their country’s 2019/20 wheat harvest, suggesting a haul of 21 MMT, which would be a new record. The reason for the increase in the wheat harvest is mainly due to farmers planting 16M acres of wheat this year and average weather.  Comparably, the USDA, in the August WASDE, raised their outlook for the Argentine wheat harvest by 500,000 MT to 20.5 MMT. Look at how the USDA forecasted this year’s wheat harvest for other major exporters in their August WASDE report.

2019 wheat harvest & exports estimates from the 2019 August WASDE report

On the flipside, Argentina’s farmers are suggesting that they’ll plant more soybeans for their 2019/20 crop, instead of “expensive corn” but also ongoing political uncertainty. [9] For perspective, in Argentina, the cost of production of an acre of corn is estimated to be about 70% more than that of soybeans, mainly because of bigger fertilizer and seed costs,. One local analyst is expecting Argentina’s 2019/20 planted corn to fall about 3% year-over-year to a little more than 14.8M acres. Comparably, soybeans are expected to account for corn’s nearly 500,000-acre drop, and see its area climb 1.1% to nearly 44M acres.

Updates on U.S. Soybean, Corn Yields

Allendale recently shared the results of its annual yield survey, muddying the waters a bit in terms of what corn and soybean yields are looking like in the United States. [10] The survey did not account for the potential of an early frost but suggested that average U.S. corn yields would come in 167.7 bushels per acre (bpa) and 46.1 bpa for soybeans. This would add up to a total 2019/20 harvest of 13.755 billion bushels of corn and 3.5 billion bushels of soybeans.

INTL FCStone also updated its production estimates this week, pushing average corn yields up to 168.4 bpa while also increasing soybean yields to 48.3 bpa. This would add up to a harvest of 13.809 billion bushels of corn and 3.661 billion bushels of soybeans. As a reminder from a few weeks ago, ProFarmer’s crop tour suggested a much different story for Harvest 2019, pegging corn and soybean yields at 163.3 and 46.1 bushels per acre, respectively.

U.S. corn and soybean yields estimates as of September 6, 2019

While it seems like corn and soybean yields and edging higher with some better weather as of late, the fact remains that this crop is late. While there are fewer signs of frost in the long-term forecast for the Midwest, the data shows we’re still 1-2 weeks behind in many places. Digging in, more than 17M acres of corn haven’t hit their dough stage (usually only about 6M acres remaining at this time of year), while more than 10M acres of soybeans haven’t even started setting pods yet! [11]

Overall, it hasn’t seemed like grain prices have done much to account for the late crop, and this is because there isn’t a real production issue yet. Until a frost or weather issues actually shows up and the damage is clear, this market is expecting these estimates to be realized. Matt Bennet from AgMarket.net probably said it right in terms of his takeaways from 2019 , “”It doesn’t really matter what kind of start you get to the crop, what kind of weather you have during the summertime, what really matters when it comes right down to it is what are the USDA numbers on these crop reports.” [12]

P.S. If you’re planning to be in Woodstock, ON next week at Canada’s Outdoor Farm Show, stop by the FarmLead booth in the FCC tent to see what some new features for grain marketing that we’ve been building in 2019!

Have a great weekend!

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

Due to some technical difficulties this morning, we don’t have grain futures prices in this morning’s FarmLead Breakfast Brief but you can review them here.

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.

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