Grain prices are trying to rebound this morning as the prospect of a new NAFTA deal lingers.
“If you’re aware of a pattern, you can do something about it, and you can be aware of your own culpability. I like to think I can do that, but, like everyone else, I’m a work in progress.” – Ruth Bradley (Irish Actress)
Wheat Prices Trying to Lead Late-August Rebound
Grain markets are mostly in the green this morning, led by wheat prices, as they try to rebound from another down day yesterday.
Garrett wrote in yesterday’s Grain Markets Today regular column that soybeans prices led the decline, mainly attributed to farmer subsidies in the US. There’s an argument that with the subsidies, the true market value of soybean prices is too high. Yesterday on the FarmLead Marketplace, we saw soybean prices (bids) fall below $7 USD / bushel.
More aggregately, there continues to be concern about the large soybean ending stocks that the US will carry over at the end of the 2018/19 crop year. Further, the recent rains were seen across the Midwest (and shutting down the US Farm Progress Show yesterday in Boone, IA) are considered to be positive for soybean yields (they usually are at the end of September.
This in mind, it looks like most of the Western Cornbelt will get rains through to next week. Up to 7 inches could fall in the more northern areas in IA, MN, and WI before mid-September sees the drier weather.
Cooler conditions are hitting the Canadian Prairies as Harvest 2018 continues, but there’s not too much rain that’s coming with it, meaning combines can keep rolling (albeit, a rain day break might be welcome after going hard for a few days!)
NAFTA Conundrum for Canada
Speaking of hard, Canada has a little less than 72 hours to try and resolve remaining issues on their side of NAFTA before US President Donald Trump says he’ll sign a bilateral deal with Mexico and put 25% tariffs on the Canadian auto sector. It’s been estimated that this could cost Ontario alone about 100,000 jobs. 
Ultimately, the NAFTA deal is pretty important for Canada, and the White House knows it. 75% of Canada’s exports go to the US, whereas just 15% of US exports head north to Canada. Research in the post-September-11 era suggests that US businesses are also very good at reorganizing trade flows away from Canada when trade hurdles between the two countries are amplified. 
As mentioned in yesterday’s FarmLead Breakfast Brief discussing NAFTA, the Canadian trade tactic has been to go after the different levels of the US government, instead of just the White House.  By stressing the importance of trade with senators and members of Congress from specific states who have a heavy trade relationship with Canada, there are a lot of politics at play.
There is now some veteran leadership on the trade front for Canada, in Steve Verheul, a veteran of the original NAFTA and one of the main architects of the EU-Canada free trade agreements. 
However, there’s a lot of concern that there has been too little done, and it’s too late.
Canadian Yield Reports
Staying in the Great White North, in tomorrow’s weekly Saskatchewan Agriculture crop report, we’ll get their first estimate at yields for the province’s crops.
Then, on Friday, Statistics Canada will put out their first production report on the 2018 Canadian crop. However, given the survey was done in July, there’s a lot of questions about the estimates from StatsCan accounting for the heat stress placed on the crops of the Canadian Prairies in August.
We already see some effects on lentil crops, namely in Saskatchewan where it’s estimated that tomorrow’ SaskAg report will show 2/3s of the pulse crop harvested.  A lower yield, combined with Canadian lentils acres being down 14% year-over-year, suggests a crop that would be much lower than the 2017/18 harvest of 2.56 MMT.
Currently, AAFC is predicting a Canadian lentils harvest of 2.375 MMT, but that’s based off an average yield of 23.5 bushels per acre (BPA), up from last year’s 21.4 BPA, but still below the 5-year average of 24.1 BPA. This has helped lentils prices stable out a bit.
Current pre-report guesstimates for Friday’s crop production report from StatsCan on lentils is between 2.2 to 2.3 MMT. Something to keep in mind is that StatsCan tends to underestimate the Canadian lentils crop by a little more than 12%, relative to their final production number in December.
In tomorrow’s FarmLead Breakfast Brief, we’ll be sharing the rest of the pre-report guesstimates, but as a subscriber to GrainCents, you get all of our in-depth reporting and our forecast of where we think Canadian yields will end up. We also will be digging into what this will mean for the likes of wheat prices and canola prices and the other crops that we cover at GrainCents.