As the complex contemplates the effect of rain on North American wheat production and tomorrow’s September WASDE report, grain markets this morning are mostly lower.
“Every problem has in it the seeds of its own solution. If you don’t have any problems, you don’t get any seeds.” – Norman Vincent Peale (American author)
Wheat Production Issues Ahead of Sept WASDE
As the complex contemplates the effect of rain on North American wheat production and tomorrow’s September WASDE report, grain markets this morning are mixed. Going into tomorrow’s WASDE report, the market is expecting slightly smaller yields for both U.S. corn and soybeans, which reverberates down to smaller production and ending stocks.
AccuWeather shared its estimates of what it’s forecasting for Harvest 2019 for U.S. corn and soybeans, pegging the former at 13.36 Billion bushels, or the lowest since 2012.  They’re also expecting an American soybean crop of 3.658 billion bushels. Coming back to tomorrow’s September WASDE, the USDA will also release updated Prevent Plant numbers, which are currently estimated at 19.8M across all crops.
Wheat Production Falls Australia (Again)
Yesterday morning, ABARES came out with their updated forecasts for Harvest 2019 in the Land Down Undaa.  With the eastern party of the country dealing with their third straight year of drought, grain prices in the region have been climbing of late.  Accordingly, ABARES had to downgrade its estimates of a few crops, but did raise their estimate of the Australian barley harvest to 9.5 MMT. This is 300,000 MT more than their last forecast back in June and 14% higher than last year’s haul, but still 300,000 MT below the five-year average (which does technically include the record barley harvest in 2016/17 of 13.4 MMT).
Australian canola production was felled by 300,000 MT to 2.3 MMT, which nearly matches last year’s 2.2 MMT harvest, despite slightly more acres being planted. On a related note, Strategie Grains lowered its estimate of the European rapeseed harvest to a 13-year low of 17.05 MMT.  This new estimate is 350,000 lower than their previous estimate from last month, but also a drop of 15% year-over-year. About a month ago, I talked about how Australian and Canadian canola and wheat exports were playing a bit of a game of musical chairs, with, notably, more Canadian canola headed for European markets that are usually reserved for Australian product. So far, total Canadian canola exports are doing well through its first month of the 2019/20 season, tracking 50% higher than the same point a year ago.
Coming back to Australia, ABARES dropped their wheat production estimate to 19.1 MMT, down 2.1 MMT from their June estimate of 21.2 MMT. This is about a 10% bump from last year’s harvest, but still 22% below the 10-year average. While it does match up closely to private estimates of 19 MMT for the Australian wheat harvest that I mentioned last Friday, but the USDA will likely come down in their September WASDE tomorrow; in their August estimate, the USDA pegged 2019/20 Australian wheat production at 21.2 MMT.
Related on the wheat production front, France’s Ag Ministry is estimating that their soft wheat harvest this year will come in at 39.45 MMT. This is up 1.25 MMT from their previous estimate in August and if realized, would be the second-largest wheat harvest ever for the country.
Wheat Production & Protein Premiums?
Rain has been a bit of an issue in northern areas of North Dakota and Montana, as well as southern Saskatchewan and Manitoba. Coming into this current week, some of these areas had already taken on up to 2.5 inches of rain. Compounding the issue has been the ongoing rains that the region has continued to receive. As I mentioned this week in the Alberta Wheat Commission’s weekly Wheat Market Insider, these areas are both major durum and spring wheat production regions.
However, the rain falling at this time of year brings back memories of Harvest 2014. That year, rain fell throughout the harvest, seriously undermining the quality of most crops, and, as a result, protein premiums were large and extravagant relative to their averages. That said, I’m not expecting $15 CAD/bushel durum to show back up like it did in the fall of 2014. This is mainly because there is a lot more carryover of durum from both Harvest 2018 and 2017 still in sitting in U.S. and Canadian bins.
However, protein premiums are likely to start showing up, and I think moreso for HRS wheat than durum, mainly because the U.S. HRW wheat crop didn’t have the greatest quality this year.  Further, as I mentioned in Monday’s FarmLead Breakfast Brief, Statistics Canada noted that there’s less non-durum wheat being held on farm this year in Saskatchewan and Manitoba.
One thing to remember though is that the highs of the durum market are usually seen sometime between late October and mid-November. While it’s yet to be confirmed that we’ll get some solid protein premiums, Canadian durum exports are tracking 60% higher than they were at this time a year ago, with nearly 375,000 MT shipped out so far through Week 4. Similarly, U.S. durum is also flying out the port, with nearly 150,000 MT shipped out through its 2018/19 Week 13. Concretely, U.S. durum exports are tracking 4 times higher than this time a year ago.
P.S. If you’re in Woodstock today or tomorrow at Canada’s Outdoor Farm Show, make sure to stop by the FarmLead booth in the FCC tent – we’d like to hear your feedback on some new tools we’re working on for digital cash grain trade!
At 7:30 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3148 CAD, $1 CAD = $0.7606 USD)
Dec Corn: -0.5¢ (-0.15%) to $3.61 USD or $4.747 CAD
Nov Soybeans: -1¢ (-0.1%) to $8.71 USD or $11.452 CAD
Oct Soybean Meal (per short ton): -$0.50 (-0.15%) to $293.80 USD or $386.30 CAD
Oct Soybean Oil (cents per lbs): +0.01¢ (+0.05%) to 28.36¢ USD or 37.29¢ CAD
Dec Oats: +7¢ (+2.55%) to $2.815 USD or $3.701 CAD
Dec Wheat (Chicago): -2.3¢ (-0.45%) to $4.80 USD or $6.311 CAD
Dec Wheat (Kansas City): -2.8¢ (-0.7%) to $4.01 USD or $5.273 CAD
Dec Wheat (Minneapolis): -0.5¢ (-0.1%) to $5.033 USD or $6.617 CAD
Nov Canola: -0.2¢ (-0.02%) to $9.963/bu / $439.30/MT CAD or $7.577/bu / $334.11/MT USD
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