FarmLead Grain Markets Review: August 2017

With August coming to a close, markets are taking a breath over the Labor Day weekend.

September expiration is approaching on the 14th for every major contract except for Canola and Rough Rice. Ahead of this date, we’re taking a look at grain markets over the last month and offering our insight into what traders and producers can expect in the weeks ahead.

Corn Prices Tumble in August

Back on July 11, corn prices sat at a six-month high.

The September futures contract topped $4.04, and all of the bulls were bring on the hyperbole. Three days after that high, Barron’s Simon Constable gave the microphone to Shawn Hackett, president of Hackett Financial Advisors in Boca Raton, Fla.

Hackett said that hot weather and weak pollination could drive prices as high as $6.00, a 50% jump from the top set on July 11. The key word as always is “could.”

The market could do anything. We could see temperatures increase to 150 degrees for a month. And we could see a day where corn starts falling from the sky. Anything could happen…

But you have to really play the percentages…

The July WASDE report was released, and corn began its blistering descent.

From July 11 to August 31, the corn futures contract saw more bottoms than tops. On the 31st, the price hit a low of $3.285. That’s an 18.6% decline in about six weeks.

For the month of August, the December Chicago corn contract was off 2.15%. The August WASDE report didn’t help.

And when the Farm Journal Crop Tour said that they weren’t seeing anything in the fields that could really fuel a massive downgrade in yields and expected production, prices fell back down to levels we haven’t seen since September 2016.

Returning to Hackett’s high-end prediction of $6.00 corn, we have to look at the two major bearish factors hitting prices right now.

What would it take to get us back to those levels, and we can’t just talk about weather and pollination?

To get a sense of how much the markets have changed in the last four years, we have to go back to the USDA WASDE report in September 2013. That month, total production was slated for a then-record 13.8 billion bushels and an average yield of 155.3 bushels per acre.

The August 2017 WASDE report meanwhile shows 14.2 billion bushels and an average yield forecast of 169.5 bushels per acre. So first, we’d need to see a pretty substantial decline, which at this point, isn’t going to happen.

The second major factor is happening down in South America. Brazilian corn production climbed from about 35 million metric tonnes in 2001 to a record 98.5 million metric tonnes.

That’s an uptick from 1,38 billion bushels to 3.87 billion bushels in about 15 years…

Argentina, meanwhile, is on pace for its second-straight record corn crop.

The world is awash in corn. During the financial crisis, it was said that Alan Greenspan had recommended that the nation identify all the excess housing on the market and burn the houses down in order to drive housing prices back higher.

That’s not what we’re advocating… but the global supply and demand imbalance has been pushing corn prices lower.

There has been a reduction in expectations in the European Union, where production estimates are off about 2% from last year’s final crop. That’s not enough right now to move the needle significantly.

Soybean Yields Move Higher, Prices Lower

The August WASDE report indicated that yield expectations would be 49.4 bu/ac.

Five minutes before the release of the report, the September contract was trading up 10.25 cents at $9.76.

By 12:02 pm, after the announcement, that same contract was off 19.25 cents at $9.46.

That was a 30-cent swing in seven minutes.

Prices never recovered from that announcement.

The September contract closed the month at $9.37.


So, what are we looking at?

First, results from the Farm Tour indicated that the USDA’s August estimates were not far off. As our Doug Kirk explained after he joined the 2017 farm tour, Pro Farmer estimated a national yield of 48.5 bu/ac.

The markets didn’t even react to the news on August 25.

Second, total soybean production was pegged at 4.381 billion bushels, topping consensus estimates of 4.212 billion. The 4.381 billion bushels expected topped last year’s record of 4.307 billion.

Third, there’s the growing glut around the globe.

World soybean stocks increased from 93.53 million metric tonnes to 97.78 million metric tonnes. The agency lowered its crush expectations by 10 million bushels to 1.94 billion.

With an uptick in supplies expected, the agency sees a scenario where ending stocks increased from 370 million bushels at the end of the 2016/17 year to 475 million bushels for the 2017/18 calendar.

Four, there was an uptick in yield expectations from the July estimates in the United States, Russia and the European Union.

Markets have been looking at weather reports around the globe and expecting that the US agency would throw farmers a bone.

Rangebound Canola Prices but Getting Bullish? 

Canola had a very “meh” sort of month of August, only finishing 0.3% lower than where it started. The November contract was off 0.8%.

The oilseed continues to be pressured by a Canadian Loonie, which topped 81 cents by the start of September.

Further, the StatsCan production estimates report from August 31st suggests that there’s only going to be 18.2 million tonnes harvested in the Great White North this year. The official Ag Canada forecast is for 18.6 million tonnes. we’re still sitting at 19 million tonnes (more on that later). StatsCan’s hotly-contested number that, as it stands, is about 7.5% below last year’s crop but still nearly 5% above the 5-year average.

Total harvested Canadian canola acres will hit 22.8 million and about 10% of that has already been combined across the Canadian Prairies. In Saskatchewan, the provincial government is reporting that average yields thus far are just 31 bushels per acre.

This isn’t far from the current Statistics Canada’s estimate of 30.7 bushels per acre but it is distant from last year’s 40.1 average yield. For reference, the USDA is estimating this year’s average Canadian canola yields at 36.6 bushels per acre.

For perspective, the 5-year average of Saskatchewan canola yields are 33.4. Further, national yields this year are estimated at 34.1 bushels per acre, while the 5-year average across Canada is 35.9.

Will these StatsCan canola numbers last? StatsCan does a have a history of revising its production, especially for canola. More specifically, in the past 7 years, StatsCan’s final Canadian canola production number has been higher 6 times from its August estimate.

Specifically, in 2013, final canola production was 26.5% larger than the August estimate while in 2015, it was nearly 40% larger.

This is why we’re standing by 19 million tonnes of canola as the final number. Food for thought though: we’ve seen some veteran industry analysts who have timestamped their call for as high as 20.5 million tonnes (which is where the USDA is currently sitting)

Needless to say though, we think that the 18% increase in Canadian canola acreage year-over-year won’t add up to a bigger harvest in 2017 than 2016. It’s a similar story in Australia where canola acreage is up 14% but dry conditions will push production down 29% from last year’s larger-than-expected crop.

In Europe, the rapeseed crop is basically wrapped up. The range of estimates includes 21.7 million tonnes from the International Grains Council. This is about 6% better than last year’s EU rapeseed harvest.

Germany’s farmer co-op is estimating a 4.31-million-tonne harvest there (5-year average is 5.31 million tonnes) off a 56.2 bushel-per-acre yield average. Average yields across the EU are pegged at 55 bpa.

On the demand front, Canadian canola exports are running a little ahead of last year. Conversely, domestic crush volumes are only using about 50% of capacity. This is because deliveries have been slowing with the focus on harvest for most farmers.

More broadly though, there was some regulation that impacted oilseeds. The US Commerce Department is starting to tax Argentinian and Indonesia biodiesel imports. This is significant. Why?

Argentina’s biodiesel association, Carbio, says the move will “result in an immediate stoppage of sales to the US.” This statement is significant considering that Argentina accounts for about 2/3s of all American biodiesel imports, or about 916 million gallons last year.

The decision intuitively means that more US soybeans could go into crush to meet the domestic American biodiesel demand. More soybean used for crush means less competition for canola.

What The Heck Wheat? 

It was a disappointing month for wheat prices. Here’s the final tally:

  • Dec Chicago SRW wheat: -13% in August
  • Dec Kansas HRW wheat: -13% in August
  • Dec Minneapolis HRS wheat: -14% in August

Wheat prices have been pressured by the ongoing Northern Hemisphere harvest and the Russian crop getting bigger seemingly every day.

One of the more bullish stories has been yields and total production in the US Northern Plains and Western Canada.

According to Statistics Canada, harvested wheat acres in Canada will come in like last year at 22 million, but yields have bombed, averaged 43.5 bushels per acre.

Last year, average Canadian wheat yields topped 53.0 bushels per acre.

As such, total wheat production in Canada is slated to hit 25.5 million tonnes. This is 22% lower than last year’s 31.7 million-tonne harvest and 17% below the 5-year average.

However, Minneapolis spring wheat prices didn’t react positively to the StatsCan number because they were, in fact, expecting a lower spring wheat production number.

The durum wheat number might be the most bullish thing we’ve seen in a while though from StatsCan. They think that Canadian production should touch 3.9 million tonnes, which is nearly 50%lower than last year’s haul and 34% below the 5-year average of 5.9 million tonnes. The market was expecting around 5 million tonnes.

From a yield perspective, StatsCan is forecasting a 28.3 bushel-per-acre average this year across Canada. Last year it was more than 52. The 5-year average is 42.4. All things being equal, most market participants think that StatsCan will revise the durum number higher. We think that we’ll probably end up closer to 4.6 million tonnes when all is said and done.

Moving across the border, North Dakota farmers planted roughly 5.25 million acres of spring wheat.

That’s a 12.5% decline from 2016/17. The acreage is roughly split equally across the west, central, and east growing regions.

That said, western yields aren’t excellent but they are better than expected.

With numbers coming in somewhere around 25 to 35 bushels per acre, it’s not great, but a lot better than what you might expect with 100 degrees Fahrenheit temperatures and limited rainfall. In the east, where rain did fall, things are looking much better / more average at around 45 – 60 bushels per acre.te

For durum wheat though, 1.1 million acres got planted in North Dakota this year. Most of it was seeded in the northwest corner of the state, exactly where the drought was.

The North Dakota Wheat Commission says that 44% of the state’s durum wheat crop was rated poor-to-very poor. 49% was ranked in fair condition.

As such, many farmers were expecting some meager yields (if their field wasn’t already baled). However, instead of the 10-15 bushels per acre, many seemed to be expecting, it’s coming in closer to 20 – 25 bushels per acre.

The USDA is forecasting an average yield of 24 bushels per acre for durum wheat in North Dakota. Keep in mind that last year that average was 40.5 bushels per acre (but it was one of the best crops ever).

Whether it’s durum or spring wheat crops, there’s going to be less of it coming out of the US this year. As such, buyers will be looking for both quality and quantity this year.

This confirms why you need to get your wheat tested, be it durum or spring, and wait for opportunities after harvest.

Earlier this week, we discussed some of the most important factors to know for your wheat.

Looking more globally though, it’s the same broken record that we’ve been hearing the last 4 years: huge crop and record carryout.

By the end of 2017/18, the International Grains Council is forecasting there to be 248 million tonnes still available in the world. As per the August WASDE report, the USDA is projecting an even larger carryout of 264.7 million tonnes.

The Black Sea obviously has been a major factor in the continuous growth of wheat numbers. The USDA’s WASDE report in August estimated the Russian wheat crop at 77.5 million tonnes, smashing last year’s record by 5 million.

Average wheat yields in Russia are pegged by the USDA at 43 bushels per acre. That’s up 10% from last month’s estimate, 8% higher than last year’s record, and 25% above the 5-year average.

The IGC raised their estimate of the Russian wheat crop later this month to 80 million tonnes. They also increased their estimates of the Ukrainian and Kazakhstani wheat harvests to 26 and 13.8 million tonnes respectively.

SovEcon also recently raised its Russian forecast to 78.9 million tonnes. They also estimated that Russia will export 32.4 million tonnes of wheat this year, making them the top exporter for 2017/18.

However, given the pace of wheat exports out of Russia thus far, more people are suggesting that this number won’t be reached, let alone the USDA’s forecast of 31.5 million tonnes.

The one obvious factor that can influence shipments is the price. If the price is not good, farmers sales will be slower.  FOB Black Sea port prices for 12.5% protein wheat is sitting around $185 USD/MT.

(By the way, that would be $5 USD or $6.35 CAD per bushel. You can calculate these numbers in seconds by using our free, farmer-friendly tools at

Add in the fact that Russia is aggressively breaking into the Asian wheat import market (exports +60% from 2015/16 to 2016/17), it’s clear that they want to own the title of the top exporter.

However, exporters will have to put the Panamax vessels where their mouths are to validate this claim.

If we’re to see a better September for grain markets, it’ll likely have to be a supply shock.

About the Author
Brennan Turner

Brennan Turner is the CEO of, 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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