The US Crop Tour Estimates, StatsCan Numbers, and Harvest Begins — This Week in Markets

Grain markets this week tracked along with the annual ProFarmer US Crop tour which hit Ohio, Indiana, Illinois, Iowa, Nebraska, South Dakota and Minnesota. The results were mostly what everyone was expecting: there’s a big crop is out there and the market knows it. Digging into the crop tour’s numbers, estimated corn and soybean pod counts were all up noticeably year-over0-year in the big three — Indiana, Illinois, and Iowa – but as you headed north to South Dakota and Minnesota, the estimated production was the same or lower than last year. However, many fields were reported with varied quality but, overall, production numbers will hit records if the frost and hailstorms can stay away (fingers crossed).

As we passed the halfway point of August, the harvest itch started to creep back with equipment (and mentalities) getting prepared to “push ‘er til she plugs”. Statistics Canada’s report this week, based on their end-of-July survey, put Canadian canola production this year at 13.9 million tonnes, below pre-report expectations of 14.5 million but more in line with the long-term average output.The government agency is also suggesting 27.7 million tonnes of total wheat output, including 4.95 million tonnes of durum. (Sidenote: durum prices have been elevated lately because of quality concerns in Europe and northern U.S. states but are likely due for a pullback soon).

Other oilseeds and pulse crops are seen having higher output than even last year’s big crop, including a new record of 5.9 million tonnes of soybeans, but this is more associated with increased acres versus increased yields. Rounding out the major crops, lentil production is seen at 1.93 million tonnes (even 2.6 per cent higher than last year’s crop), canary seed, mustard, and flax are seen up year-over-year at 145,700, 222,300, and 908,000 tonnes respectively, while barley and oats are down significantly from not only last year but also 2012 to eight million and 2.8 million tonnes respectively.

One of the arms of the USDA, the Farm Service Agency, released data as to what’s been enrolled in government subsidy programs this year, reporting 83.32 million acres of corn, 79.25 million acres of soybeans, and 52.57 million acres of wheat. These numbers are all below the USDA’s official forecasts but the FSA’s lost acres (also known as “prevent plant”) also below that of the USDA’s at 1.54 million for corn, 827,000 for soybeans, & 1.36 million of wheat. These reports are always taken with a grain of salt though as it’s more than a few weeks before any grain is even taken off (especially the Stats Canada one as surveys are compiled towards the end of July and that’s a lot of time for the crop to grow still).

Recent rains in eastern Australia will help maintain the size of the winter crop as the region was in need of a good drink, otherwise the 25 million-tonne wheat crop might’ve been scaled down. The big issue in the Land Down Undaa though remains in its transportation infrastructure, as like in Western Canada and northern US states, getting grain to export-ready positions is the biggest hurdle the industry faces. Aussie infrastructure consultants point to our “efficient” railroad and port system here in Canada (oh, you can almost choke on the irony!). The underlying problem will continue to be based around that various industries in resource-rich regions will continue to compete for rail space unless new infrastructure/track is added.

The cost of just being a farmer in Russia is increasing as western economic sanctions are making it difficult to obtain new financing & pay off current debt. Farmers in southern Russia “rushed to sell grain” this harvest as interest rates have risen since the beginning of the year. With a potential 60 million-tonne wheat crop coming off in the Black Sea country, it’s expected that producers will keep selling, in turn pushing down prices, as there’s a lot of grain so it’s not very smart to try to hold on for better prices, especially when loan payments are due. With Russia instituting a food import ban on western countries, it’ll turn to some of its old comrades, such as Kazakhstan, to help supply beef and other fodder crops that Russia is not self-sufficient in (unlike wheat, of which it has a lot). Coming back across the pond, reports are growing that in a few major wheat growing regions in North America (i.e. northern U.S. states and Western Canada), problems of disease are leading to significant losses. With all this in mind, prices have climbed a little bit this week but Russia definitely has the ability to move the wheat complex and with seemingly bigger numbers coming out of the Black Sea every day, harvest selling pressure will start to build up and likely stay for the next couple months.

 

Brennan Turner

Brennan Turner is originally from Foam Lake, SK, where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, he spent some time working in finance before starting FarmLead.com, a risk-free, transparent online and mobile grain marketplace (app available for iOS & Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email ([email protected]) or phone (1-855-332-7653). @FarmLead

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