Finally, the end of a tumultuous quarter — This week in the grain markets

Grain markets ended the last trading week of September mostly in the red, weigh on by relatively bearish stocks report from the USDA.

Oats and canola prices were the only crops that were able to end the week in the green as concerns about the Western Canadian harvest continue to mount. The gains made this week for oats – 8-12 cents higher— also reflected that for the month. For the quarter though, oats prices on the futures board in Chicago gained 16 – 30 cents. Comparatively, for the month, canola prices were slightly higher but were down nearly $12 from where they started the calendar quarter at.

Corn and soybean prices finished the week a couple cents per bushel lower as harvest and trade pressures continue to weigh on markets. Compared to where August ended, soybean prices were able to climb a few cents, but corn prices were down nine cents per bushel. For the overall third quarter of the calendar year, corn and soybean prices ended 10 to 15 cents and 20 to 35 cents lower, respectively.

Kansas City and Chicago winter wheat prices were mixed for the quarter with HRW wheat up about five cents USD / bushel, whereas SRW was down five to eight cents. However, for the month of September, both classes saw their futures prices fall by 30 to 40 cents. Part of that was because for the last week of September, winter wheat prices lost 10 to 15 cents.

On Friday, the USDA released its quarterly stocks and small grains report. The agency said that all wheat stocks came in 2.38 billion bushels for September 1. That figure is up five per cent from one year ago when all-wheat stocks sat at 2.27 billion bushels. From a quarter-over-quarter perspective, total U.S. wheat stocks decreased 605 million bushels from the 1.1 billion bushels reported for June 1. That disappearance is an eight per cent decline from last year.

For corn, corn stocks came in at 2.14 billion bushels on September 1. That figure is down seven per cent year-over-year from September 1, 2017.  For soybeans, the agency said that stocks came in 438 million bushels, up 45 per cent from one year ago when soybean stocks sat at 301 million bushels.  This meant also that, for the quarter, total U.S. soybean inventories decreased 781 million bushels from the 1.22 billion bushels reported for June 1. That total disappearance is a 18 per cent increase from the same period last year.

Also, this week Statistics Canada released its monthly crush report, which indicated ongoing margin pressures and proximity to the oversupplied U.S. soy oil market are having an impact on canola crush volumes in Canada.

The report showed that the amount of canola crush in August hit roughly 743,000 MT. That figure represented an 11.3 per cent decline from July. Conversely, the monthly canola crush was about 18 per cent higher than the August 2017 numbers. Very concretely, Canadian canola crushers used 114,700 MT more canola in August 2018 than during the same period last year.

As it relates to the five-year average for the month of August of a little more than 559,000 MT, August 2018’s canola crush was nearly 33 per cent higher.

Cash prices continue are trying to swing higher as harvest progress across North America was slowed by wet weather. This is no more evident that in Western Canada.

In Manitoba, all grains combined increased by just 2 points, to 73 per cent. Comparably, two weeks ago, it was at 71 per cent, and three weeks ago, the harvest was at 67 per cent complete.

In Saskatchewan, the total harvest is sitting at 68 per cent, up just six points from last week’s 62 per cent completed.

The slowest progress has been in Alberta, where the harvest of all crops is sitting at 33 per cent, the exact same as the previous week.

This means there’s millions of tonnes still left to go. But, the real question is when things can start up again? The frustratingly short answer is unlikely soon. Drew Lerner of World Weather says it’s relatively unlikely, unless the expected fall El Nino starts strengthening in order to provide “more sunny days and warm weather biases.”

As a reminder, with this sort of weather, and so much crop left out, we strongly recommend that you proactively order your grain tests so that as soon as the samples are coming in, you can send them away and get the grain tested. Be it disease or other quality issues in cereals, or earth tag in pulses, knowing what quality of grain you have is the second-most important step in my grain market plan (the first is knowing your cost of production).

Finally, the macroeconomic factor that slipped under the radar this week was the Federal Reserve’s decision to raise interest rates for the third time in 2018. The central bank could again raise rates in December as it attempts to curb inflation and keep the U.S. economy from overheating.

With that in mind, higher rates have negative impacts on the bottom lines of farmers and weigh on grain prices. Looking ahead into the fourth calendar quarter, NAFTA and other trade agreements, harvest progress (if any), and the potential for a Canadian federal election will likely continue impact grain prices. However, getting off the pressures of the harvest lows is going to be the nicest thing.

 

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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Wheat prices jump into August — This week in the grain markets

This week, winter wheat prices touched a three-year high, but it didn’t last. Chicago SRW wheat prices for September 2018 gained 5 per cent or about 26 cents US/bushel to close at $5.56. While the December 2018 contract was up 5.4 percent — or nearly 30 cents — to finish a tad under $5.80. In…Read more »

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