Market Insider

Obvious Changes

Cash spring wheat markets in Western Canada saw a nice bump over the past 2 weeks as U.S. and Canadian production concerns weighed heavy on the market. More specifically, 90% of the Dakotas are experiencing severe or extreme drought conditions. In the last week of June alone, Minneapolis spring wheat markets gained over 13%! More acutely, for the month of June, Chicago wheat futures are up 18% and Kansas City wheat is up 13%, driven mainly by a poorer quality U.S. harvest. Currently, May 2018 KC wheat futures are above $5.50 USD / bushel, its highest in 2 years. Winter wheat gains have been certainly supported by the spring wheat rally though. The September spring wheat market started June at $5.76 USD / bushel and that $7.68 reached on Thursday, June 29th would be a 33% gain for the month. Obviously, it’s hard not to love this sort of price action. 

Conversely though, with a strengthening Canadian Loonie, cash spring wheat prices in Western Canada only have gained 13% over the past two weeks, according to PDQ info. In fact, $8 CAD / bushel new crop CWRS wheat prices are available almost everywhere on the Prairies. CPS wheat prices are up about 7% in the last two weeks but durum markets haven’t rallied as much as per PDQ. What we do know here at FarmLead though is we are seeing cash values on the FarmLead Marketplace trading closer to that coveted $10 CAD / bushel handle. Canola and peas haven’t been able to rally as much either, mainly due to some bigger-than-expected acres (more on that later). As more of the crop starts to get known, any price action tends to start to fade. Of course, we know people will say “oh no way that XX million acres of (enter crop name) got seeded this year.” It was either too wet or too dry. While we can challenge these numbers as much as they want, they do set the playing field for where prices can head. 

On Thursday, June 29th, Statistics Canada came out with their acreage estimates for the 2017/18 Canadian crop. The number most market participants were watching is canola. According to StatsCan, their survey of farmers suggests 22.8 million acres got planted this spring by Canadian farmers. This would be a 12.1% increase over last year’s 20.4 million acres, a new record, and above the market’s expectation of 22.2 million acres. Next on the most-watched list was wheat area, which StatsCan will top out at 22.4 million this year, down about 3.7% from last year & below the 22.7 million the market was forecasting. This will be the first time ever that canola acres in Canada top wheat’s area.

Digging into it, spring wheat area in Canada will be 15.8 million acres, an 8% drop from last year. Area seeded to durum wheat was expected to show 5 million acres even, but StatsCan says that number is actually 5.2 million. That’s still a 16% drop from last year, albeit remember that last year’s acreage was a record. The durum acreage decline was led in Saskatchewan, down 18% from last year to 4.1 million acres seeded this spring. Winter wheat acreage in Western Canada is expected to be just 410,000 acres, down 31% from last year and 52% from a year ago. With Ontario winter wheat acreage at still-healthy value of 900,000 acres, the Western Canadian share of national winter wheat acreage is only 30% of he national total when, over the past 5 years, it’s been responsible for almost half of all area.

Barley acreage came in at 5.77 milloin, down 9.7% from last year and down from the 6 million that the market was expecting. One could argue that that barley acreage loss went into oats as 3.22 million acres of the cereal is getting planted in Canada this year, up 13.6% over last year (market was expecting 3.4 million though). Fall rye is falling back to more normalized levels with 260,000 acres getting planted. That’s a 21% decline from last year’s large crop but does mirror the 259,000 acres seeded in 2015.

Soybeans continue to be the big surprise in Canada as even though the market was expecting to see 7 million acres (which would’ve been a 28% increase from last year), the actual number came in at 7.3 million, a 33% jump! Flax acreage will top 1 million acres again, up 11.2% from last year’s blip of just 935,000 getting seeded. This was generally in line with what the market was expecting. Mustard acreage will revert back to the mean as 380,000 acres are expected to get planted, down nearly 28% from last year’s anomaly of 525,000 acres. Canaryseed acreage is expected to stay relatively flat at 255,000, down just 2% from last year’s 260,000.

As for the pulses, the numbers came in generally as expected. We knew lentils acreage was going to drop from last year’s record. StatsCan met the market’s expectation with 4.4 million acres getting seeding this year, down about 25% year-over-year. 4.1 million acres was sown to peas this year in Canada, slightly above the market’s 4 million-acre pre-report forecast but still a 3.4% drop from last year. Chickpea acreage continues to roller coaster, coming in at 135,000 this year in Canada, down nearly 16% from last year’s 160,000 but still above the 115,000 acres seeded in 2015. 

Happy Canada Day!

To growth,

Brennan Turner
President & CEO | FarmLead.com