Market Insider

Tracking Year-Over-Year

Grain markets started into the month of October with a bit of a negative swing before some concerns of how fall-seeded crops are faring started to creep into the markets. Winter wheat seeding in America is behind schedule with just 36% of the expected crop in the ground as of Sunday, October 1st. The five-year average is 43%. Kansas produces the most amount of winter wheat, and they were only at 21% seeded. The 5-year average is 39%. Rains are to blame for the below-average field activity. Dryness in the Black Sea is causing some concern for the germination of recently seeded crops there. Regardless, given the amount of acres that got seeded, especially in Russia, there’s a strong feeling that, like the last two years, wheat production will be huge.

For grain prices in Western Canada, things aren’t all that different from a year ago if we look at the grain pricing website PDQ. Average hard red spring wheat prices to start October were hovering just above $6 CAD per bushel a year ago. 365 days later, prices are about 20 – 30 cents a bushel (or 3.25% higher). CPS wheat is also a bit higher than a year ago, hovering near $5 per bushel. Feed wheat prices have probably improved the most though, considering that a year ago there was a lot of distressed cereals flooding the pipeline. Durum is the outlier of the wheat complex, down more than 5% across Western Canada compared to a year ago (more on this later). Prices for pulses are also lower as a global supply shortage of the past few years has been basically alleviated. On the canola front, cash prices have traded sideways the last couple weeks, but they have improved nearly 10% compared to where they were a year ago.

Sticking with our year-over-year theme, the US Wheat Associates came out with numbers of their assessment of the US wheat harvest. For hard red spring wheat in America, average protein is 14.6%, up a bit from 2016’s 14.2% average. Falling number is lower though in 2017 at 397 versus 2016’s 413. Test weight is similar year-over-year at 61.2 pounds per bushel this year versus 61.3 pounds per bushel a year ago. Finally, vitreous kernels (measured as HVK in Canada and DHV in America) is sitting at 76% in 2017. A year ago, the average was 79%.

Digging into the Small Grains Report again though from Friday, September 29th, we know that there’s certainly less crop coming out American fields this year. Harvested acres are down across the board except for durum! In fact, US durum harvested acres are forecasted to be 17.5% higher than their 5-year average. Regardless though, durum wheat production in the US is supposed to fall 28% from that 5-year average and 47% from 2016’s record crop to 1.494 million tonnes. For the US hard red spring wheat crop, production is pegged at little under 10.5 million tonnes, or 1/5th lower than last year’s crop and 26% below the 5-year average.

Overall, while the datapoints on the Canadian crop still come in, we know the American spring wheat crop quality is certainly like last year's. What’s clearly the big difference is the size of the crop. Here in Canada, we’re hearing through the pipeline that grain elevators are not paying any premiums out for top grades and quality. This is mainly because there’s a lot of supply still out there and this year’s crop quality in Western Canada was really good, despite it being smaller. I think it’s still early in the game and there’s a bit of a “who’s going to blink first” sort of game in play. In the meantime, both we here at FarmLead and the Alberta Wheat Commission will continue to stress that you should get your grain tested. We’ve built GrainTests.com to help you simplify this process and order tests from multiple labs.

To growth,

Brennan Turner
President & CEO | FarmLead.com