Market Insider

Eyeing New Numbers

Grain markets are pushing through the middle of August with less focus on weather and more focus on demand numbers. In South America, the limited availability of soybeans in Brazil is putting the U.S. in the so-called driver’s seat for demand until new production becomes available in early 2017. However, Chinese soybeans imports in July were just 7.76 million tonnes, down 18.3% from a year ago, but still a 2.6% pump-up from June’s numbers. This comes as China continues to auction off its state reserves at a significant discount, but they did buy more than 2.7 million tonnes of U.S. soybeans over the first 10 days of August. In Canada, canola processors crush numbers totaled 8.27 million tonnes in 2015/16, a healthy 12.3% jump from last year’s 7.36 million tonnes. Overall, total Canadian canola demand came in at more than 19.2 million tonnes in 2015/16, a healthy 17% jump from last year thanks to 10.2 million tonnes of exports! Ag Canada is currently projecting that we’ll top the 8 million-tonne mark in 2016/17 for domestic demand but a lot less exports with just 8.25 million tonnes forecasted by the U.S.D.A. The bigger trump card could be a bigger soybean number in August’s W.A.S.D.E. report, surely creating some competition for Canada’s oilseed.

While Canada may ship less canola, Ukraine is exporting more peas. Given the high global price of peas, Ukraine peas exports in 2016/17 will double from last year to a record 500,000 tonnes, with harvested acres up 41% year-over-year to 591,000 acres and total production pegged at 745,000 (+97% YoY) thanks to record average yields of 47 bu/ac. Next door in Russia, a similar story is going on as we’ve seen peas export estimates as high as 1.5 million tonnes, also more than double what they exported last year.  We’ve been making the call since the spring that average 2016/17 pulse crop prices wouldn’t reach the highs seen in the 2015/16 year and to get more forward sold than in year’s past (a call reiterated in June by us).

Looking across the Pond in Europe, wet weather continues to hamper production and quality potential in the wheat crops, also helping prices. France’s farmers are sitting and waiting as the harvest continues to be slowed by unfavourable combine weather. Currently, only 35% of the French wheat is rated good-to-very good with harvest usually close to finished by now but only about 2/3s has been taken off. With the poorer quality coming out of Europe’s largest wheat producer, feed wheat use across the EU Bloc is expected to climb 3.4% year-over-year to 57.9 million tonnes, the biggest number since 2007-08 and 15% higher than the 5-year average. Furthermore, while corn feed use in the E.U. will fall to its lowest in 4 years at 57.6 million tonnes as it’s more expensive than wheat options.

In terms of European exports, Agritel is forecasting that Germany could overtake France as the E.U.’s top shipper. The French analyst is forecasting that French soft wheat exports will fall 60% year-over-year to just 5.1 million tonnes in 2016/17, while Germany is expected to export 6.65 million tonnes outside of the bloc. This comes as Agritel is estimating a 28.7 million-tonne crop in France (a 30% drop from last year’s record) off of 80 bu/ac average yields (lowest since 1986), slightly lower than the French Ag Ministry’s call of 83 bu/ac. What’s worse, Agritel is forecasting the percentage of the crop to meet milling grade to only be about 40%, almost half of the usual 70%. InVivo, France’s largest wheat exporter, is a bit more optimistic than Agritel, estimating that the country will ship 11.5 million tonnes of wheat in 2016/17 but agrees that amount of higher-quality will be much smaller than in year’s past.

With the poorer wheat in western Europe, Ukraine is winning the price war when it comes to international trade competition, with grain being produced and getting to export positions sitting at prices that are $100/metric tonne less than Canadian or Australia levels. That being said, per the PDQ grain pricing website, for the first time in more than 7 weeks we’ve start to see Western Canadian cash wheat prices actually improve a bit. Both CPS and hard red spring wheat prices are up an average of almost a dime per bushel compared to a week ago, with the increase fully attributed to basis. While durum was relatively unchanged week-over-week (not enough is known about crop quality yet), canola got a good kick in the pants, up almost 30 cents/bushel on the cash market after touching yearly lows last week. Malt barley prices remain depressed as the pipeline is supposedly full through the end of this year while strong demand for immediate movement of sound quality pulse crops has helped the markets see numbers that we would suggest executing a 10% block sale at.

To growth,

Brennan Turner
President & CEO |