Less Wheat, More Rain for Harvest 2019
On Friday, Statistics Canada came out with their survey-based stocks report, after questioning more than 13,100 farmers throughout July and the early part of August. Statistics Canada reported that total wheat stocks held in Canada at the end of the 2018/19 crop year sat at 6.2 MMT, down 4.6% year-over-year. The majority of the decline was attributed to the smaller amount of wheat held on-farm, down 40% year-over-year to 1.9 MMT, whereas commercial inventories jumped by 30%.
The decline was helped though by a great year of exports, which StatsCan pegged at 23 MMT, thanks to higher shipments to Indonesia and China. As we think about Harvest 2019, those with protein might find some premiums in a few months as the quality of the U.S. HRW wheat harvest hasn’t been all that great. This is probably one of the main reasons that we’ve seen on-farm stocks dwindle down in the Prairie provinces, notably Saskatchewan (as the chart below shows).
While I raised my eyebrows at those values, there more interesting dynamic as it relates to wheat prices is the recent weather falling in northern North Dakota and Montana, as well as parts of southern Saskatchewan. These areas are both major durum and spring wheat producing regions but the rain falling at this time of year brings back memories of Harvest 2014. That year, rain fell throughout the harvest, seriously undermining the quality of most crops, and, as a result, protein premiums were large and extravagant relative to their averages. That said, I’m not expecting $15 CAD/bushel durum to show back up like it did in the fall of 2014, mainly because there is a lot more carryover of durum from both Harvest 2018 and 2017 still in sitting in U.S. and Canadian bins.
One thing to remember though is that the highs of the durum market are usually seen sometime between late October and mid-November. While it’s yet to be confirmed that we’ll get some solid protein premiums, Canadian durum exports are tracking 60% higher than they were at this time a year ago, with nearly 375,000 MT shipped out so far through Week 4. Similarly, U.S. durum is also flying out the port, with nearly 150,000 MT shipped out through its 2018/19 Week 13. This is nearly 4 times as much as was shipped out as the same time a year ago.
Looking internationally, ABARES (the Australian USDA) came out with their updated forecast for wheat production in the Land Down Undaa. In it, ABARES dropped their number from June’s estimate of 21.2 MMT to now sit at 19.1 MMT. This is about a 10% bump from last year’s harvest, but still 22% below the 10-year average. However, it does match up pretty close to private estimates of 19 MMT but the USDA will likely come down in their September WASDE, as in their August estimate, they pegged the Australian wheat harvest at 21.2 MMT. The smaller wheat harvest in the Land Down Undaa has undoubtedly opened the door for more Black Sea wheat, but also Canadian shipments.
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