Settling in for Winter
Wheat markets pushed towards the U.S. Thanksgiving holiday with some technical and farmer selling keeping a lid on any further movement to the upside, contrasting some solid gains in corn and soybean futures. Also pressuring the wheat complex was some healthy moisture events across North America, with some rain falling in the Southern Plains while northern parts, including both Western and Eastern Canada got some snow. Currently, U.S. winter wheat good-to-excellent ratings are sitting at 43%, which is a 3 point drop week-over-week and now 9 points behind this time a year ago. However, I caution any bullish sentiment from this as, we and the Lord knows, the crop isn’t made in November.
That said, there’s certainly some moisture concerns in Russia, where farmers are expected to plant a record 47.2M acres of winter grains, the majority of which is winter wheat. With acreage up and moisture down, the net effect might be similar production numbers to this past growing campaign, but again, the crop isn’t made in November. Of course, we’ll have to watch for freezing conditions and snowpack levels, but what I’m watching more closely is any indication that Russia will change its plan for wheat export restrictions starting in the second half of February 2021.
On that note, total Canadian wheat exports continue to impress, still tracking 17% higher than last year with more than 7.6 MMT of both durum and non-durum wheat shipped out of the Great White North. The durum shipments have been picking up speed over the last few months, and with nearly 1.5 MMT sailed now through Week 15, this volume has eclipsed last years for the first time so far in the 2020/21 crop year.
Also worth mentioning is that farmer deliveries of durum are up 20% year-over-year for this week in the crop year, with 1.76 MMT dumped at the elevator thus far, which aligns well with the large volumes of durum we saw bought since September through the Combyne Ag Trading Network. This increased buying and deliveries is important to note since the International Grains Council just reduced their global durum harvest estimate by 1 MMT to 34 MMT. This translates to global ending stocks of 7.6 MMT, a 15% drop year over-year and the lowest since the 2014/15 crop year, suggesting that any demand shocks could prove to be very bullish.
For non-durum Canadian wheat, total exports are sitting at 6.12 MMT, after another week of more than 400,000 MT sailed. The strong start to the 2020/21 export campaign is being recognized by Agriculture Canada, who updated their forecast for total year exports of non-durum wheat by 250,000 MT to now sit at 19.45 MMT. However, the tough news is that feed wheat usage was dropped by a similar amount, meaning ending stocks were left at 5.5 MMT, unchanged from last month and still 16% or 737,000 MT higher than a year ago. With less feed wheat though, you’d think that feed wheat prices could increase, but AAFC did note that feed barley usage is going to increase a bit to offset this, as are feed barley prices.
Worth noting, however, that domestic feed barley buyers are certainly battling against the international buyers, as total Canadian barley exports are more than double what they were a year ago with nearly 1.05 MMT now sailed. Ultimately, with the unopposed movement of grain this year on railroad and at the port, total Canadian exports of cereals, oilseeds, and pulses have totaled 16.4 MMT, which is nearly one-third above last year’s pace. Canola and non-durum wheat are easily leading the charge, up 34% and 27% respectively, year-over-year, but might things be slowing down?
We have seen some data that CN’s delivery of cars has started to slow a bit, whereas CP Rail continues to perform as they should. However, we are getting into the winter months, which is when we tend to hear plenty of reasons why railcars aren’t getting delivered (and thus contracts can’t be delivered on). Just because the snow and COVID-19 may be keeping you shacked up inside, it’s important to stay diligent on your current contracts, but also new-crop pricing opportunities.
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