Market Insider

Trying to Get Out of Bearish Ruts

On Thursday, October 12th, the USDA came out with month’s report of world agricultural supply and demand estimates, or more commonly known as the WASDE. Going into the report, the focus was on yields, despite the bearishness that the reports in September and August provided.

For canola, there wasn’t much changed in this USDA report. Production was stayed at 19.9 million tonnes, well below Statistics Canada’s current forecast. We won’t get an update from the latter on their estimates of Canadian grain productin until December 6th, 2017. Global carryout numbers of canola / rapeseed for the end of 2017/18 was lowered below 5 million tonnes for the first time since 2012/13. As an aside, the French Ag Ministry says that this year’s rapeseed harvest came in a little over 5.5 million tonnes, which would be close to the record set in 2009.

For corn, the USDA continued to be bearish, increasing average US yields to 171.8 bushels per acre. That’s up 1.7 bushels from the September estimate. It is also the second-best yield ever after last year’s monster 174.6 bushels per acre record. This would put total production at nearly 14.3 Billion bushels, also the second-largest number after last year’s record 15.15 Billion-bushel crop. US ending stocks were raised slightly to 2.34 Billion bushels, although the USDA did raise corn-for-feed demand by 25 million bushels. Globally, 2017/18 ending stocks were lowered below 201 million tonnes, which was seen as a positive.

For soybeans, the USDA finally got bullish! They dropped average US soybean yields to 49.5 bushels per acre when the market was expecting a 50-handle. September’s estimate was 49.9 bushels per acre. However, because of the harvested acreage number increasing, US soybeans production remained unchanged at 4.43 Billion bushels. Good demand numbers though helped push American 2017/18 ending stocks down to 430 million bushels. Comparably, the market was expecting 447 million while the September’s WASDE report showed 475 million bushels. Globally, 2017/18 ending stocks were dropped by nearly 1.5 million tonnes.

On the wheat front, things continue to be bearish. Total world production was raised yet again, this time by more 6 million tonnes to 751.2 million tonnes. The increases were attributed to Canada (+500,000 to 27 million tonnes), Russia (+1 million tonnes to 82 million), Europe (+2.2 million tonnes to more than 151 million), and India (+2.4 million tonnes to 98.4 million). This more than offset a 1 million-tonne drop in Australia to 21.5 million tonnes of wheat production in 2017/18.

For the Land Down Undaa, this number seems a bit puzzling as it is on the top-end of all estimates out there. Further, the USDA is forecasting that Australia will export 18 million tonnes of wheat this year. That seems very, very unlikely. This means that there’s likely 3-5 million tonnes of wheat export business that will go somewhere. Most guesses are that Black Sea (looking at you Russia) will win the business. However, we did note in a daily Breakfast Brief this week, how Venezuela has been buying Russian wheat but isn’t too happy with the quality.

It’s also a bit surprising that the USDA didn’t downgrade the 2017/18 Argentinian wheat crop despite the stress it’s receiving (too much moisture in the north, not enough in the south). Ironically, the USDA actually increased the 2016/17 Argentinian wheat crop by nearly 1 million tonnes to 18.4 million. Hitting the bearish nail on wheat’s head, the USDA raised global wheat ending stocks 2017/18 by 5 million tonnes to 268 million! That’s a 5% jump year-over-year. The most notable is Russia’s ending stocks climbing 60% from last year’s 10.8 million tonnes to end 2017/18 at 17.3 million!

To growth,

Brennan Turner
President & CEO |