Harvest bigger than expected; commodity markets’ expectations mixed

By Brennan Turner, FarmLead

Grains ended the month of September and the third quarter of the year a bit mixed as the market was chasing weather, export trade data, and harvest headlines. We ended the trading quarter and oats was the biggest loser, dropping 15% over the course of it, followed by Chicago wheat (-12.8%), soybeans (-12.1%), canola (-10.6%), and corn (-10.5%). From a currency perspective, the Canadian Loonie fell 5% for the quarter, a bit better than the Australian Dollar’s almost 8% loss, while the Eurodollar actually gained 3/4s of a percent. Oilseed prices continue to be pressured by lower vegetable oil prices (and more broadly, oil prices), albeit canola has been able to buck the trend the last few days thanks to a lower Canadian Loonie and better crush margins in Western Canada. Given the drop of prices since the end of June, further price declines may be limited (albeit I find it hard to argue against some more short-term downside risk in the oilseeds).

We also got StatCan’s most recent Canadian crop production estimates (phonecall survey-based) and expectations were that, with Harvest 2015 cruising along, the crop is surprisingly bigger than what was previously guessed at. For wheat, total production is forecasted at 26 million tonnes (July’s estimate was 24.6 million, 29.4 million tonnes were taken off last year. Breaking it down further, durum output was pegged at 4.7 million tonnes (-8.6% from last year’s 5.2 million tonnes), oats production is set by StatsCan at 3.3 million tonnes (+10.5%), and barley at 7.6 million tones (+7%). In the oilseeds, Statscan said 14.3 million tonnes of canola is getting combined this year in Canada, well above July’s estimate of 13.6 million tonnes, but down 13% from last year’s 16.4 million tonnes. Flax and soybean production is relatively unchanged from last year at 869,000 and 5.9 million tonnes respectively. Lentils production is seen jumping by 8.6% to 2.16 million tonnes but field peas production is expected to drop 17% to 3.16 million tonnes.

On that note, given the bit of rains that fell in mid-September, more than a few Canadian grain buyers and analysts are saying the stuff take off since the wet period is likely getting downgraded into the lower-grade tiers. The early harvested stuff is all ranking with good protein and milling qualities, suggesting that there could be more blending going on but more of those later-harvested cereals going into the feed market (hence, FarmLead’s recent calls to make some sales on feed grains). All in all, the market will continue to mostly listen to North American harvest activity and Southern Hemisphere weather headlines.

To growth,?

Brennan Turner

President & CEO | FarmLead.com

Brennan Turner is originally from Foam Lake, SK, where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, Mr. Turner spent some time working in finance before starting FarmLead.com, a risk-free, transparent online and now mobile grain marketplace (app available for iOS & Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (b.turner@farmlead.com) or phone (1-855-332-7653).