Finally a bullish report, or was it?


Statistics Canada came out with their first production estimates of the 2017 Canadian crop on Thursday, August 31st. For once, they weren’t bearish!

13,300 Canadian farmers were surveyed between July 19th and August 1st on their acres, yield and total production. However, while the numbers below are considered bullish, there has certainly been some healthy rains that have fallen since then, especially in Western Canada where most grain is produced in the Great White North.

Further, StatsCan does a have a history of revising its production, especially for canola. More specifically, in the past seven years, StatsCan’s final Canadian canola production number has been higher 6 times! Specifically, in 2013, final canola production was 26.5% larger than the August estimate while in 2015, it was nearly 40% larger!

Maybe the market already knows this and so a the 18.2 million-tonne canola number that StatsCan is estimating didn’t excite anyone. Since last Friday, canola dropped 0.8%. For the month of August, canola has only dropped 0.3%! All Canadian cash grain prices have been negatively impacted by a stronger Loonie, which topped 81 cents USD this week! Conversely, oats futures have pulled back 16% in the past 31 days while in the past 7 days, its down nearly 7%. This is mainly due to the better-than-expected production potential not just in Canada but globally.

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For corn, it was able to rally this week, up 0.35%, but has fallen 2.15% since the start of August. Similarly, soybeans finished the week up 0.6% but have dropped 1.45% in the past month. For wheat, prices have pulled back on North American harvest pressures and the size of the Russian crop getting bigger and bigger – estimates are now up to 80 million tonnes!

Getting back into the StatsCan report, total wheat production in Canada is slated to hit 25.5 million tonnes. This is 22% lower than last year’s 31.7 million-tonne harvest and 17% below the 5-year average. Comparably, most of the market had been expecting a 26 – 26.5 million-tonne number. Harvested area will stay at 22 million but yields have bombed, averaging 42.5 bushels per acre versus last year’s 53.2.

The durum wheat number might be the most bullish thing I’ve seen in a while from Statscan. They think that Canadian production should touch 3.9 million tonnes, which is 72% lower than last year’s haul and 34% than the 5-year average of 5.9 million tonnes. The market was expecting around 5 million tonnes. This confirms our rationale to get your wheat tested, be it durum or spring varieties, and wait for opportunities after harvest. We built just for this reason, so check it out, especially to get both U.S. and Canadian grading done on it.

The hotly-contested canola number has been pegged by Statistics Canada at 18.2 million tonnes for the 2017/18 crop. This is about 7.5% below last year’s crop but still nearly 5% above the 5-year average. Total harvested acres will hit 22.8 million and about 10% of that has been combined across the Canadian Prairies. In Saskatchewan, the provincial government is reporting that average yields thus far are just 31 bushels per acre. This isn’t far from the current Statistics Canada’s estimate of 30.7 bushels per acre, but is distant from last year’s 40.1 average yield. For perspective, the 5-year average of Saskatchewan canola yields are 33.4. Further, national yields this year are estimated at 34.1 bushels per acre, while the 5-year average across Canada is 35.9.

Corn and soybean production in Canada will climb year-over-year to 13.65 and 7.74 million tonnes respectively. For soybeans, this is an incredible 32% jump from the 5-year average. It probably could’ve been a bigger crop if yields weren’t expected to drop 11% from last year to an average of 39.3 bushels per acre. For corn, average Canadian yields are expected to come in at 153.4 bushels per acre, down 3.3% from last year. Like in the US, the corn and soybean numbers are generally neutral-to-bearish for prices.

For barley and oats, the 2017 Canadian output should come in at 7.2 and 3.7 million tonnes. For barley, this is down 19% over last year and 15% from the 5-year average. The decline is a combo of harvested acres coming in at only 5.2 million acres but moreso yields dropping 14% year-over-year to a little more than 63 bushels per acre. Harvest oats is up to 2.7 million tonnes with average yields very similar at 90 bushels per acre. For barley, this is bullish and again, it’s important to know your quality if you’re trying to push for malt (get it tested!) However, on oats, we think that the market is already pricing in the bigger crop.

Rounding out the StatsCan report, total flax production should only come in at 507,300 MT (-8.6% from last year, -30% from the 5-year average). The 2017 canaryseed harvest in the Great White North should touch 117,00 (about 16% lower than last year and the 5-year average) while fababean production should increase to 110,300 (+68.5%, +36%). Lentil production hasn’t deviated from the 5-year average at 2.29 million tonnes but it is nearly 38% lower than last year’s crop. StatsCan says that total peas production in Canada will hit 3.79 million tonnes, again, barely a change from the 5-year average but about a third lower than last year.

For the smaller, less liquid crops, production numbers are mostly lower compared to last year. Triticale is the biggest loser at just 17,600 MT of production this year compared to last year’s 42,500 MT. Rye production is down nearly 40% from last year to 326,000 MT but that’s still 15% above the 5-year average. Mustard production is set to fall 86% from 2016 to 129,500 MT this year. That’s also 22% below the 5-year average. The one bright spot in production is edible beans are up to 316,500 MT. This is 36% higher than last year’s production and 29% above the 5-year average.

Overall, we’d take this report as bullish and for many crops, it’s the beginning of better prices. The next reports that we’re looking to are StatsCan’s carryout estimate for the Canadian crop on September 6th. Thereafter, it’s the USDA’s September WASDE report on September 12th. Most of the market is expecting a decline in the corn yield number to somewhere around 166 – 167 bushels per acre. However, most private estimates are now sitting around 48.5 – 49.5 bushels per acre of the national soybean yield in America.

We are at the time of the calendar year when grain prices are pressured by harvest and any bullish factors will be muted by this. Accordingly, the next question we’ll be answering is when to make your first sale into a bull market.

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