Chasing Headlines

Breakfast Brief

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 recently got the got the U.S.D.A.’s September 1st grain stocks report, which could be viewed as more supportive than negative for grain prices, with the numbers coming in below pre-report expectations. U.S. corn stocks were seen slightly lower than what the market was expecting at 1.731 Billion bushels, but the supply will be the largest since 2006. Similarly, soybean stocks as of September 1st were seen a bit below pre-report expectations, coming in at 191 million bushels. On the wheat front, stocks sat at 2.089 Billion bushels, again slightly below the trade’s expectations of 2.149 Billion bushels. Interesting data point though: on farm wheat stocks dropped 9.3% from a year ago, despite stocks being 9.5% higher than a year ago. 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). 

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, again up from the July estimate of 24.6 million, but still below last year’s 29.4 million tonnes taken off. Breaking it down further, durum output was pegged at 4.7 million tonnes, down from last year’s 5.2 million tonnes, oats production is set by StatsCan at 3.3 million tonnes, up 10.5% from last year, and barley up 7% at 7.6 million tonnes. In the oilseeds, Statscan said 14.3 million tonnes of canola is getting combined this year in Canada, well above July’s 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. Canaryseed & chickpea production is both expected to be lower this year by 5.6% and 18% respectively (albeit Aussie production might make up for it) while 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.

All in all, today, the last day of the month and quarter for trading could see some quick moves but 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

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