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 per cent over the course of it, followed by Chicago wheat (-12.8 per cent), soybeans (-12.1 per cent), canola (-10.6 per cent), and corn (-10.5 per cent). From a currency perspective, the Canadian Loonie fell 5 per cent for the quarter, a bit better than the Australian Dollar’s almost 8 per cent 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).
The big announcement that everyone is talking about is the new Trans-Pacific Partnership agreement that has been agreed to. However, the deal still needs to be ratified by each of the 12 respective countries in the deal, which includes the U.S., Japan, Australia, Mexico, Vietnam, Chile, Malaysia, and (obviously) Canada, or about 40 per cent of the world’s gross domestic product. The new deal supersedes the N.A.F.T.A. agreement signed back in 1993 and will open up trade for everything from technology to cars to drugs, and most importantly for you, food. The dairy sector will be protected through limited import quotas and the Canadian government has pledged to compensate farmers for any losses via $4.3 Billion in new programs. Finally, tariffs on things like beef, pork, canola, and barley will be reduced to either nothing or a fraction of what they were in the past, over the next 15 years. Just a heads up, full deal implementation could take as long as 2 years!
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 per cent from last year, and barley up 7 per cent 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 per cent 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 and chickpea production is both expected to be lower this year by 5.6 per cent and 18 per cent respectively (albeit Aussie production might make up for it) while lentils production is seen jumping by 8.6 per cent to 2.16 million tonnes but field peas production is expected to drop 17 per cent to 3.16 million tonnes.
Overall, bearish pressures remain, and so despite the exciting T.P.P. trade news, the market will continue to mostly listen to North American harvest activity and Southern Hemisphere weather headlines.
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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 and Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (firstname.lastname@example.org) or phone (1-855-332-7653).