As we get into the first few weeks of kids going back to school and farmers going to harvest, the agricultural market continues to trade mostly around weather reports. Fresh supplies coming off the fields have pushed durum prices in ICE’s Winnipeg market to below $260 per metric tonne while a massive canola crop expected is offsetting the rally seen in soybeans in Chicago.
While we see pretty good harvest conditions here in the Canadian Prairies, things are a lot hotter south of the 49th parallel. As such, with corn and soybean crops still in development, there’s widespread speculation that the USDA will lower their average yield estimates for the two crops in their Sept. 12 world supply and demand estimates (WASDE report).
There’s much talk lately about U.S. crop insurance and its effect on the industry as a whole as the widely government-subsidized program is seen as just padding the pockets of farmers who’ve seen their income broadly improve in recent years. I think crop insurance is mandatory on almost every farm these days but the way that things are done in America is such that the government helps minimize premiums. One South Dakota farmer suggested some farmers “are farming the program with the intent of making an insurance claim rather than harvesting a crop.” Countries who are under economic pressure have reduced or eliminated subsidies (i.e. Sudan) for their agriculture industries while Egypt recently has considered increasing the minimum price paid to wheat farmers to spur production and aid inventories there.
Speaking of stocks, we recently got Statistics Canada’s estimate for Canada’s stocks of principal field crops as of July 31. The big take away from the data was supplies are down across the board from the same time last year. This obviously doesn’t mean prices should skyrocket because there are differences in production numbers from last year but it does mean demand for Canadian grain is there. Specifically, total wheat stocks fell 14.8 per cent from the same time last year to 5.1 million tonnes (five-year average is 5.5 million tonnes) while canola stocks fell 14 per cent year over year to 608,100 tonnes, significantly lower than the seasonal average of 1.5 million tonnes. In the pulses, lentils, dry field peas, and chickpeas stocks were seen down 65 per cent, down 41 per cent, and up 391 per cent respectively.
Finally, while the crop is coming off, producers are already thinking about winter wheat planting intentions. Some new varieties available to producers, such as AC Flourish, are moving well but some changes to insurance coverage in Manitoba mean lower payouts for failed winter wheat crops. Nonetheless, some good rains in southern Alberta have likely increased interest in winter wheat seeding as the crop will need a good soak to offset the near-perfect harvesting conditions we’ve seen over the past two weeks or so. Getting a seed test is never a bad idea though as it’ll help point out a few things that could ultimately take your margin higher.
Brennan Turner is originally from Foam Lake, Sask., 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 Farm-Lead.com, a risk-free, transparent online grain marketplace. 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).
— FarmLead Breakfast Brief