Grain markets are all in the red as the complex continues to have a losing first week of September.
Wheat prices continue to be the worst-performer of the group as the bullish dynamic in Europe, the Black Sea, and Australia has seemingly been priced in, relative to a decent-sized crop coming off in Canada.
In Canada, the focus is again on quality… not quantity. On Thursday, StatsCan said that total wheat stocks for the period ending July 31 came in at 6.2 million metric tonnes (MMT). That was a 10% decrease from the same time in 2017 and 11% below the 5-year average.
We saw on-farm stocks increase by 15% year-over-year to 2.66 MMT (still 11% below the 5-year average of 5 MMT). In Alberta specifically, total wheat stocks are up 85% year-over year to 1.26 MMT. That’s also 44% more than the 5-year average of 872,000 MT held by Alberta farmers by the end of July.
This increase in total wheat on-farm inventories offset the 23% decline from last July in commercial stocks, which were estimated to be sitting at 3.5 MMT.
Worth noting is the strong increase in on-farm durum stocks in Alberta sitting at 260,000 MT. This is double July 2017’s on-farm inventories in Alberta and 5.5X more than the 5-year average of 46,000 MT.
Switching gears to production, on August 31st, StatsCan estimated total wheat production of 29 MMT in Canada, which would be down 6% year-over-year but 7% below the 5-year average. This includes spring wheat production in Canada of 21.6 MMT, down about 3% from the 5-year average and last year’s harvest.
For durum, the production number has been reduced to 5 MMT, thanks to yield falling to a significant low level of 30.6 bushels per acre.
However, early reports are that there is very high protein wheat (both spring and durum wheat) to be found across the country. Thus, more acres were planted this year into wheat, yields and production are down. Yet, it looks like quality is going to be pretty good. From a global, macro perspective, this would likely offset any quality concerns coming out the Black Sea or Australia.
The bigger question being asked is how many acres will get harvested. Right now, Statistics Canada is saying that 98.4% of all Canadian spring wheat acres will get harvested. This is above the 5-year average of 97.4%. For durum, StatsCan is saying that harvested acreage will match the 5-year average of 97.9% of seeded acres getting combined. There is certainly a lot of doubts to these numbers, given some of the weather seen from August (dryness) through now (getting colder and wetter?).
Looking bigger, right now, there seems to be a lot of positioning for next week’s September WASDE from the USDA. There is some optimism for wheat prices to rebound on increased US export, but the truth is they’re tracking almost 1/3 behind last year’s pace (which wasn’t very good in its own right). Conversely, Canadian wheat exports (excluding durum) are tracking about 2% ahead of last year.
Simply put, the market seems to have priced in the somewhat bullish production estimates from StatsCan, but they’ve also accounted for a relatively neutral-to-bearish stocks report. Apart from the WASDE report on Wednesday, September 12th, we’ll also be watching for numbers in StatsCan’s satellite-based production estimates out a week later on Wednesday, September 19th.
Source: Alberta Wheat Commission