MARKET SUMMARY 8-31-2021
The crop production numbers released by Statistics Canada on Monday morning were very reflective on the difficult growing season seen in the Canadian prairies this past year. Initial production estimates were sharply lower from both 2020 and the five-year average for most crops, as expected. The question remains if those adjustments were large enough. Estimated production for all Canadian principal field crops is 73.825 mmt, the first year-over-year drop in four years, while 26% below the volume estimated for 2020-21. This would be the largest year-over-year percentage drop seen since 1988. The total wheat crop was down 35% from the 2020 levels at 22.9 mmt and 29.5% below the five-year average. This is the smallest all-wheat crop produced in 14 years, or since 2007. A key component of that is spring wheat production, which is down 37.7% as yields disappointed and acreage numbers were low. Another key crop is canola. Canola production was estimated at 14.749 mmt. This would be the smallest canola crop in nine years, down 24% from last crop year and 27% below the previous five-year average. The tightness of these crops will stay supportive in U.S. prices with the tight production in Spring wheat here in the U.S. and canola a piece of the puzzle in the edible oil category. This summer’s weather was very impactful, and the Canadian numbers are a glimpse of the similarity with conditions across the northern Plains.
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CORN HIGHLIGHTS: Corn futures closed lower for the second day in a row, losing 6-1/4 cents in September, closing at 5.34. December gave up 8-1/2 cents to finish the session at 5.34-1/4. Heavy technical selling was noted at mid-morning as futures were as much at 17-1/2 weaker. Across the grain complex, weakness ensued as soybeans and wheat also experienced sharp losses before recovering some into the close. Managed money was long 257,000 contracts coming into today’s session. The point there is that liquidation is likely this time of year in front of harvest. The catalyst to the downturn may be as simple as hurricane Ida creating logistical issues for moving grain. Additional pressure may be coming from COVID as well as concerns that China’s economy is slowing, which may result in less import business in the year ahead. China’s PMI (Purchasing Managers Index) non-manufacturing data was less than expected at 47.5% vs 53.3% last year. Today’s technical picture was bruised, but we wouldn’t say it was broken. December futures did trade below last week’s low of 5.29-1/2 trading as low as 5.25-1/4 but clawed back to close at 5.34-1/2, well off the low.
SOYBEAN HIGHLIGHTS: Soybean futures weakened again today on softer overseas prices and weaker vegetable oil values. Meal continues to lose ground this week, closing 1.2 to 2.00 weaker today and at its lowest level since late June. September soybeans lost 6 cents to close at 12.92-1/2 and November down 10-3/4 to end the session at 12.92-1/2. Bear spreading in back months continues to suggest that the market is adding carry or encouraging producers to sell later. This simply reflects a slowdown in the crush pace as well as export demand, no surprise as harvest approaches. We’ve argued that the slowdown has been exasperated this year due to higher prices as end users, by early summer, appeared to have enough purchased to get them to the harvest window. The technical picture again looks soft, after last week’s rally and challenges the bullish fundamental factors, which could suggest paper thin carryout into the growing season for South America as well as next summer for the US. In other words, not much room for error on the production front. Attention will focus on South America and a la Nina pattern suggesting a 70% chance of affecting South American crops, particularly in southern Brazil and northern Argentina according to private weather forecasters.
WHEAT HIGHLIGHTS: First notice day was today for September futures, meaning it will trade without limits until September 14. September Chicago wheat lost 2 cents, closing at 7.06 3/4 and December lost 1 1/4 cents, closing at 7.22 1/4. KC September gained 1 cent, closing at 7.05 and December contracts lost only 1/2 cent at 7.12. Wheat saw more pressure through the morning and midday and fought to close with either a minor gain or loss at the end of the day. Damage to export facilities at the Gulf, along with power outages incurred from Ida, is shifting business away from the Gulf in the short term. Stat Canada’s report of wheat production dropping to 22.9 mmt still is not as bearish of a number as the market anticipated; however, further cuts are estimated as that number was July’s estimate, and August has been anything but friendly to Canadian wheat. Global demand stays strong, even if US wheat continues to be left out due to being over-priced. As expected, spring wheat was projected to be close to 90% harvested here in the US, and yesterday USDA reported progress at 88%. It is expected harvest will be close to wrapping up this week with little to slow it down; what rains have fallen are not expected to hinder what wheat is left.
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Author
Amberlee Bratcher