Grain markets pushed through the second week of May with a little more volatility, but not from weather effects, rather, new data, as the market is expecting Plant 2017 progress to be back near the seasonal pace. However, cash markets in Western Manitoba ended the week somewhat closer to where they began it. More specifically, canola edged slightly lower as good planting conditions this week and the U.S.D.A. suggesting a lot of oil-seeds will hit the market in 2017/18. Old crop and movement before end of July is still trading about $11.50 CAD / bushel, while new crop continues to hover between $10.50 – $10.75 with some $11 specials rumored. Similarly, soybeans in the region have $11 handles available today but most producers are hoping for $12 (plus, immediate bean movement right now by elevators is pretty tough to come by).  Wheat markets were the biggest loser as the U.S.D.A. says that global carryout by the end of 2017/18 will be another record. Overall, we’ve had some great progress in the fields, but that usually doesn’t translate to positive progress (to the upside) when it comes to grain prices.

The U.S.D.A. gave out their first supply and demand forecast for the 2017/18 crop this week and it surprised the market in a few areas. American corn and soybean yields this year were pegged by the U.S.D.A. at 170.7 and 48 bu/ac respectively. This would be a drop of 3.9 bushels and 4.1 bushels from their respective records last year of 174.6 and 52.1 bu/ac (also worth noting is that these first estimates are both above the linear trend yield). Based on historical abandonment averages, the U.S.D.A. expects 82.4 million of the 90 million acres planted to get harvested, meaning production of 357 million tonnes (14.07 Billion bushels). The biggest domestic bullish surprise was in wheat where production is expected to drop 21% from 2016 to 49.6 million tonnes (or 1.82 Billion bushels), using a 47.2 bu/ac average yield (last year was 52.6) off of 38.5 million acres (compared to the seeded area of 46.1 million). U.S. spring and durum wheat production should decline 10% from last year, thanks to the aforementioned lower yields and lower acreage. Overall, the lower production numbers will see 24.86 million tonnes  (or 914 million bushels) of wheat still available in the U.S. by the end of 2017/18, a 21% drop year-over-year. This, despite, total U.S. demand dropping 2.2% year-over-year.

In a bit of surprise move, U.S. corn exports are expected to drop significantly in 2017/18, down by almost 16% to 1.875 Billion bushels, versus the 2.23 Billion bushels expected to be used in 2016/17. Net-net, available corn by the end of 2017/18 in America will drop by more than 8% to 2.11 Billion bushels (or 53.6M tonnes). Globally, 2017/18 corn output should hit 1.033 Billion tonnes (slightly lower from 2016/17), which, combined with a little more demand, equates to a carryout of just 195.3 million tonnes (or -31% year-over-year. This is mainly due though to the U.S.D.A.’s expectations of Chinese inventories dropping significantly this year as higher consumption but lower acres means less production to shore up supplies again! More specifically, they’re expecting the People’s Republic to end 2017/18 with 81.3 million tonnes, which would still account for 42% of total world supplies, but it would still be 20 million tonnes lower than the end of 2016/17 and the lowest in the past 5 years!

For soybeans, U.S. production will hit 115.8 million tonnes (4.26 Billion bushels) off of 88.6 million acres versus the 89.5 million that should get seeded this spring. Domestic crush and exports are both expected to increase in 2017/18 from this year by 25 and 50 million bushels respectively. However, the size of the crop, combined with international competition means U.S. soybean carryout for 2017/18 will hit 480 million bushels (or +10.3% year-over-year to 13.08 million tonnes).  Total global soybeans production in 2017/18 is expected to be just 3.5 million tonnes smaller than 2016/17 at 344.7 million. However, strong demand – namely the U.S.D.A. saying that China will import 93 million tonnes in 2017/18 – will push ending stocks down slightly from the 90.14 million tonnes ending 2016/17 this year to 88.8 million by the end of 2017/18. While America, Brazil, & Argentina will continue to be the major production players this year, China will continue to be the wildcard on the other side of the table.

For wheat, global production should drop about 15 million tonnes from 2016/17 to 2017/18 at 737.8 million tonnes, but with demand relatively stagnant due to competition with corn and other feedstuffs, new crop global carryout is pegged 3 million tonnes higher than 2016/17 at 258.3 million tonnes (another new bearish record). However, much like the corn market, China owns more than 50% of those supplies so if you were to remove them from the table, the global stocks-to-use ratio would the lowest in the past decade! Overall, we can conclude that there’ll be less corn globally and in the U.S., less soybeans worldwide but significantly more within American borders, and way less wheat in the U.S. but more of the cereal worldwide. What we do know is that for the first time nearly 30 years, global production of corn, soybeans, and wheat will be declining simultaneously. One can easily argue that this is positive progress for prices in the long-term.

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