Some hot, dry weather through the first few weeks of June in parts of Western Canada and the Northern Plains added some premium to the markets. For example, 25% of North Dakota is considered to be in moderate drought while the other 3/4s is considered abnormally dry. In southern Saskatchewan, about 1/3 of topsoil moisture is considered to be in short or very short supply, although seeding is practically wrapped up. In the northern and peace regions of Alberta though, these regions are only about 2/3s and half-way done seeding respectfully, well behind the 5-year average of being done by this time. That being said, Western Manitoba prices, like the rest of the West, saw hard red spring wheat values react the most bullish. After trading sideways for most of the 2017 calendar year, HRS wheat cash prices have gained about 10% for old crop and 7-8% for new crop (we consider these sellable levels). Conversely, oilseed values have pulled back as production in the western half of Manitoba is looking generally favourable right now.
The U.S.D.A. came out with their June W.A.S.D.E. report on Friday, June 9th but it came and went without much fanfare as the number-crunchers in Washington didn’t change much, especially on the domestic front. Despite some obvious late / replanting of this year’s crop, the U.S.D.A. kept yield and production estimates unchanged from last month, sitting at 170.7 bushels per acre for corn and a 48 bu/ac for soybeans. Global soybean carryout was raised by almost 4% from the previous estimate, up 2.08 million tonnes to 92.22 million. This is technically just a 2.3% increase from last year’s carryout but the most notable increase is in the U.S., where available beans by the end of 2017/18 will be up 13.85 year-over-year to 13.5M tonnes. A similar story is being seen in Argentina, with their carryout raised by 5% from last month to 32.5 million tonnes. The reason for this is a larger carryout from 2016/17 in the U.S. and a bit of slowdown in exports from Argentina.
Wheat production in both Argentina and Russia were raised by 3% from the previous estimate last month to 17.5 and 69 million tonnes respectively. Compared to last year though, this would be a 5% drop for Russia whereas Argentinian production is up nearly 10%. However, Russia’s available stocks by the end of 2017/18 is expected to climb 21% to 11.63 million tonnes as a result of a bigger carry-out to end the 2016/17 crop year, mainly because of less-than-expected exports. A smaller crop is expected in Germany but total E.U. wheat production is expected to be up almost 4% from last year’s output. For corn, Canadian production was downgraded to 14.4 million tonnes (a 5% from last month’s estimate) which would a 9% improvement from last year’s crop. Across the 49th parallel, there’s more suggestions now that the national yield may lose 2-3 bushels off the forecasted 170.7 bu/ac. Further, due to replanting issues, the corn crop may lose 1 – 1.5 million acres from the expected 90 million, meaning, with the combined yield loss, 2017/18 carryout could drop below 2 Billion bushels (but since the U.S.D.A. didn’t change the forecasts, it didn’t happen this month). While the bullish catalysts is clearly on the supply side with production concerns, the bearish factors are centering around Brazil starting to ramp up their corn exports program as their harvest starts up. As such, while the North American crop must get growing (and conditions are mostly reasonable right now), international demand will follow where the fresh supply is available.