Bearish pressures from the USDA’s August WASDE report continues to negatively impact local cash prices. US corn yields were only lowered by 1.2 bushels to 169.5 per acre. Average American soybean yields were actually increased by 1.4 bushels to 49.4 an acre! And while US wheat production downgrades were as aggressive as the market was expecting, the global numbers were even more surprising.
The biggest surprise was Russia! They’ve got something going on in the soil over there because the USDA just increased wheat production by 5.5 million tonnes from their July forecast to 77.5 MMT. This is 5 million tonnes above last year’s record. The USDA says the reason for the increase was two-fold. First, higher yields were seen in the winter wheat areas. Second, satellite imagery in spring wheat-growing areas of Russia shows some pretty deluxe conditions. Overall, total average wheat yields in Russia are pegged at 43 bushels per acre. That’s up 10% from last month’s estimate, 8% higher than last year’s record, and 25% above the 5-year average.
In the U.S., spring wheat production estimates were lowered by 21 million to 364 million bushels (or 9.91 million tonnes). US durum output was also lowered by 6 million bushels to a 51-million-bushel crop (or nearly 1.4 million tonnes). Australian production was kept at 23.5 million tonnes despite private firm downgrades to 22 MMT and lower. Meanwhile, Canadian wheat production was dropped by nearly 2 MMT from July’s estimate to 26.5 million tonnes. Average yields are forecasted at 43.7 bushels per acre. That’s down 7% from July’s forecast and 18% lower than last year’s yields.
The USDA also dropped Canadian canola production by 500,000 MT to 20.5 million tonnes. That’s above almost every other estimate I’ve seen, including my own (sitting around 19.75 million tonnes). The USDA is forecasting average Canadian canola yields at 36.6 bushels per acre. This, despite admitting below-average soil moisture conditions across Western Canada and higher temperatures in Saskatchewan and Alberta. We’ll see in 3 weeks on Thursday, August 31st how StatsCan feels about this number when they release their production estimates (albeit, they’re based on July surveys).
From a demand perspective, the USDA raised 2017/18 Canadian canola exports by 200,000 MT to 11.2 million tonnes in their July estimates. However, this month, that 200,000 MT was erased, and the number was moved back to 11 million tonnes. EU rapeseed production is forecasted at 22 million tonnes, meaning they’ll have to import less in 2017/18. That being said, EU rapeseed imports for 2016/17 were revised higher by 380,000 MT 4.8 million tonnes. The USDA also says that the bigger crop in the EU also offsets output reductions in the US and Canada.
Unsurprisingly, almost all of the market thinks that yield numbers will be lowered by the USDA eventually. However, harvest pressures and large inventories of old crop will continue to challenge and cap any rallies.