While there is undoubtedly some weather issues affecting both South and North American growing seasons, grain markets continue to buck the bullish thoughts.

This is mainly attributed to the geopolitical risk, centered mainly around the USA. More specifically, there continues to be risk on the table in the form of trade tariffs between America and China, as well as whether NAFTA renegotiations will amount to anything any time soon.

On Thursday, May 10, we got the USDA’s first estimates of the 2018/19 crop marketing year’s balance sheet. The report certainly had some bullish sentiment but, again, the market’s mind has been transfixed on trade risk. More specifically, the USDA cut 2018/19 US soybean ending stocks all the way down to 415 million bushels from the 530 million that’s forecasted for the end of 2017/18. The biggest contradiction in this month’s report centered on Chinese imports. The USDA projected that Chinese imports would increase by 6.2 per cent to 103 MMT.

But China disagrees. The nation’s agricultural ministry projected that higher prices and difficulty security supply (especially during the U.S. trade spat) will cause imports to fall for the first time in 15 years. Even though China plans to consume about 111.2 MMT, the country says that imports will decline slightly to 95.7 MMT.

The USDA said world rapeseed production in 2018/19 is expected to increase by 1.1 million tonnes year-over-year, or roughly two per cent higher, to 75.4 million tonnes. This is a new record and mainly attributed to bigger acres in Australia, the EU, and India. However, canola / rapeseed is expected to enjoy some strong demand in 2018/19 as well. The net result is 2018/19’s ending stocks pegged at 6.5 million tonnes unchanged from the year before and three per cent down from the five-year average pegged at 6.75 million tonnes.

Weighing on canola prices though is the Statistics Canada Stocks report (as of March 31, 2018). According to the report, there was still 9.08 million tonnes of canola available as of the end of the first calendar quarter. This is up 14 per cent year-over-year and 17 per cent more than the five-year average. Canola held on farm in Canada still is sitting at 7.5 million tonnes. This is 18 per cent more than last year’s 6.36 million tonnes held by farmers through the end of March, but also 20 per cent higher than the five-year average. Comparatively, canola held in commercial storage as of March 31st came in at roughly 168,000 tonnes.

Coming back to weather, the question we’re asking for Western Canada is when will the rain show up? After last year’s drought, the question of precipitation (and thus, soil moisture) is a pretty important one. At least one forecaster, BAMWx, is seeing weather models similar to 1986, 2001, 2006, and 2012 for the Canadian Prairies and sees the forecast as trending drier than usual again. This doesn’t mean you should lock your bin doors just yet, but it’s something to be cognizant of.

To growth,

Brennan Turner is the President & CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Turner was named to Fast Company’s List of Most Creative People in Business. He is originally from Foam Lake, Sask. where his family started farming land nearly 100 years ago (and still do to this day).