Western Canadian Crop Marketing Update – October 4th

Western Canadian Crop Market Update

Click Here To Access 2024/25 Crop Recommendations

Canola

  • Updated Recommendations in the Link Above
  • Canola posted its third weekly gain. Closing for Friday at $625.90. Canola hit a contract low of $538.80 on September 16th. The November contract hit $632.80 for a recent high and that was today, Friday October 4th.
  • Earlier this week talk of Australian canola production figures being pushed closer to the 5.0 -5.1 mmt figure down from the current 5.5mmt forecasts. Dryness and significant frost in southern production regions also taking a toll on the crop.
  • Canadian canola values up on strength in soybean oil and finding some fundamental support on the perceived smaller western Canadian crop. Canola traded up over $90 from its September 16th low 3 weeks ago
  • Canola exports soften for week 8 due to the port strike that took place for 4 days of the period. 87,000 tonnes were shipped for the week vs 220,000 for an average weekly pace. Canola exports sitting at just over 1.7 million tonnes vs 565,000 same time last year. Canada has remained a cheap source of Canola for the globe. Still as of this week coming in with a significant discount to global pricing.
  • US East and Gulf Coast Port Strike Resolved.
  • Vancouver Port Strike Resolved last Friday. Port of Vancouver strike began Tuesday September 24th. The ports affected accounted for over 50% of Canadian Grain Export capacity. Strike resolved September 28th.
  • Early exports have been very strong for Canola but still need to keep the goods flowing. Critical time here as Canada needs to dominate export season early. Thunder Bay stocks are rising 174,000 tonnes sit in those facilities vs 153,000 in Vancouver.
  • China announced an antidumping investigation at the beginning of harvest pertaining to Canola imports in to China. Chinese Antidumping investigation is likely linked to the Electric Vehicle and US steel tariffs launched by Canada in late August.
  • Canadian tariffs go into affect on October 1st on Chinese EV and Steel
  • Statistics Canada put out its latest figure at 18.9 mmt.
  • Private analysts well below 19mmt for the crop being currently harvested. Pushing 18.5mmt or lower as the remainder of the canola crop comes off fields. Many areas reporting below anticipated production. Stats Canada not out again until early December with its final production estimates but private figures will keep rolling out.
  • Concerns over oil quality in the crop.
  • US soybean cumulative sales are finally back to last years pace after a terrible start to the marketing year.
  • Overall market sentiment understands that we have a large Corn and Soybean crop coming in the United States and Southern Manitoba.
  • United States soybeans FOB sitting at some of the cheapest values in the globe. North American grains in general very cheap and we will need some impressive usage / export numbers to incent traders to take their fingers off the sell button.
  • For the short term, rallies need to be sold into if producer is undersold. Know your position and where you want to be sold. Opportunities will need to be capitalized upon in short order. Work with your advisor to “stickhandle” cashflow, logistical and other requirements. Ensure you are in the position you need to be and avoid cashflow issues.
  • PRODUCTION:
    • Most private analysts have the crop at 18.5 mmt. Stats Canada sits at 18.9 mmt
    • Aussie Crop at 5.1mmt down from 5.9 last year and 8.3mmt year prior
    • Estimated EU Crop at 17.5 to 18.0 and was around the 20.0 mmt level last two years
    • Ukraine 4.7 mmt last year, 3.7mmt this year.
    • Canadian canola crop smaller than anticipated in July.
  • EXPORTS and USAGE:
    • European Union harvested a much smaller crop than last year. Crop estimates came in close to 17.6 mmt which is lower than the 20mmt early forecasts.. EU needs around 25mmt total and larger imports will be required. Some carryover in the equation but USDA states they will need 6.6mmt. Canada exported next to nothing this past marketing year to EU. Last year we exported 103,000 tonnes to Belgium. Few years ago, it was not uncommon to do 500,000 to 1.5 mmt in years where EU faced crop shortfall.
    • OLD CROP: For the 2023/24 canola export program, Canadian canola was much to expensive to compete with Australian Canola for the first half of the export program. By early January, Canadian canola exports were only tracking for 6mmt of total exports, a dismal export number. It was not until exports picked up last half of the year where we came in right around 7mmt.
    • AAFC has 2024/25 export forecast at 7.0 mmt. This is viewed as a conservative figure, many private analysts sit around 8.0 mmt assuming Japan, Mexico and European Union will likely be in for more crop, time will tell. Chinese demand is in question. Will they place tariffs on CDN imports or will they import their requirements before taking action?
    • See Global FOB canola prices chart above and historic ones below.
  • GOING FORWARDS:
    • Harvest wrapping up. It is key that traders get a good start to the canola export program. Which shows promise so far. Chinese trade spat has ability to cause logistical headaches going forwards. Global Rapeseed and Canola balance sheet has potential to tighten up longer term, ending stocks already shaping up 19% smaller than last year according to USDA figures. Will mostly depend on what Canadian canola crop comes in at. We know other global production regions well enough already as harvest wrapped up in Canada / Europe. Aussie crop coming in Mid October to Early December.
    • Australian crop the wildcard here, although their crop is expected to be 200,000 tonnes smaller than last year. This crop is in the ground and will be harvested Oct/Nov/Dec.

Spring Wheat

  • Spring Wheat values up for the week but lower for the past two sessions. Playing with the 100 day moving average for the past three sessions and finding a challenge breaking above that.
  • For wheat, markets trading weather stories right now. Dryness in US Southern plains for wheat, dryness in Argentina, Dryness in black sea region. Canadian crop should fare alright for yields, US spring wheat crop came off with decent quality and quantity.
  • Frost in southern Australia combined with dryness has recent reports axing off about 1mmt of crop off of production estimates.
  • Canadian wheat exports still coming out strong through week 8 but below last years initial pace. See chart above. We are about 11% below last years pace so far so need to keep a close eye on this development.
  • USDA added about 600,000 tonnes to global ending stocks. 257.2 mmt down from last years 265.2 mmt.
  • Challenges with wheat yields in pockets of eastern Alberta and some southern Sask regions. Other areas reporting quite strong yields so the wheat appears to be more of a mixed bag vs canola which is being reported lower across the board.
  • Markets in general have been in a downwards trend since the end of May. Past three weeks have started to shift this notion. All growing season, no weather stories and prospects of a potential record yield from North Dakota, the largest Spring Wheat producing state in the USA
  • For the short term, rallies need to be sold into if producer is undersold. Know your position and where you want to be sold. Really work closely with your advisor on your general marketing plan, decide what crops need to move and what crops we are keeping at home. Weight the risk and reward of each decision.
  • PRODUCTION:
    • Canadian non durum wheat crop expected to be large. 1.2 mmt larger than last years crop. Around 29MMT is expected to be produced according to AAFC’s latest stab at the crop size. Looks like ending stocks could be more burdensome than earlier forecasted as well.
    • Wheat will come down to quality. Protein levels and quality will be closely watched. Mostly being reported as satisfactory.
    • Global production – Winter and Spring wheat crop is off in the United States. Quality was quite good and plenty of good yields reported. Spring wheat good. As mentioned above watching Black Sea, US southern plains planting and Argentinian Crop.
    • Across the pond, wheat quality was questionable at best. Some multi decade low wheat yields being reported in Germany and France Plenty of low protein wheat came off fields in Russia, Ukraine, Germany, France, Poland. Grading issues a concern over rains at harvest especially in France and Germany.
    • French wheat is forecasted by private analysts at around 25 mmt. Last year the crop was closer to 35mmt
  • EXPORTS and USAGE:
    • Global balance sheet for wheat actually tightest in several years. Ending stocks of 257 million tonnes vs 260 to 285 mmt range in recent years. Balance sheet amongst key exporters even tighter.
    • Canadian exports last year were particularly strong, not due to cheapness, but due to the quality of the crop. We need some good new crop quality coming into the system to give us the blending capacity we need. Canadian crop was blended and fit a gap in the market. Exporters looking to hit the same niche this year and push wheat exports as strong as they were last year.
    • AAFC has 2024/25 export forecast at 20.5 mmt. This is viewed as a strong year and will keep ending stocks in check.
  • GOING FORWARDS:
    • Harvest is wrapping up, wheat prices coming off of some of the lowest levels in 4 years. We are 30% sold new crop overall and will await quality results before making next cash sale move.

Corn

Soybeans

Oats

  • Western Canadian oat production is trending to the light side. Weight was a concern with this oat harvest having trouble hitting spec for 2CW. 3CW and 4CW is prevalent.
  • Oat prices are sit at $4.00 to $4.75 new crop across the prairies. The $4.75’s belong to the glyphosate free market. Oat market prices have followed other ag commodities lower. Oats were anticipated to have been heavily sold by producers early in the production year. Seeing bids pick up here in recent weeks due to lack of good quality oats. Oat bids about $0.50 to $0.75 from its lows already
  • Oat crops lost top end yield with the heat and dryness. Test weight is an issue with lack of any precipitation towards the end of the filling period. Oat balance sheet could tighten up if yield losses come to fruition. North East Sask and Western Manitoba will call the shots on this crops balance sheet. Expect a tight balance sheet if demand stays steady.
  • Front end demand is largely covered off for oats although and pricing will depend on post harvest demand and how this crop actually shakes out. AAFC is calling for a carryout of just 350,000 tonnes which would be considered very tight. Private analysts are higher but adjusting balance sheets lower in recent weeks.

Barley

  • End users / Maltsters came out of the gate early with bids and appear to have covered off front demand. Malt supply issues are prevalent. High Protein is a problem and some problems have maltsters and exporters keeping bids firm. Maltsters still looking for some crop to round out their inventories
  • Maltsters will need to be nimble here to source the proper supply they need.
  • Corn is the Achilles heel to feed barley pricing. Corn is very cheap and even with barley values about 40% lower year over year, it still struggles to find competitiveness into feed rations. Barley is pricing into Alta feedlots competitively right now, but walks a fine line with corn.
  • Exports are not expected to be anything special as we largely lost a pile of market share to the Australian market exporting into China.
  • Malt is the play this year and grade at harvest will dictate price sentiment. Early malt bids are still holding place, slightly increasing.

Pulses

  • Lentil Balance sheet revisions will be made lower than they were in early July. Some small pockets reporting way above average yields but more common than not to see less than anticipated yields. Some grade issues, disease.
  • Global demand will be the key factor here. A few key sales to export markets will dictate the balance sheet massively come the end of the marketing year.

Durum

  • Durum harvest well understood in western Canada. Yields leaning to the disappointing side from prior estimates and light weights are commonplace. Disease showing itself this year as some rains fell at prime time for disease timing. Crop easily smaller than July estimates. Grade will be the stickhandling part of marketing this crop.

Flax

  • Flax production is forecasted to be quite small this year with less acreage going into the ground. In fact, Flax acres are the smallest since the mid 1940’s. Flax prices will be influenced by EU demand. Russia’s flax crop will be challenged to move into EU borders this year due to new import tariffs that began on July 1st for flax which will be scaled up in the coming years.

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