The Good: The canola crop this year maybe poor, but at least prices are now trying to reflect the poor conditions. After closing up the limit C$30 on Friday, canola was up the new limit C$45 per tonne to close the day at C$889 per tonne. The limit now moves to C$60 per tonne tonight, but the canola rally is not over yet. The canola contract is likely to test the all time high of C$1035 per tonne set in May. With deteriorating crop conditions and continued hot weather expected through the end of the month, crop estimates are bound to go lower. The point that MarketsFarm continues to make is that the canola situation was tight when we were projecting a crop over 20 million tonnes. With a smaller crop prices will need to go higher to ration demand from both domestic crushers and exporters. This drop in canola production is still yet to be accounted for by USDA. In today’s report they dropped the Canadian production by 300,000 tonnes to 20.2 million tonnes. If it is any consolation, the wheat estimate was dropped by 500,000 tonnes to 31.5 million tonnes. It appears that the USDA thinks that the drought stopped at the U.S. border.
The Bad: Spring wheat conditions finally stabilized this week after six straight weeks of decline. The USDA estimates that 16 per cent of the crop is rated in good to excellent condition. The crop is rated higher than the 1988 crop, but is still well below the 2002 and 2017 crop conditions. The spring wheat conditions did drop in Minnesota by seven per cent to 28 per cent good to excellent, but was offset by a 10 per cent improvement in Montana. The spring wheat crop is 83 per cent headed and is turning color in Minnesota and South Dakota. That means that harvest is just around the corner and the growing season is essentially over. Time has run out for rains to provide a lat minute yield boost.
The Ugly: The USDA report today printed the lowest yields for spring wheat since 2002. Other spring wheat production was 114 million bushels below the average trade estimate at 344.5 million bushels. Looking at HRS alone, production came in at 305 million bushels on a yield of 28.4 bushels per acre. The HRS crop of 305 million bushels is the smallest crop since 1988 as a substantially lower area was planted this year when compared to 2002. USDA projected ending stocks to drop to 119 million tonnes for HRS wheat, which is the lowest level since the 2007-08 crop year. You may remember that the all time highs for spring wheat were established that crop year. We are unlikely to move back to those levels this year with production in Europe and the Black Sea at near record levels, but the report certainly will provide some price momentum for wheat.