1. 'Take it easy, Doc. You're boldly going where no man has gone before!'
2. 'You know, in Arkansas, we're now legally married.'
3. 'Any sign of the trapped miners, Chief?'
4. 'You put your left hand in; you take your left hand out...'
5. 'Hey! Now I know how a Muppet feels!'
7. 'Hey Doc, let me know if you find my dignity.
8. 'Could you write a note for my wife saying that my head is not up there?'
GOOD MORNING...HERE IS YOUR MORNING MARKET NEWS
CANADA GRAIN STOCKS REPORT
Statistics Canada released its Canadian grain stocks as of March 31 report this morning. An expected trend seen in the report...stocks of wheat, canola, barley, soybeans, dry peas, oats and lentils were all down on March 31 compared with the same day a year earlier, on record exports. Stocks of corn for grain rose.
StatCan says increased global demand translated into higher exports for most field crops during the COVID-19 pandemic, while the pandemic continues to contribute to uncertainty in both the global and Canadian grain markets. Export demand was led by China, which has been actively purchasing grain worldwide, and was the main driver behind higher Canadian exports for most principal field crops. Canadian railways continued to move grain at record levels for the first eight months of the crop year, likely partly because of increased capacity as a result of lower movements of petroleum products by rail.
The following table is a recap of Statistics Canada's stocks report for the period ended March 31, 2021. Figures are in million metric tons.
Total Stocks Total Stocks 5-year avg
March 31/21 March 31/20 (2016-20)
Barley 2.806 3.531 3.578
Canola 6.572 10.554 9.414
Flaxseed 0.232 0.304 0.388
Oats 1.844 1.846 1.812
All wheat 16.231 18.781 17.001
Durum 2.753 3.305 3.522
Lentils 1.435 1.678 1.335
Peas 1.878 1.909 1.819
Wheat stocks lower on record exports
Stocks of total wheat fell 13.6% year over year to 16.2 MMT as of March 31, which was slightly lower than expected by the trade. Both on-farm (-14.3%) and commercial (-11.2%) stocks contributed to the overall decline. Stocks of wheat excluding durum were down 12.9% to 13.5 MMT, while durum wheat stocks fell 16.7% to 2.8 MMT.
Nationally, deliveries of wheat rose 19.3% to 22.6 MMT. Exports of wheat rose 28.9% to a record 17.8 MMT, 2.3 MMT higher than the previous record set in March 2019. Exports of wheat excluding durum were largely driven by China, whose imports of Canadian wheat almost quadrupled as demand for feed in that country remained high.
Domestic use of wheat increased 5.5% on higher demand for animal feed, which rose 11.0% to 4.2 MMT.
Canola stocks decrease to lowest level since 2013
Total stocks of canola fell 37.7% to 6.6 MMT as of March 31, the lowest level since 2013 and slightly below trade ideas, because of a 47.1% decline in on-farm stocks to 4.8 MMT. Commercial stocks rose 19.1% to 1.8 MMT.
Deliveries of canola increased 14.2% to 15.5 MMT year over year, while domestic canola use rose 0.7% to 7.4 MMT as canola crushing remained strong.
Exports were up 27.2% to a record 8.0 MMT to the end of March. China imported more than 1.8 MMT (+61.9%) of canola, while exports to the European Union also rose.
Barley and oat stocks fall
Barley stocks fell 20.5% to 2.8 MMT as of March 31, which was at the bottom end of trade guesstimates, driven by a 29.4% decline in on-farm stocks to 2.2 MMT. Commercial stocks rose 51.0% to 590,200 tonnes. Highlights a critically tight feed grain supply situation in Canada.
Off-farm deliveries increased 36.0% to 4.2 MMT, pushing on-farm stocks lower. The volume of barley used for domestic purposes, largely animal feed, rose 6.1% to 6.1 MMT. Exports surged 48.7% to 2.9 MMT, with over 90% going to China, up from 71% one year earlier. Exports to all countries as of March 31, 2021, equalled total exports for the entire previous crop year.
Modest surprise here on oat stocks...edged down 0.1% to 1.8 MMT, slightly lighter than expected. On-farm stocks rose 1.9% to 1.5 MMT, while commercial stocks fell 8.4% to 338,500 tonnes. Domestic use of oats increased 5.3%, while exports rose 18.3% to 2.1 MMT.
Stocks of dry peas and lentils lower as deliveries increase
Stocks of dry peas fell 1.7% to 1.9 MMT as of March 31. On-farm stocks drove the decrease, falling 2.1% year over year, while commercial stocks remained flat.
Lentil stocks declined 14.4% to 1.4 MMT as on-farm stocks fell 16.4%, while commercial stocks rose 3.4%. Lentil exports increased 3.1% year over year.
OVERNIGHT GRAIN TRADE
ICE canola futures are trading mixed this morning, with nearby July futures up $16/tonne, though new crop futures down $1 to $3/tonne. Chicago soybeans are 11 to 16 cents/bu higher, with new-crop leading.
Corn futures are 5 to 7 cents higher, with new-crop leading gains. US wheat futures are mostly 9 to 13 cents higher, with futures either testing or setting new contract highs.
The US Labor Department's employment situation report for April non-farm payrolls was released this morning and was a disappointment...266,000 jobs created in the month vs trade expectations of 1 million jobs thought to be added to the US economy.
Here in Canada...also a disappointment...employment in April fell by 207,000 (150,000 decline expected) and the unemployment rate rose 0.6 percentage points to 8.1%.
In Other News
- Saskatchewan seeding ahead of average... Warmer daily temperatures have allowed Saskatchewan farmers to make good seeding progress, despite an abnormally cool start to the spring, according to the first crop report of the season from Saskatchewan Agriculture. Nine per cent of the 2021 crop was in the ground as of May 6, which was up from 7% at the same point a year ago and the five-year average of six per cent.
The southwest region was leading the province, with 19% of the crop seeded. There was 11% seeded in the southeast, 6% seeded in the west-central, 5% seeded in the east-central, 5% seeded in the northwest and 2% seeded in the northeast.
Light precipitation was reported in the past week in many areas of the province. The north-east region received the greatest amount of rainfall, with 22 mm reported in the Porcupine Plain area. Other areas, including the east-central region, received precipitation in the form of snow and rain towards the end of the week that will help with the dry field and pasture conditions.
On a crop-by-crop basis, field pea seeding was farthest along at 23% done. Spring wheat was 8% seeded, barley 11%, and canola 5% done.
Topsoil moisture for cropland, hay and pasture was below normal levels in most areas of the province, with cropland topsoil moisture rated as 1% surplus, 41% adequate, 44% short and 14% very short. Hay and pasture land topsoil moisture was rated as 0% surplus, 27% adequate, 48% short and 25% very short.
There were some reports of winterkill on winter wheat, fall rye and other fall seeded crops; producers are busy assessing the damage and determining whether or not to re-seed.
- Canadian wheat exports roar along... Canadian weekly wheat exports (excluding durum) hit 532,000 tonnes during the past week, which pushed total crop year exports to 15.1 MMT with 13 weeks left in the crop year. The wheat exports should come as no surprise as spring wheat has the largest remaining stocks of any commodity. With the stocks of barley, canola and peas tightening, wheat is the only crop left standing for significant exports in the last quarter of the crop year. The Canadian situation is in sharp contrast to the US wheat exports which totalled 585,600 tonnes. When you include durum exports (like the US does) Canadian exports for the week totalled 819,000 tonnes.
- Ocean freight rates at decade highs... MarketsFarm reporter Phil Franz-Warkentin writes that ocean freight rates have climbed steadily higher over the past year, recovering from the lows hit at the start of the pandemic in early 2020 to see their highest levels in over a decade. The Baltic Dry Index (BDI), which is a major indicator of shipping rates, hit a high of 3,266 points on May 5. That marked its strongest level since June 2010, and compares with the multi-year lows just under 400 points hit at the same point a year ago.
Canada is at a freight disadvantage compared to its competitors into some markets, and higher freight rates can heighten that disadvantage. However, Canadian grain exports continue to move at a solid pace, with total bulk exports of the major grains and oilseeds through week 38 of the 2020-21 crop year of 39.9 MMT running 30% ahead of the previous year's pace, according to Canadian Grain Commission data.
- More on China's efforts to stabilize grain supplies... Yesterday we reported China plans to increase subsidies for corn and soybeans to boost production. The country also plans to expand winter wheat area for the first time in four years, according to Chinese Premier Li Keqiang. China will also ban the use of arable land for non-agricultural purposes. These efforts, paired with steps to broaden farm insurance coverage, improve storage and prevent pests/disasters are part of China's overall effort to stabilize grain production. China's aggressive purchases of corn and other feed grains this year signal its crops were likely harder hit by last year's typhoons and other weather events than Beijing let on.
- Morocco reintroduces wheat tax... Morocco's government announced it would reintroduce a tariff on imports of soft wheat and durum wheat from June 1 forward. The country hopes to tamp down imports leading up to what is expected to be a big cereal harvest of 9.8 MMT, more than double last year's crop.
- IKAR trims Russian wheat crop peg... The Russian ag consultancy IKAR shaved 500,000 MT off its 2021 wheat crop estimate, dropping it to 79 MMT. Parts of northwest Russia have been overly wet, but spring planting conditions have generally been favorable in other areas.
- French wheat ratings still sliding after April cold snap... France's farm office now rates 79% of its soft wheat crop good or excellent as of May 3, which was a two-point drop from the week prior and the fourth week in a row ratings have fallen. The crop was hit by record-setting cold temperatures in April, plus conditions were overly dry. The two-point dip was lighter than the four-point slid the week prior, which could suggest some crop stabilization thanks to recent rain. Ratings are still well above year-ago when just 57% of the crop fell in the top two categories.
- US and China ramp up war of words on trade, human rights and even a stray rocket... US President Joe Biden used a schoolyard euphemism to fan the flames on the already smoldering US/China relationship, accusing Beijing of stealing America's happy meal. "The Chinese are eating our lunch," Biden said while hyping his $2.25 trillion infrastructure plan in Louisiana on Thursday. "They're eating our lunch economically. They're investing hundreds of billions of dollars in research."
Beijing issued a more pointed message at Canada, the US and its allies for a joint statement by the G7 calling out human right abuses. China said it "strongly condemns" the G7 nations for accusing Beijing of rights abuses in Xinjiang, Tibet and Hong Kong. One Chinese foreign ministry official called the G7's actions "wanton destruction of the norms of international relations."
Meanwhile, an uncontrolled Chinese rocket will soon come crashing back to Earth. Some say it's a fitting symbol for the dangerous US/China relationship.
The Dow Jones Industrial Average rallied 318.19 points higher on Thursday to a new high of 34,548.53. Early Friday, June Dow Jones futures are down 42 points on weaker than expected US employment data this morning.
The June US Dollar Index is down 0.391 at 90.545.
June crude oil futures are down $0.53 at US $64.18/barrel.
Chicago soybean futures are trading another 11 to 16 cents/bu higher this morning. There was another round of support from the tight soybean supply, strong domestic demand, and strong global demand for vegoils. Yesterday saw double digit bean gains on net new buying. Soyoil futures are up 67 to 98 points this morning after rallying 89 to 130 points yesterday on the front months. Technically, the price trend in soybeans remain up with no signs of reversal yet.
US cash soybean bids are largely $16/bu and higher in the eastern Midwest, in the upper-$15s in the West.
China Dalian soy complex futures were higher again overnight, with canola and palm moving to new highs. No sign of easing demand with July prices of soybeans and soyoil near or at new highs early Friday.
Even in Brazil where this year's record harvest is still new, the FOB soybean price for May increased to a new high of US $582/tonne on Thursday.
US soybean planting is off to a fast start and rain in the forecast for this weekend and in the 8 to 14-day period will be helpful for new crops.
Chicago corn futures are mostly 5 to 7 cents higher heading into the last trade day of the week, continuing its push to new highs while the seven-day forecast remains hot and dry for Brazil's second corn crop, a damaging prospect at pollination time. Through Thursday July corn prices were up 33.75 cents for the week. On Thursday, the corn gains were led by new crop Dec which was up 3.43% at the close.
Traders remain focused on the tight US corn supply, solid demand, planting delays, and concerns about probable yield loss in Brazil's second crop. The USDA is expected to lower its production estimate for Brazil next week in its monthly supply/demand report (May 12).
US corn planting continues in earnest with moderate to heavy rains expected across the central and Eastern Corn Belt over the weekend.
US wheat markets are also higher... HRS/HRW futures up 8 to 13 cents, with SRW wheat 3 to 10 cents higher. Thursday ended with wheat near the highs of the day... Minnie spring wheat ending up 7 to 8 cents to fresh contract highs. We are seeing spring wheat futures cross above the US $8.00/bu threshold for the first in this broader rally.
Some rain is expected in Kansas and eastern Colorado (HRW areas) the next seven days, but amounts will be limited...and much of North America's spring wheat and canola areas will only see light amounts. The Pacific Northwest is contending with drought, which extends across the northern US Plains and southern Canadian Prairies.
While the dry weather threat is seriously bullish for spring wheat, winter wheat price prospects are dampened by favorable SRW wheat conditions and largely favorable conditions in Europe, Ukraine and southern Russia.
Wheat price trends remain up, with bullish influence from corn.
CANADIAN GRAIN MARKET
ICE canola futures surged higher again on Thursday, moving up the daily $30/tonne limit in the old crop July contract.
Tightening old crop supplies and end-users scrambling to fulfill commitments accounted for much of the strength in July, with bullish chart signals adding to the gains as any sellers keep to the sidelines and watch prices rise. Advances in the Chicago soy complex provided spillover buying interest for canola as well.
July canola jumped $30 yesterday to $963.50/tonne, November was $21.20 higher at $761.50 and January advanced $17.40 to $752.10.
For today... canola futures were strongly higher overnight, but have come off those highs. Old crop July is still up notably, but new crop canola futures have faded into modest negatives...which seems odd as it doesn't line up with the bullish fundamentals...though Nov canola is up strongly on the week.
Canola is drawing support from a strong CBOT soy complex this morning...Malaysian palm oil has gapped up into new highs...though EU rapeseed is more narrowly mixed but leaning higher.
Looking at this morning's StatCan canola stocks peg on March 31 at 6.6 MMT, down a whopping 3.9 MMT from the same time last year (37.7% lower), the lowest level since 2013 and slightly below trade ideas.
Consider canola usage last year (2020) in the period of April 1 through the balance of the crop year to July 31 totaled 7.423 MMT, while totaling 6.687 MMT on average during the past five years. That means with normal use from April 1 through to the end of July...canola ending stocks would decline to ZERO! Obviously the market will not allow to happen.
So then, the task for the market is to curb demand for the remainder of this marketing year...and the explosion higher in price, especially over the past month, is attempting to do just that. Old crop cash bids have now tapped as high as $24/bu confirmed at one crusher in southern Manitoba for Aug delivery.
The driver of the broader ag commodity markets is currently corn with soybeans and wheat going along. The rally in soybeans has gone a touch under the radar of late if you can believe that, as corn appears to be intent on poaching acres from soybeans in the United States. The new crop soybean to corn price ratio at 2.25 has steadily been shifting to favor corn production over soybeans. This ratio has moved dramatically since the release of the USDA acreage report at the end of March.
The dilemma for the market is that the soybean situation also remains bullish. USDA reported US export sales of 165,300 tonnes of old crop soybeans and 192,900 tonnes of new crop sales in the latest week. The old crop sales were enough to push the total commitments to 61.28 MMT, which is 50,000 tonnes HIGHER than the current USDA export estimate for the entire marketing year...and there are still 17 weeks left in the crop year for even more export sales of soybeans.
Canola has benefitted from the rally in soybeans and in fact seems to be leading the oilseed complex. July canola futures are up another $16.40 this morning to a fresh contract high of $979.90/tonne...that's up $111/t in just this past week! It's also a $262/t rally since the start of April! These kinds of moves are unheard of! OK...enough with the exclamation points!
But relative to soybeans, nearby canola is running away and looking overpriced on a comparative basis. Expect corrective price action at anytime, though old crop fundamentals remain bullish.
New crop canola is also setting new contract highs with the premium over soybeans currently around $130/tonne. This makes the US soybean situation very critical for both new and old crop positions. Soybean area in the US is unlikely to increase significantly from the USDA intentions report as farmers swap out intended area for corn. Even with above average yields, US soybean supplies in 2021-22 will likely be very tight. Soybean prices need to increase to reflect the weather risks for 2021-22. This in turn should boost new crop canola futures.
On the feed grains... MarketsFarm reporter Adam Peleshaty writes that prices of feed grains are continuing to go up and with depleted stocks and dry conditions forecasted for the Prairies, they are likely to rise a bit more. "There's a shortage of corn. Corn's at over $400/tonne delivered southern Alberta feedlot. You've got barley that's now pushing over $340 to $350 and that's a $50 difference between the two," said Mike Fleischhauer of Eagle Commodities in Lethbridge, Alta. "Between the two, we're starting to see signs that there's just no inventory left. We're still a couple of months away from anything new coming in."
Adding to the pressures on current feed grain stocks, according to Fleischhauer, are international buyers purchasing new crop, a new 40,000-head feedlot north of Enchant and ongoing drought. "In the next 30 to 40 days, we'll see what transpires. In southern Alberta, it's limping," he said.