Crop markets usually fall to their lowest levels of the year in the August-September period as yield projections firm and combines start to roll in North America.
It is too early to say that the lows are in, but with August in the rearview mirror, we might be getting close.
The next United States Department of Agriculture report is on Sept. 12. Its August report had higher than expected corn and soybean yield projections. Some private forecasts are now coming out with yields a little lower.
If the USDA September report also has lower forecasts that would support the market.
However, no one thinks that the cuts will be large. The market generally believes there is no reason to worry about the supply of corn, soybeans or wheat.
How does this affect the canola market?
While other major crop supplies will be ample, analysts generally expect 2017-18 canola supply will be tight relative to demand.
Last week, Statistics Canada forecast the canola crop at 18.2 million tonnes and on Sept. 6 it was set to release its 2016-17 year-end stocks report.
I wrote this column before the stocks report but you can get the details at www.producer.com.
The year-end stocks report is always important but this year it has more interest given the surprise that StatsCan gave us in the production report.
It sees the current harvest at 18.2 million tonnes, close to market expectations, but it also revised its 2016 crop estimate upward by 1.2 million tonnes to 19.6 million.
It did that based on the information it got from its farmer survey conducted in late July.
It will be interesting to see how these new numbers will work into Agriculture Canada’s supply and demand expectations.
Before these revisions from StatsCan, Agriculture Canada had forecast year end 2016-17 canola stocks at 1.2 million tonnes.
It forecast the total supply for 2017-18 would be tight relative to its export and domestic use forecasts, which were only a little lower than the 2016-17 records.
It wound up with a year-end 2017-18 stocks forecast of only 600,000 tonnes, which would mean the stocks-to-use ratio would be a super tight three percent.
If stocks were that tight, canola prices would have to be near the top of their usual relationship with soybean prices so as to ration demand and encourage 2018 seeded area.
With the new numbers from Statistics Canada, that stocks forecast of 600,000 tonnes might now be out of date and requiring an increase.
But stocks are not the only price-determining factor. We must also follow the soybean the palm oil markets.
Looking beyond this year’s U.S. soybean production, very soon the market will weigh South American soybean seeding forecasts and also seeding forecasts for the 2018 American crop.
With corn prices mired under huge year-end stocks, and lower seeding costs for soybeans, the prospect is for more acres of the oilseed in Brazil and America in the coming months.
Meanwhile, palm oil production has recovered from the El Nino drought of 2015 and is expected to continue to grow in the second half of this year, but perhaps at a slower pace than in the first half.