Cereals, oilseeds and pulse crops are expected to continue to move quickly through the grain-handling system, keeping pace with the unusually rapid shipments we saw this summer.
Analysts say lingering concerns that a second wave of COVID-19 could disrupt supply chains later this year have prompted international grain buyers to secure supplies earlier than usual.
According to Canada’s Grain Monitoring Program and statistics from the Canadian Grain Commission, the Canadian grain supply chain moved record or near-record volumes of grain throughout the normally slow July-to-August shipping period and into early September.
Above-average producer deliveries continued into the new crop year, even as western Canadian farmers were preoccupied with harvesting their new crops, rather than delivering grain.
Amid strong demand for Canadian grain and attractive cash prices for some bulk commodities, especially canola and durum wheat, more farmers are selling grain directly off the combine, setting an unusually fast pace for late-summer grain exports.
Through the first five weeks of the 2020-21 crop year, farmer deliveries of all principal field crops surpassed 6.2 million tonnes, according to data from the Canadian Grain Commission.
That’s nearly 35 percent ahead of last year’s pace and well ahead of the five-year average of 4.8 million tonnes.
Mark Hemmes, president of Quorum Corp., said producer deliveries have been “phenomenal” throughout the months of July and August and into early September.
“Overall, the total volume so far this crop year has been really, really good,” Hemmes said Sept. 16.
“Deliveries in the country have been phenomenal. For two weeks in a row now, we’ve been over 1.4 million metric tonnes. It’s just been a really, really good start to the crop year overall.”
Hemmes said weekly producer deliveries of 1.4 million tonnes would be outstanding at any time of the shipping year, let alone during harvest.
He said international demand for Canadian grain remained strong throughout the summer and cash prices for off-the-combine grain are attractive.
CGC data puts Canadian export terminal receipts during the first five weeks of the crop year at more than 5.4 million tonnes, roughly 33 percent higher than last year and well above the five-year average of 3.9 million tonnes.
Total crop-year-to-date Canadian grain export volumes as of Sept. 6 were listed at more than 4.3 million tonnes, nearly 15 percent ahead of last year’s pace and a million tonnes higher than the five-year average.
Hemmes said movements through the Vancouver corridor during the past two to three months were among the best the industry has ever seen for the summer period.
“You always see a drop in the volumes in July and August and then it normally starts to kick up again in September when the new crop starts to come off,” he said. “But when you look at it this year, we went through all of July and August pushing record amounts of grain,” Hemmes said.
“It was not a normal summer.”
In addition to steady demand and good cash prices, Hemmes suggested that a lot of growers looked at the grain they had in the field and decided to move as much as they could to make space for the new crop.
“There was very strong international demand and the prices aren’t half bad right now either,” he added.
Grain shipments through the Great Lakes and St. Lawrence Seaway are also up 20 percent, thanks largely to European demand for durum and canola.
Total grain shipments through the St. Lawrence corridor during the five-month shipping period ending Aug. 31 were in the range of 5.2 million tonnes and handlings through the Port of Thunder Bay were more than 25 percent ahead of last year’s pace as of late August.
The only weak point in the western grain supply chain has been at the Port of Prince Rupert in northern British Columbia, where rail car unload numbers have been lower than normal, Hemmes said.
“They’re still backed up.”
As of last week, there were six grain vessels waiting to be loaded at Prince Rupert, an unusually high number.
Brennan Turner, chief executive officer of FarmLead, an online grain marketing platform, said farmers have been seeing some unusually attractive cash bids for canola, durum, CPS wheat and some pulses this summer.
“I think we’re seeing unusual movements of grain at this time of year because we’re seeing unusual pricing for this time of year,” Turner said.
Between canola, durum, and in some cases pulses, “these are values right now, at harvest time, that we never expect to see, at least not for probably another few months when that harvest supply glut expires.”
Turner said unusually strong prices for some commodities during the growing season resulted in more forward contracting during the April-through-July period.
Cash prices for canola and durum have also remained strong entering the new crop year, thanks in part to a reduction in European canola production and a smaller durum harvest in France and Italy.
Analysts are expecting a seven-year low in European canola production while durum yields in France and Italy are projected to fall 19 percent and six percent, respectively, compared to a year ago.
“If you’re a producer who has some of these crops like canola or CPS wheat or durum, you’d be naïve not to take advantage of these current prices, in my opinion,” Turner said.
There is also a lingering concern among some foreign buyers that a second wave of COVID-19 could disrupt global shipping efforts later in the calendar year.
As a result, foreign buyers are attempting to secure supplies of quality Canadian grain earlier than usual, before supply chain issues become a factor.
By buying Canadian grain earlier, international customers are managing their risk and ensuring that they have ample supplies to keep processing facilities operating at full capacity later in the year.
Turner cautioned, however, that earlier buying could change seasonal rallies that western Canadian growers typically see in the November-December-January shipping period.
“Basically, they’re buying more than they would normally buy now, which means that they might not have to buy as much in those winter months when we normally start to see some better pricing,” Turner said.
“So just be cautious. If you’re expecting a big improvement in pricing in the next couple of months, it might not be as big as it usually is….”
Turner said it might be in growers’ best interests to address their cash-flow needs now, when prices are strong, rather than waiting for a market rally.
“It’s better to basically ensure your cash flow needs right now versus trying to wait for another 20 or 30 or 40 cents a bushel in just a couple of months,” he said.
“Is it really worth the gamble because there’s no guarantee this year that it’s going to happen.”