Production data | No big surprises seen in Statistics Canada report
All eyes are on the Oct. 10 U.S. Department of Agriculture report to see if it ends the string of bearish news that has brought crop markets low.
If the World Agricultural Supply and Demand Estimates report doesn’t worsen the bearish situation, the mood could become more positive and mark the end of harvest pressure. Early signs of bouncing off the bottom might have been seen in recent days, with a number of crops rallying sharply off multiyear lows.
“I think we need to see Friday’s actual corn and wheat production estimates, and see how the market reacts, before we can safely say corn and wheat have put a low in,” said Mike Krueger of the Money Farm in Fargo, North Dakota.
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“I think the (soy)bean market …maybe has one more leg down, depending on what the government tells us.”
Austin Damiani of Frontier Futures in Minneapolis thinks the market lows for grain are already in, but no big rally is likely.
“We’ve been telling customers that for wheat, we’ve seen a harvest low,” said Damiani Oct. 6.
“There hasn’t been anything, any change to supply and demand fundamentals, that are bullish. It’s simply that we’ve traded the negative balance sheet. It was an argument for covering the short positions. It’s not really an argument for going long and saying wheat has to go higher.”
U.S. markets are lumbering under the weight of big corn and soybean crops and ample supplies of wheat and have sold off greatly since spring.
Corn and soybean crops have appeared to grow bigger as the year progresses.
However, Krueger said most of the negative story is already priced into the markets, so the USDA might have to find surprisingly good yields, beyond the record yields already expected, to justify a further reduction.
Krueger said soybeans have the greatest downside potential because of soybean meal fundamentals, but he thinks canola and sunflowers could gain in relative strength because of the improvement in world vegetable oil dynamics.
“That should give the high oil crops an edge; it just might not be much of an edge,” said Krueger.
Statistics Canada’s newest production estimate didn’t faze markets when it was released Oct. 3.
Canola production at 14.1 million tonnes was slightly less than the average of analyst expectations, but many expect Statistics Canada’s number would rise in the final report.
That has been the pattern for a few years.
“They are almost notorious for underestimating in the October report and walking it higher in December,” said analyst Jon Driedger of FarmLink Marketing.
“The number’s simply too low.”
FarmLink estimates 15 million tonnes of final canola production.
The Statistics Canada wheat numbers didn’t surprise markets either, but Brian Voth of Agri-Trend Marketing said that’s because the raw volume of the crop isn’t the most important factor.
“One thing that report doesn’t say is the quality side of it. That’s a bigger issue than anything this year,” said Voth.
Bear sentiment has been so strong in recent weeks that otherwise bullish stories have not played much of a role in the markets, Damiani said.
Australian wheat production estimates are being reduced now, and much of the U.S. hard red winter wheat area appears to be back in drought conditions.
Neither situation has sparked market-moving worries.
“That’s because it’s a bear market,” said Damiani.
“We talked a lot about it when we were in a bull market this spring. In a bear market, everything conforms to the overall narrative.”
