Smaller than expected U.S. corn and soybean crops “stopped the bleeding” in agricultural commodity markets south of the border but are not expected to have much of an uplifting effect on western Canadian crop prices.
In its September domestic crop production estimate, the United States Department of Agriculture forecast a 307 million tonne corn crop and an 80 million tonne soybean crop, both of which were below industry estimates.
Crop analysts used terms like “friendly,” “supportive” and “positive” to describe the report.
“It’s a glimmer of hope to try to grind these grain prices out of these doldrums,” said Errol Anderson, analyst with ProMarket Communications.
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Added Charlie Pearson, crop analyst with Alberta Agriculture, “it probably doesn’t change the trend or anything like that but on the other hand, at least today it kind of stopped the bleeding a little bit on corn and soybeans.”
Anderson said the corn number stood out. Average yield is projected to be 152 bushels per acre, down from 155 in the August report.
“That doesn’t sound like a lot but in reality it does have a ramification for the ending stocks for next year.”
By Aug. 31, 2009, corn stocks are anticipated to be 25.9 million tonnes, 35 percent lower than last year’s carry-out. That’s one month’s supply.
By contrast, the wheat outlook was bearish. The USDA projected 676 million tonnes of global production, up from last month’s estimate of 671 million tonnes.
“Even though the stocks are building on wheat, there is going to be still a snugness of bread-making wheat,” said Anderson.
“What I’m sniffing is we’re going to start to see some improvement and rebound in corn and in wheat values in the U.S.”
However, he doesn’t detect a bullish scent wafting north of the border, where barley and feed wheat prices will be under pressure, because of excess Canadian and world supply and canola prices are set to fall because of increased competition.
Wet weather in Manitoba and eastern Saskatchewan has downgraded wheat crops in those provinces and barley yields of more than 100 bu. per acre in Alberta will add to an already oppressive global feed grain supply caused by a large but poor quality wheat crop in the Black Sea region.
Anderson wonders whether the Canadian Wheat Board will have a program this year for feed barley and low quality wheat. He is advising feedlots to buy supplies on a hand-to-mouth basis because feed will likely get cheaper.
“The cash bid trend on feed wheat and feed barley is down and it’s going to go lower.”
Despite a small bounce in canola prices with the smaller than anticipated U.S. soybean crop, he remains bearish on canola prices. Russia is set to triple its rapeseed exports, edging out Canada in the Chinese market. Also, a glut of palm oil will have a damping effect on the overall vegetable oil complex.
“Canola prices could lose another 50 cents a bu.,” said Anderson.
Pearson agrees with Anderson’s assessment.
“Canola will probably struggle,” he said.
And while old-crop feed supplies are tight, that does not look to be the case for the 2008-09 harvest.
“There will be more than adequate feed supplies available for our livestock industry. We’re not by any stretch of the imagination tight, particularly in the short term here,” said Pearson.
