Monday July 06 2015





The Saskatchewan and Alberta weekly crop reports for the week ended June 28-29 showed rapid and general erosion in crop potential as the drought worsened. In Saskatchewan the good/excellent rating for spring wheat was 52% (57% two weeks earlier), durum 29% (41%), canola 46% (47%), lentils 40 (47%)%, flax 39% (51%), mustard 18% (33%). Province wide soil moisture was 32% adequate (48% a week ago, 45% 2 weeks ago), 48% short (38%, 35%) and 20% very short (14%. 17%). Moisture was considered adequate across 7% of the southwest, 14% west central, 16% northwest, 37% east central, 52% southeast and 70% northeast. Adequate moisture on hay land averaged 23%. Conditions worsened despite scattered rain. Cereals are heading and canola blooming prematurely in most areas. Alberta Agriculture reported the average of all crops rated good or excellent down 8% to 30% in a week, the lowest since 2009. Good/excellent ratings for spring wheat dropped 10% to 33%, barley 10% to 29% and canola 6% to 25%. The slight improvement from mid-June rain has now been entirely lost. Good/excellent topsoil moisture ratings dropped 8% to 21% while the poor category rose 13% to 43%. Subsoil moisture is rated only 25% good/excellent and 29% poor.


Statistics Canada on June 30 issued its annual seeded acreage report, based on conditions as of June 11. The seriousness of prairie-wide frost and Alberta-Sask drought may not have been clear to farmers who were surveyed, so that final numbers may vary. However the report put total major crop acreage at a new record of about 64.5 million acres and summerfallow in the west at a record low. Canola area was put at 19.78 million acres, down 2% from 20.26 in 2014; area was a four-year low and slightly under the five-year average. All-wheat acreage increased 1.3% to 23.16 million with non-durum spring wheat down slightly but durum up 21% to 5.75 million, the highest in five years. Winter wheat area, due to adverse fall conditions was down 46% to 595,000 acres in the west. Pulse and special crop area showed big year-to-year swings. Lentils set a record at 3.87 million acres, up 24% from 2014 and 48% from 2013. Field peas were basically unchanged at 3.7 million acres. Corn area in Manitoba was 230,000 acres vs 260,000 last year. Soybean acreage in western Canada rose to 1.63 million from 1.54 last year and 1.22 million in 2013, slower expansion than some expected.


The US agriculture department also reported planted area on June 30. US corn was estimated at 88.9 million acres, down 2% from 2014 and the lowest since 2010. Soybean area was a record high 85.1 million, up 2%. US all wheat area was 56.1 million, down 1%, with winter wheat at 40.6 million down 4%. Spring wheat was estimated at 13.5 million acres, up 4%. including 1.95 million of durum, up 40% from last year. Prior to the report, trade estimates for corn were 89.3 million, soybeans 85.2 and all wheat 55.9 million. Area of minor crops important to Canada, (2014 in brackets), million acres: oats 3.06 (2.72); barley 3.41 (2.98); canola 1.57 (1.71); flax 420,000 (311,000). Of all oats area, 1.22 million acres are expected to be harvested for grain vs 1.03 in 2014.


The USDA acreage and grain stocks reports triggered a stunning rally in Chicago futures. July corn closed up 30 cents, soybeans 53 cents (the expiring spot month did not have a daily limit), Chicago wheat 32 to 34 cents. Chicago traded above $6, briefly higher than Kansas City wheat which normally carries a premium. Minneapolis wheat gained 20 cents. Most closing prices for near months were highs for 2015. Trade at the CME Group set an all-time daily record of 2.87 million contracts, triple the month's average. Variations between the USDA numbers and pre-report estimates did not come close to explaining such a sudden surge after months of languid trade dominated by weak exports, a strong US dollar, aggressive pricing by competing exporters and movement of speculative funds out of agricultural contracts (partly because of low volatility). Several issues besides the USDA report appeared to be in play, particularly ideas that excess moisture is seriously damaging US corn and soybean crops. Some traders interpreted the grain stocks reports as showing a higher rate of corn and soybean use than USDA has projected. However the chances appeared low that new and higher ranges were established in US ag futures. Markets are weighed down by large world surpluses and a sustained rally depends on substandard production in other parts of the world.


Recent rain in Alberta did not improve the drought situation by much. Topsoil moisture for the week ended June 23 was 30% poor, 41% fair, 26% good and 3% excellent, basically unchanged from the prior week. Spring wheat was rated 43% good or excellent, barley 39%, canola 31%, oats 36% and peas 51%. Average for all crops was 38% good or excellent vs 41% a week earlier. A year ago at this date wheat was rated 81% good/excellent and canola 82%.


There could not be more of a contrast between too much rainfall in practically all US farm states and not enough across Alberta and western Saskatchewan. Hot, dry weather is predicted to continue through the week of June 29. Environment Canada issued a heat advisory for the weekend of June 27. Excessively wet conditions in the US corn belt more likely to improve than dryness in western Canada. Canadian and US futures markets rallied strongly in the week ended June 26 strictly on the weather situation and speculative short covering.


The canola market during the week of June 22 was increasingly drought driven. Consecutive contract highs were posted in near months with all traded months well over $500 per tonne. Exporters and domestic users are trying to lock in prices for both old and new crop, and speculative shorts were covering aggressively. The inverse in canola is shrinking. Moisture conditions are relatively better in eastern Saskatchewan and southern Manitoba. These are high yield areas but cover only about 35-40% of western Canada’s crop area. The rest is in trouble if rain does not come at once. Forecasts through the first days of July were unchanged with extreme heat and dryness for the weekend, normal or higher temperatures later in the period with no indication of any wet weather or low pressure system to follow.


The Saskatchewan weekly crop report put soil moisture province-wide as of June 25 at 46% adequate, 38% short and 14% very short. However conditions vary widely by region. Rated with adequate moisture were southeast 46%, northeast 81%, northwest 59%, east-central 63%, southwest 21%, west-central 27%. Crop condition ratings were not given this week.


The International Grains Council lowered its estimate of 2015-16 world wheat production in its June 25 monthly report to 711 million tonnes from 715 in May, 3% under 721 million in 2014-15. Projected world wheat use was lowered to 713 million tonnes from 715 last month, with carryover unchanged from May at 149 million, just 4 million less than at the end of 2014-15. Coarse grain production was estimated at 1.255 billion tonnes vs 1.253 last month and 1.290 last year. Coarse grain carryover is unchanged from May at 226 million, down slightly from 240 million last year. Changes in the outlook were not enough for any price effect.


High temperatures and low rain chances were forecast for the entire prairie region into next week. Highs in the 30s C were predicted late this week and into the weekend. Only scattered thundershowers are expected with no general rain event. Crop conditions vary vastly across the west, with record yields possible in Manitoba’s Red River valley but canola near write-off in the drier parts of Alberta. Most crops seeded early are hanging on, but high heat and low humidity predicted for this week will be very hard on these stands. Meanwhile, the US NOAA weather service reported that May 2015 was the wettest month in history (of any month) in some agricultural states. Oklahoma and Texas got 5 times normal rain, with corn states at 2 to 3 times.


A light season is expected for the port of Churchill, at about 500,000 tonnes. The port will be ready for its first ship in late July, about two weeks later than usual due to light bookings. The port handled 540,000 last year and over 600,000 in 2013. CWB Ltd, once the major shipper, is not using the port this year to maximize volume through its Lakehead facilities.


Saskatchewan and Alberta crop reports for the week ended June 18 showed slight improvement in the topsoil moisture situation. In Saskatchewan moisture was rated 45% adequate and 52% short or very short, compared to the previous week's 40% adequate and 57% short or very short. Spring wheat was rated 57% good or excellent, winter wheat 40%, durum 41%, canola 47%, barley 59%, all slightly improved from the prior week. The Alberta weekly report said topsoil moisture compared to the prior week was 30% short (43%), 42% fair (37%), 26% good (19%) and 2% excellent (1%). Spring wheat was rated 46% good/excellent, barley 42%, canola 32%, oats 38%, peas 55%, lentils 54%. Rain has been very spotty with the Peace River bloc, northeast Saskatchewan and western Manitoba getting up to 20 mm. Most of Manitoba has excellent to excess moisture.


Temperatures were well below normal over the June 12 weekend with scattered in northern Alberta and central Saskatchewan. Rain amounts were mostly light and highly variable with the driest parts of Alberta and southern Saskatchewan missed. Private forecasts for the next 10 days are for below normal temperatures with highs barely above 20C but good rain chances in the June 17-22 time frame. As of June 10 topsoil moisture in Saskatchewan was rated 40% adequate, 42% short and 15% very short, compared to 51% adequate, 37% short and 9% very short a week earlier. Crop development has slowed in some areas due to dryness, however most crops are rated in good condition. In Alberta surface moisture was 43% poor and 37% fair as of June 10, vs 30% and 43% a week earlier. The good/very good rating dropped to 20% from 27%.


The US agriculture department's monthly supply demand report for June included uniformly bearish global estimates for wheat, coarse grains and oilseeds for 2015-16. However for wheat at least it does not appear to have factored in potential impact of the El Nino climate event, which tends to bring drought to Australian wheat areas. El Nino may also be responsible for worsening dry conditions in western Canada, but USDA did not lower Canadian crop projections either. It raised the world wheat production estimate to 721.6 million tonnes from 718.9 last month, coarse grain output to 1.276 billion tonnes and world oilseeds to 531.8 million. Projections of consumption show little growth and ending stocks are forecast to remain historically burdensome at the end of 2015-16. World oilseed carryover will exceed 100 million tonnes for the first time. Its July monthly report will give the first estimates for US crop acreage, yields and production based on field surveys.


Some western grain companies announced they will not accept delivery of any crops treated with Manipulator, a new growth regulator that reduces straw length in wheat and increases yield. Importing countries have not established tolerances for Manipulator residue. Other companies will require producers to state whether wheat offered for delivery has been treated. The chemical product is registered for use in Canada but US approval is still pending.


Frost and dryness have all but eliminated the possibility of recent-average yields in the 2015 canola crop and production in the range of the last few years, according to Morris W Dorosh, AGRIWEEK'S publisher. Canola acreage, projected at 19.4 million acres in the April seeeding intentions report, has been overestimated. After losses to frost and abandonment harvested area will be in a range not seen since 2011 or 2010, when it was 18.86 and 16.82 million respectively. (Statistics Canada will issue its seeded acreage report June 30). The general and worsening moisture shortage across the west will soon rule out any chance of average yields, if it has not already, regardless of how favorable weather is later. In the best case, 18.5 million acres will be harvested with a 30-bushels average yield for 2015 production of approximately 12.6 million tonnes, the smallest since 2010. With carryover from 2014-15, canola supply in the new crop year may be little more than 13 million or less than 75% of 2014-15 disappearance. In this scenario price rationing would have to start even before the 2015 harvest. Some users of canola end products, especially oil, will continue regardless of price. But most will have a strong incentive to substitute soybean and other more plentiful and lower-cost oils. The price range for canola seed during 2015-16 will be determined almost entirely by the relationship that the market maintains between the prices of canola and soybean oils. During most of 2014-15 this premium was quite small, at times zero. Canola oil supply was ample, leading to large-scale use for biodiesel, a very low-level application for a premium oil. Importers will compete with domestic crushers for a much reduced canola seed supply, but in an environment of record-large US, South American and world soybean supplies.


Canola futures at the ICE exchange in Winnipeg continued their amazing bull run, with contract highs again made on June 4. The high for the spot month was 498.60, just shy of $500 a tonne, which is considered a benchmark. The rally appeared to be getting over-extended, and a correction always follows a sharp run-up. However in coming days canola futures could get support from the cash market as farmers become more stubborn holders in view of the crop condition. The spot July contract was at


The Saskatchewan agriculture department said in its weekly crop report for June 4 that seeding was nearly complete, except for reseeding necessary due to frost. It rated winter wheat 72% good or excellent, spring wheat 65%, durum 54%, barley 66%, canola 44%, peas 69%. Surface moisture was rated 54% surplus or adequate, 37% short and 9% very short. A week ago 62% was surplus or adequate.


A heat wave with daytime highs above 30C was predicted by private weather services for the entire prairie region starting on the weekend of June 6. No rain is expected except local thundershowers or storms. Ten-day weather forecasts are often wrong, but if this prediction comes true the damage to all crops could be major. Early June is very early for an extended hot, dry stretch. Newly emerged crops are at their most vulnerable. Soil moisture is already short across half of the grain belt. By July-August, heat waves are less damaging because plants have been able to develop root systems and access subsoil moisture.


G3 Global Holdings, the Bunge-Saudi Arabian joint venture which will soon own CWB Ltd, and Western Stevedoring Co said they will study the feasibility of building a grain export terminal on the North Shore of Burrard Inlet in Vancouver. The site being considered is the Lynnterm Terminal, which has almost a mile of dock space and 50-foot low-tide draft, now containing flat forest products warehouses. The venture does not appear to involve CBW Ltd.


Seeding in western Canada seeding is all but complete, but a second seeding to replace frost-killed canola in eastern Saskatchewan and Manitoba is probably the highest ever, up to half a million acres. At least the fourth significant freeze event in since early May occurred over the May 30 weekend, with most fields were emerged and very vulnerable. Some rain fell across the region last week, but the driest areas in Alberta appeared to be mostly missed. Forecasts for the next 10 days were for dry weather after a showery spell, with above-normal temperatures to the high 20s C. Unless widespread and ample rain comes in the next 15 to 20 days the possibility of average yields could be out of reach. Insect problems in canola have appeared early, especially flea beetles and diamond-back moths. Disease pressure so far has been low, but the peak period for fungus diseases is still ahead.


Canola futures trade at the ICE Future Canada exchange in Winnipeg for May was 546,512 contracts, up 30% from 420,295 for April and 400,611 in May 2014, as compiled from daily trading statistics. For the calendar year to date volume is 1.790 million contracts vs 2.076 million year-earlier. US futures trade for May with April in brackets from daily trade statistics: Chicago wheat 2.502 million (2.223); corn 6.431 (5.793); soybeans 3.912 (3,741); oats 16,106 (11,640); Minneapolis wheat 192,569 (109,140); KCBT wheat 543,154 (496,238).


Alberta Agriculture reported seeding all but done as of May 26 at 95% vs 77% a week earlier and far ahead of the 5-year average. Emergence is 54%, retarded by extremely dry conditions and cool nights. Moisture conditions continue to deteriorate. Province-wide, topsoil moisture was rated 22% poor (11% a week earlier), 47% fair (34%), 29% good (49%) and 2% excellent (6%). Subsoil moisture dropped from 48% good or excellent from 58% a week earlier.


The US Environmental Protection Agency has finally issued proposed renewable fuel standard blending targets for 2014 to 2017, at higher levels than some expected. The requirement for total renewable fuels is 15.93 billion gallons for 2014, 16.30 for 2015 and 17.40 for 2016. Biodiesel targets are 1.63 billion for 2014, 1.70 for 2015, 1.80 for 2016 and 1.90 in 2017. By law the EPA is required to issue annual targets by June 30 of the preceding year. There is now a public comment period before the numbers are finalized in November.


The IGC in its monthly grain report today raised the estimate for 2015-16 wheat production by 10 million tonnes from last month to 715 million and consumption by 4 million to 715, which will equal production. Projected wheat trade was down by 2 million from last month at 149 million. Global wheat carryover at the end of 2015-16 is expected to remain unchanged from the prior year at 200 million tonnes, 6 million more than expected last month. Coarse grain production was estimated at 1.253 billion tonnes, compared to 1.242 last month and 1.290 last year, with use at 1.266 billion vs 1.259 in April and carryover of 226 million vs 221 million last month.


Seeding in Saskatchewan advanced to 87% complete as of May 25 vs the 5-year average of 61%. Moisture conditions deteriorated to only 62% having surplus or adequate topsoil moisture province-wide. Moisture was considered adequate across 91% of the southeast, 48% in the southwest, 38% in west central, 40% in northwest, 74% in east central and 71% in the northeast. Emergence has been slow in dry areas, with some of the advantage of early seeding being lost.


Statistics Canada said farm cash receipts for the first quarter of 2015 showed a 4.5% increase over 2014 quarter despite lower crop and hog prices, to a new first-quarter record of $14.83 billion vs $14.20 billion a year earlier. Even more notably, all of the increase was in the western provinces, where cash income increased 7% to a record for the period of $10.04 billion. Cash receipts declined 1.5% in eastern Canada. The west also had a record 68% of national farm cash income. Higher livestock receipts accounted for the entire gain, up 8% to $6.32 billion. Cash revenue from crops was virtually unchanged at $7.93 billion. Cash revenue from sales of cattle and calves increased 25.5% to $2.65 billion, as average prices increased 45%, while marketings were the lowest for the quarter since 1994. For the first time since 2003, revenue from cattle sales exceeded the total of the supply-managed dairy and poultry sectors. Cash receipts from hogs fell 12% to $1.03 billion because of a 16% decline in average prices.


Lack of rain and drying topsoil is fast becoming a concern in Alberta and western Saskatchewan, while Manitoba and eastern Saskatchewan are still very wet from the recent storm. Most of the west half received less than 40% of normal rain since the spring thaw and southwest Saskatchewan and southern and central Alberta have had virtually none in several weeks. Some farmers have stopped seeding remaining canola because of insufficient moisture for germination. Little or no rain is forecast for the entire region over the next 10 days with temperatures above normal in the mid to high 20s. However crop stress may not be reflected in futures values unless similar conditions develop in the northern states.


In its weekly crop progress report for the week ended May 17, USDA reported spring wheat planted at 94% (week earlier 87%, average 65%, year ago 47%):spring wheat emerged, 67% (54%, 38%, 22%); winter wheat headed, 68% (56%, 56%, 55%); soybeans planted, 45% (31%, 36%, 31%); soybeans emerged, 13% (0%, 12%, 8%); corn planted, 85% (75%, 75%, 71%); corn emerged, 56% (29%, 40%, 32%);


The World Trade Organization's dispute settlement body, as widely expected, ruled for a fourth (and for now the final) time that the US country of original labelling (COOL) legislation is WTO-illegal. This was the final possible appeal, to a process that started in 2008. The panel said that the original decision rendered in 2009 was correct, as were the conclusions of the first appeal, after the US government revised COOL regulations. The revisions were meant to address the WTO objection that domestic and imported livestock was treated differently by applying the same labelling requirements to domestically produced meat, which made compliance even more onerous for American packers. The next step is up to the US administration and Congress. If the law is not repealed or the offending parts removed, Canada and Mexico can proceed with retaliation in the form of duties against American imports, subject to WTO permission.


Alberta Agriculture's latest weekly crop report said seeding was near 50% done vs 10% year-ago and 22% average as of May 14. Seeding was being delayed in central districts because of topsoil dryness. Overnight lows were cold with scattered frost reported. Topsoil moisture was reported 57% good or excellent vs 69% in the prior week. Spring wheat is 59% seeded, barley 43%, canola 35%.

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