Friday September 04 2015





Alberta's agriculture department said harvest progress reached 21% combined and 19% swathed province wide, with the southeast at 45%. Province-wide, spring wheat was 23% threshed, barley 11%, canola 6%, peas 83%. Swathed: spring wheat 10%, canola 37%, barley 13% of the barley and 10% of the spring wheat have been swathed. In Saskatchewan 29% of crops were combined and 30% in swath or ready to straight-cut with the southwest 51% combined, southeast 45%, west-central 20%, northwest 13%. Topsoil moisture was 3% surplus, 78% adequate, 17% Short and 2% very short.


Statistics Canada reported July 31 stocks of the main grains and oilseeds, which represent 2015-16 carryover, at 12.22 million tonnes, 31% under year-ago but near the five-year average. Farm stocks were just over half the total of a year earlier, when rail system bottlenecks prevented producers from selling the record 2013 harvest was quickly as they would have liked. Almost all of the change was in farm stocks, since commercial stocks vary little from year to year. All-wheat inventory on farms was down 52%, barley 39%, oats 42%, canola 47% and lentils 57% from year-ago but mostly close to two years ago. Wheat stocks were 32% under year-ago but 38% higher than at the end of 2012-13. Durum stocks were down sharply with farm inventory at half of year-earlier but above that on the 2013 date. Canola carryover of 2.32 million tonnes (1.02 million on farms and 1.31 in commercial storage) was 23% under 2013-14, above the five-year average of 1.5 million and well above very low 588,000 at the end of 2012-13. It was also more than the trade expected, which was 1.8-1.9 mmt. Canola supply for 2015-16, even with a subnormal harvest, will now be adequate.


Statistics Canada retroactively revised both 2013 and 2014 canola production and 2012-13 carryover stocks figures upward. Originally reported at 1.44 million, farm stocks as of July 31 2014 were placed at 1.90 million. The official canola crop estimate for 2013 was raised from 17.96 million tonnes to 18.55 and for 2014 from 15.55 to 16.41 million. The inaccuracy of Statistics Canada's production and stocks figures, especially in canola, is disconcerting to the trade. Large revisions from one report to the next make it hard for grain companies to anticipate off-farm flow. These errors and big, abrupt revisions are common, especially in canola, and arise from farmer survey information.


Commodity markets were remarkably unaffected by severe losses in world stock markets this month. Daily changes in leading stock market indexes were in the 5 to 8% range, setting long-time records for volatility. 6-8% a day over the past , stemming from another 8% loss on Chinese exchanges. Equity traders bought and sold with no evident pattern but with a herd instinct that exaggerated prices movements, dominated by the idea that world economic conditions are weak and another global recession may be ahead. Agricultural commodity fundamentals are also very weak but remained separated from financial market convulsions. In then case of canola, there appears to be no concern that financial and economic turmoil in China will affect canola seed or oil demand. Japan and Mexico are also expected to remain steady buyers.


Viterra will acquire the TRT-ETGO oilseed crush plant at Becanour, Quebec for $190 million. The plant has a capacity of 1.05 million tonnes annually and can crush canola or soybeans. TRT-ETGO is owned by Felda Global Ventures Holdings, a Malaysian government investment fund with interests in 10 countries. The plant was completed in 2010.


The International Grains Council said world grain stocks at the end of the current marketing year will be the highest in 29 years, with combined wheat and coarse grain carryover of 447 million tonnes, up 2 million tonnes from last month. Production will exceed consumption for the third straight year. The IGC kept its estimate of 2015-16 world wheat production at 720 million tonnes and raised its consumption estimate to 710 million from 707 last month, but also raised projected carryover to 206 million tonnes from 201 in July and 202 last year after an adjustment in carry-in. The wheat trade estimate was also lowered by 5 million tonnes from last month to 148 million vs 150 last month, 153 last year and 156 in 2013-14. Coarse grain production is expected to be 1.268 billion tonnes compared to 1.295 last month and 1.292 last year. Coarse grain use is projected at 1.275 billion vs 1.270 and 1.240 and carryover for 2015-16 was estimated at 241 million tonnes vs 243 last month. Increases in IGC world wheat estimates were a surprise, if not a shock, and continue to show close to zero growth in world grain demand. The IGC's wheat figures did not exactly align with other sources which have been discussing reduced prospects in the EU, Canada and a few other places. However Australia now expects a bigger wheat harvest in the middle of the feared El Nino.


Saskatchewan's agriculture department said that as of August 25 the harvest was 16% done and another 19% of crops were swathed or ready to straight-combine. Winter wheat was 81% done, peas 58%, lentils 53%, canola 7%, spring wheat 5%. The 5-year average is 6% combined. Harvest was 33% complete in the southwest and 27% in the southeast region. Topsoil moisture was rated 7% surplus, 81% adequate, 11% short and 1% very short. In Alberta, showers and rain kept harvest progress slow in the week, but reached 10% overall with winter wheat 71% done, peas 58%, barley 11%, spring wheat 8%, canola 2%. The 5 year average is 4% combined. Yield estimates continued to improve, however projections for the Peace River region declined. Soil moisture was 39% good or excellent.


Statistics Canada on August 21 reported large declines in 2015 production of key Canadian crops as a result of severe drought in Alberta and western Saskatchewan. National wheat production was estimated at 24.6 million tonnes, 16% less than in in 2014 and barely two-thirds of the record 37.5 million in 2013. National average wheat yield was 17% lower. The canola harvest was put at 13.3 million tonnes, a 14% drop from 2014, as average yield fell 13% to 30.0 bushels per acre. The national soybean harvest was put at 5.9 million tonnes, with a 10% drop is expected in Ontario to 3.4 million from 3.8 million last year, the record; a 3% increase in Quebec did not prevent the first year-to-year decline since 2007. National corn production is projected 7% higher at 12.3 million tonnes, however it is 13% under the record 14.2 million harvested in 2013. Ontario corn production is expected to be 8.2 million tonnes, up 7% on a 9% increase in harvested area.


Western Canadian farmers seeded 3.2% more acres to the main crops in 2015 than the year before but expect to take off 10% less because of the drought in Alberta and Saskatchewan, according to Statistics Canada's August 21 crop report. Production of the seven principal crops plus lentils was estimated at 53.5 million tonnes vs 59.6 last year and the record 72.5 in 2013. The wheat crop in Alberta was put at 7.1 million tonnes, down 24% with a 39.5 bushel per acre yield. The Saskatchewan wheat crop is put at 11.2 million, down 21% from 14.2, but in Manitoba at 4.3 million the wheat crop will be up 18% on 15% larger harvested area and a high average yield of 49.9 bu/ac. The prairie canola crop was estimated at 13.3 million tonnes, a 14% drop from 2014 after 13% decline in yield to 30.0 bushels per acre. The Alberta crop was reported at 4.0 million, down 27% after a 22% decline in yield to 29.4 and a 7% drop in area; Saskatchewan at 6.7 million, a 12% decline with average yield of only 28.4 bushels. However Manitoba will see a 19% increase to 2.6 million as average yield rose 4.3% to 36.3 bushels per acre. Soybean production in Manitoba and Saskatchewan is expected to increase 13% as soybean areas escaped drought stress. Manitoba corn production was estimated at 660,400 tonnes, down 5% on an 8% drop in area.


Some in the trade believe Statistics Canada underestimated yield and production, and will raise them in the remaining reports of 2015, which are due October 2 and December 4. There is some precedent, especially in 2013 when the final report estimated production 19% higher than the first of that season. Historically large changes have tended to occur in late years when crops were difficult to assess during the July survey. The 2015 season is the earliest in years, with crops more advanced, so farmers' assessments should have been correspondingly more accurate. In Alberta crop conditions declined in the latest week. On the contrary, yield estimates for Alberta could be considered too high in view of extreme drought in many areas.


Almost all projections in the US agriculture departmentís monthly supply-demand report for August were more bearish than trade estimates, sending futures prices limit-down on August 12. Average corn yield was 168.8 bushels per acre, vs the average trade estimate of 164.5. Soybean yield was out at 46.9 vs 44.7. Corn production was estimated at 13.686 billion bushels whereas the trade expected 13.327, and soybeans at 3.916 billion against 3.724. USDA projected corn carryover at 1.713 billion bushels and soybeans at 470 while pre-report estimates were 1.424 and 301. All wheat production is down slightly from the July report but 5% higher than in 2014. Winter wheat at 1.44 billion is up 4%, hard red winter at 856 million is down 1% and soft red winter at 389 million is down 1%. Durum wheat production estimated at 77 million bushels, 45% higher than in 2014, and non-durum spring wheat at 621 million is up 4%.


USDA world projections were also mostly negative. Global wheat production was estimated at 726.5 million tonnes vs 721.9 million in the July report and 725.2 last year with consumption at 714.7 million tonnes, up 0.8% from 708.9 last year. Carryover was raised to 221.4 million from 219.8 last month and 209.6 last year. USDA estimated the world coarse grain harvest at 1.276 billion tonnes, down from 1.294 last year, with consumption of 1.281 billion up only slightly from 1.273. Coarse grain carryover was estimated at 227.4 million vs last season's 232.3. The global oilseed output estimate was lowered to 529.0 million tonnes from last month's 531.7 and 537.1 last year but carryover is expected rto increase to 96.0 million from 94.1 last year.


Near-record drought across the western two-thirds of the prairie grain belt has given way to nearly daily rains, including torrential downpours that flooded parts of Calgary and Regina. Soil moisture has been much improved in the drought area, too late to help but in time to frustrate the start of the harvest. In Saskatchewan as of August 5 harvesting reached 1% with winter rye 23% done, winter wheat 10%, peas 5% and lentils 2%. Topsoil moisture was rated 4% surplus, 69% adequate and 27% short or very short. The Manitoba harvest has also started with winter wheat yields of 60-85 bushels pe acre reported. Some spring wheat and peas are also being cut but the main harvest is 2 weeks off.


The major international forecasting agencies have been steadily lowering estimates of the 2015 world canola/rapeseed crops. Most or all the drop has been in Canada, the dominant exporter. The latest was Informa Economics, which reduced its global rapeseed forecast to 64.8 million tonnes from 65.8 a month ago and 71.7 million last year. For Canada Informa now sees a harvest of 13.2 million tonnes vs 14.2 million a month ago and 15.6 last year. Seed available to Canadian import buyers will be much tighter, especially with rising domestic crush capacity. This should widen the canola/soybean spread to the extent that China, Japan and Mexico do not substitute soybean and other oils. In this sense later canola futures months appear quite underpriced with old-crop prices maintaining a premium.


The biggest international commodity trading houses reported weaker results in their latest quarters because of instability in world commodity markets, reduced processing margins and currency exchange movements. ADM reported revenue for the quarter ended June 30 down 20% at $17.2 billion and earnings 28% lower at $386 million. Bunge had a 36% drop in quarterly world revenues of $10.78 billion with earnings for the quarter of $72 million vs $172 million a year earlier. Cargill reported its first quarterly loss in 14 years of $51 million vs net of $376 million year-ago, on a 21% drop in global revenue to $28.4 billion.


The Trans Pacific Partnership negotiations in Hawaii ended without an agreement and without setting a date for the next negotiating session. A brief official statement did not give a reason. Other sources said agreement was not reached in only a few areas, including insistence by New Zealand for access to Canadian, US and Japanese dairy markets; the length of patent protection for advanced new drugs (five to 12 years) before generic copies could be produced; Australian demands for a larger quota for US sugar imports; Japanese refusal to open up its rice market; and a minimum local content in motor vehicles. Canada reportedly made an offer for a tariff-rate quota for dairy imports that was acceptable to all countries except New Zealand. The Maui talks showed again that many countries expect more in free trade benefits to their exporters than they are prepared to concede to more import competition, the same attitude that stalled out the WTO Doha Round. The next steps are complicated by pending elections in Canada and the US, although trade minister Fast said the government would continue to negotiate even during the election campaign


The takeover of CWB LTD by G3 Global Grain Group was completed July 31. The CWB name will be dropped and the business will now be known as G3 Canada Ltd. G3 Global, a joint venture of Bunge Canada and the Saudi Arabian sovereign investment fund SALIC, acquired 50.1% of CWB equity for $250 million. After assets of CWB are combined with certain Bunge properties in Quebec, G3 Canada will have seven primary elevators in western Canada including four recently built or under construction and four in Quebec, and port terminals at Quebec City, Trois Riveieres and Thunder Bay; also two new Great Lakes grain ships, approximately 200 km of short-line rail track in Saskatchewan. and a fleet of grain hopper cars. Remaining interest is held in trust for grain farmers, who will gain trust units at the rate of $5 per tonne of grain delivered since the 2013-14 crop year. G3 has an option to buy out the trust in 2022 at fair market value. The CWB commercialization process is complete a year before it was mandated in the revised Canadian Wheat Board Act which removed its 75-year monopoly.


The Pacific Coast Canola crush plant in Washington state, 84% owned by Legumex Walker, appears to be on the verge of bankruptcy. AgCountry Farm Credit Services, which heads a syndicate of lenders owed $55 million, called its loan and was expected to take over the plant, built at a cost of over $100 million. It has been unable to arrange alternate financing. Negative crush margins caused by high seed prices drained its cash and it operated at a loss for most of the time since it opened. Legumex said the canola plantís failure will not affect its special crops business. Its shares on the TSE dropped from $2.45 to as low as 82c before closing at $1.


The Saskatchewan agriculture departmentís crop report for the week ended July 27 indicated a small but quite significant improvement in crop conditions from recent rains. It said 60% of spring wheat, 52% of winter wheat, 35% of durum, 62% of barley, 56% of canola and 46% of lentils were in good or excellent condition. A month earlier the good/excellent rating was 52% for spring wheat, 45% for winter wheat, 53% for barley, 46% for canola and 40% for lentils. Topsoil moisture also greatly improved to 7% surplus, 62% adequate, 25% short and 6% very short. Meanwhile the Alberta agriculture department estimated average yield at 34.2 bushels per acre for spring wheat (51.8 last year), 33.4 for durum (48.1), 50.1 for barley (54.2), 27.6 for canola (32.2) and 32.2 for peas (31.7). These yields are generally 25-30% under the 5-year average. Good/excellent rating averaged for all crops was 30.2%, up slightly from 29.7% a week earlier.


A study at the Johnson-Shoyama Graduate School of Public Policy at the University of Regina found that non-farmer investors own about 837,000 acres in Saskatchewan, compared to 52,000 acres in 2002. It did not explore ownership by country of residence, so did not provide data on foreign ownership. Investor-owned land represents 1.4% of the provinceís total. The Canada Pension Plan Investment Board has 14% of all investor-owned land or 115,000 acres, purchased from Assiniboia Capital Partners in 2013 for $128 million.


The CWB crop tour July 22-24 estimated average prairie spring wheat yield at 38.9 bushels per acre compared to 45.7 last year, durum at 27.8 vs 40.9 and canola at 29.3 vs 34.4. Based on Statistics Canadaís acreage estimates production would be 18.14 million tonnes of spring wheat, 4.19 of durum and 12.49 of canola. These appear to be the first realistic quantification of drought impact on yields and production, and may still be high. Even if moisture conditions continue to improve, these estimates should be considered the high end of probable results. Low carry-in of most crops from the 2014-15 crop year will result in lower 2015-16 supply than any current credible estimate. However prices in the new crop year will be influenced more by US and world prices and the dollar exchange rate than by western Canadian supply, except in the few crops (lentils, flax, possibly peas) where Canadian availability is a large part of world supply.


A bill was introduced on July 23 in the US Senate by seven sponsors from both parties to address the country of origin (COOL) trade dispute with Canada and Mexico, after weeks of inaction since its agriculture committee recommended unconditional repeal. The Voluntary Country of Origin Labeling & Trade Enhancement Act would eliminate the existing mandatory provision for beef, pork and chicken and substitute a voluntary version with very similar features. Processors and retailers would be allowed to use the present label format to identify meat by the animalís origin. Agriculture minister Ritz and trade minister Fast immediately responded with a statement to the effect that the proposed revision would still violate WTO trade rules and that Canada will not accept a voluntary COOL. The law must be repealed in its entirety to prevent imposition of retaliatory duties. US organizations which were instrumental in the passage of the existing law also objected, urging members to lobby their Senators.


The federal government announced that the usual tax deferral for forced sale of cattle due to the drought is being initiated. A list of designated regions in the four western provinces has been released in which livestock producers facing feed shortages can defer income tax on part of sales of breeding livestock for a year. However proceeds are only partly offset. In order to defer income, a breeding herd must be reduced by at least 15%. At the 15% level, 30% of income from forced sales can be deferred into the next tax year. If the reduction is 30% or more, 90% can be deferred.


Agriculture Canada, in a monthly supply-demand report July 22, gave its latest estimates of 2015 Canadian crop yield and production, but they appeared to make an insufficient allowance for the impact of drought in Alberta and Saskatchewan. Its yield and production estimates: non-durum wheat, 44.6 bushels per acre and 21.90 million tonnes; durum 33.9 and 5.19 million; barley 57.0 and 6.90 million; oats 77.0 and 3.20 million; canola 36.2 and 14.30 million; flax 21.0 and 950,000. Corresponding 2014 results: non-durum wheat, 47.3 bushels per acre and 24.09 million tonnes; durum 40.9 and 5.20 million; barley 61.9 and 7.12 million; oats 83.7 and 2.91 million; canola 39.0 and 15.56 million; flax 20.70 and 847,000. While the figures are for all Canada, such yields are very unlikely to be reached due to drought conditions. Statistics Canada will issue its first crop production report based on a farmer survey on August 21.


Corn and soybean crops in Ontario are behind normal development due to late planting and lack of heat. Crop progress varies widely according to planting date but latest corn is 18Ē high and soybeans have not canopied. A bumper crop of first-cut hay is being taken off. Warmer weather in the week of July 20 may help.


Canadian domestic canola crush for the week ended July 15 jumped to as 168,513 tonnes, apparently from the opening of he new Cargill crush plant at Camrose. Throughput was the high fro the crop year to date, up from the prior week's 124,637. The four-week average is 135,231. Cumulative crush for the crop year to date is 6.94 million tonnes, 5% above 6.64 in the year-ago week. The Cargill facility, which has a capacity of 850,000 tonnes a year, is running at almost full capacity.


Alberta and Saskatchewan weekly crop reports pointed to slight improvement in crop and moisture conditions during the week of July 13. The Saskatchewan report said topsoil moisture was 1% surplus, 44% adequate, 36% short and 19% very short compared to 33% adequate, 45% short and 22% very short the week before. However the overall crop outlook continues to show the drought's effects with spring wheat 51% good or excellent. durum 26%, barley 49%, canola 45% and peas 39%. At the start of the growing season June 6 comparable ratings were spring wheat 65%, durum 54%, barley 66%, canola 44%) and peas 69%. The Alberta report said widespread showers brought limited drought relief to some districts but the overall moisture and crop situation was only slightly improved. Spring wheat was rated 32% good or excellent (30% a week ago), barley 30% (27%), canola 25% (21%), peas 38% (37%).


The US agriculture department issued its monthly supply-demand report on July 10, generally with less favorable changes in production, use and carryover than analysts expected. The US wheat production estimate was raised to 2.150 billion bushels from 2.120 last month, 6% above 2.030 billion in 2014-15. Wheat exports for the current year were raised to 950 million bu from 925 last month and 855 last year. US wheat carryover was estimated at 842 million bu, up from 814 last month and 753 last year for a very high stocks to use ratio of 38.5%. The corn production number was trimmed to 13.530 billion from 13.630 last month, down from 14.220 last year. Corn carryover was projected at 1.600 billion vs 1.770 last month and 1.850 last year, reducing stocks to use to 11.6% from 13.0%. USDA raised its soybean crop estimate to 3.885 billion bushels from last month's 3.850 and 3.970 billion last year. Exports at 1.770 billion were unchanged from last month but below 1.820 in '14-15. Soybean carryover at the end of '15-16 is expected to be 425 million bu, down from 475 last month but sharply higher than 255 at the end of '14-15. USDA did not seem to compensate adequately for lower wheat prospects in western Canada from the drought. It put the Canadian wheat crop at 27.50 million tonnes vs 29.00 last month and 29.30 last year. The current figure is at least 5 to 8 million tonnes too high. Combined US and Canadian HRS wheat production was implied at 1.574 billion bu vs 1.632 last year but is more likely to be 1.4 billion or less, reducing export availability and carryover considerably and improving the price outlook. Projected '15-16 US imports ('14-15 in brackets), million bu: wheat 130 (144), barley 25 (24) and oats 95 (107).


The weekly crop report for Saskatchewan showed moisture conditions to have somewhat stabilized in the week ended July 6, but the situation remains very adverse. Province-wide topsoil moisture was rated 33% adequate, 45% short and 22% very short. A week earlier it was 32% adequate, 48% short and 20% very short. Per cent short or very short by district: southeast 57%, southwest 88%, west-central 79%, northeast 29%, northwest 83%. Spring cereals are 39% headed and canola is 55% in bloom. Crop condition ratings were not given this week. Weather forecasts for all of western Canada for the next week continue to predict temperatures in high 20s to above 30C in all areas. High humidity will increase local thunderstorm and shower chances, however no general rain is predicted.


Something is holding western Canadian cattlemen back from herd expansion, with cattle numbers the lowest since 1993. Cattle slaughter statistics for the first six months of 2015 do not show much sign of holding heifers back for the future cow herd. Canadian cattle slaughter for the first six months was 1.212 million head, down 10% from 1.350 a year earlier. Steer slaughter was 9% lower and heifer kill 10% lower. Cow kill was down 15%. Live cattle exports to the US were 25% lower at 460,000, with slaughter cattle down 49% at 104,000 and feeder cattle off 3% to 218,500. Exports of live cows and bulls, in high demand for the hamburger trade, were down 23% at 130,000. Combined exports and slaughter (marketings) were 1.67 million head compared to 1.96 million in the first half of 2014. Exports of beef and veal to the US were up 7% at 172 million lbs while exports to all countries were up just 5%.


The drought area of western Canada covers most of the western ranch country and lack of pasture and hay is posing very serious issues. There has been no first cut of hay in many districts. The hay shortage has already raised prices to double from a year ago and they are still climbing. Some grass cattle are being fed grain because there is no forage. Cattle and calves are going into feedlots early and at light weights. The summer grazing months are normally the time of lowest-cost weight gains.


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.

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