Wednesday October 07 2015



Agriweek Canadian agribusiness authority since 1967


The Trans Pacific Partnership negotiations finally concluded with an agreement signed on to by all 12 members, with compromises all around. Canadian negotiators were able to get away with giving up only 3.25% of the market for dairy products to duty-free imports, 2.3% for eggs, 2.1% for chicken and 1.5% for broiler hatching eggs. When Canada entered the talks New Zealand and the US said the whole Canadian system must go. Later talk was for a minimum 10% duty free access. Not only is new import competition insignificant, but the government has agreed to $4.3 billion in compensation to dairy and poultry farmers over 15 years, regardless of whether prices or quota values are impacted. This likely was the last threat to the supply management system for many years to come. (10/05/2015)


Canada, along with other ag-exporter members of the TPP group, will get better access to Japan, Vietnam and Malaysia under the TPP agreement. Some duties in these net-importer fast-growth countries will be reduced or eliminated as soon as the agreement takes effect, but most of the most restrictive tariffs will be reduced or eliminated over five to 15 years. Canada already exports about $15 billion worth of grains, oilseeds and products to the TPP zone, but almost all are to the US, Mexico and Japan. Exports to the US and Mexico are already duty-free under NAFTA. Japan will eliminate tariffs on pork and beef, but over 10 to 15 years. Possibly the most promising market in the bloc is Vietnam, which agreed to eliminate duties on agricultural and food imports either as soon as the agreement takes effect or over two to five years. Overall, the competitive position for Canada relative to the US and Australia is little changed because these TPP competitors get the same concessions. Obviously it would have been catastrophic for existing pork, beef, canola and other exports had Canada not been part of the deal. There is still a long way to go, with ratification required by legislative bodies of 12 member countries. The outcome of the Canadian election may change everything. There is also much opposition in the US Congress, which will not vote until early 2016. The earliest that the TPP agreement can come into force is the start of 2017. (10/05/2015)


A news conference to have been held at the Trans Pacific Partnership trade negotiations in Atlanta on the afternoon of Sunday October 4 was again delayed and is now not expected until Monday October 5. Talks continued through Sunday. A news blackout was maintained but it was reported from Atlanta that the same issues were holding up finalization of an agreement: the period of patent protection for advanced biologic drugs (few of which exist up to this time), dairy imports by Canada, Japan and the US and auto and parts content. New Zealand, with a population of 4.5 million and GDP of $150 billion, was understood to be inflexible in demanding access to TTP dairy markets. NDP leader Mulcair may have seriously complicated the negotiations by stating on October 3 that he will not be bound by any agreement, would discard it if it did not leave dairy supply management intact and attacking the Harper government for engaging in negotiations during an election campaign. (10/04/2015)


Statistics Canada’s second crop production report of the season, issued October 2, was based on the standard methodology using aggregated results from a survey of 9,300 farmers. Figures were not directly comparable to the new model-based report issued September 15, which adjusts survey responses according to satellite images of vegetation and weather events. Estimates were significantly higher for western crops compared to the first report in August. Total production of the major crops was projected at 73.44 million tonnes nationally compared to 72.46 in August and 78.08 million in 2014. Manitoba, which did not experience drought, was projected to produce 9.90 million tonnes compared to 9.94 in the August report and 9.07 million in 2014. The Saskatchewan estimate was raised to 26.57 million tonnes vs 24.86 and 28.99, and Alberta 17.64 vs 16.51 and 21.38. (10/02/2015)


Compared to the August report, production of the main western crops was put at 55.77 million tonnes, up 3% from the special September report and just 4% above the August survey. The canola crop was put at 14.29 million, 7% above 13.29 million reported in August and 13% smaller than the 2014 crop, which was restated higher last month to 16.28 million. However it was close to the five-year average. The Saskatchewan and Alberta canola crops were estimated at 7.28 and 4.40 million vs 6.70 and 3.99 in August. In Manitoba it was put at 2.54 million, similar to 2014.0 Average yield for canola on the prairies was estimated 32.2 bushels per ac rev compared to 30.0 expected in July when the first survey was taken. The bottom line for western crops is that yields were remarkably high in the half the grain belt that had severe drought during the main part of the growing season. (10/02/2015)


Key figures in the USDA quarterly grain stocks report released September 30 were slightly less bearish than expected, below private pre-report estimates, but not by enough to support prices. All-wheat inventory was put at 2.09 billion bushels, up 10% from year-ago, though farm stocks of 647 million were 9% lower. The trade guess had been 2.17 billion. Durum stocks were 28% higher at 74 million with farm stocks up 15% at 44 million. Durum figures indicated good disappearance of a large supply. Corn stocks were up 41% at 1.73 billion, right on the trade estimate, with farm stocks of 593 million 28% higher. Soybean stocks were 191 million bushels vs 217 million expected but farm stocks of 50 million were 133% higher than a year ago. USDA lowered the 2014 soybean crop estimate to 3.93 billion bushels from 3.97 to make figures balance. (09/30/2015)


Despite some unsettled weather, harvest in western Canada progressed well last week towards an earlier conclusion than in most recent years. In Saskatchewan 88% of area was either combined or in swaths (28% swathed or ready to straight-cut) as of September 21, although northwest and northeast districts were only about a third combined. In Manitoba only corn, sunflowers and reseeded canola remain to be done. Commonly-heard comments from farmers are that yields mostly exceeded expectations and quality is also closer to average than earlier appeared. Alberta reported limited harvest progress for the week but 46% of area was combined and 27% in swath. Work is behind year-ago in central and northern districts but ahead in the south. Yield estimates are improving dramatically even in driest areas. The weekly crop report put spring wheat average yield at 38.2 bu/ac, durum 35.0, barley 51.7, canola 32.3, peas 34.3. (09/25/2015)


World wheat carryover at the end of the 2015-16 world crop year will be a new record high, according to the latest monthly report from the International Grains Council. It projected wheat production for 2015-16 at 727 million tonnes, up from 720 last month and last year, and a third consecutive record. Global wheat use is expected to be 1.7% higher and production 1% higher but an adjustment in carry-in boosted carryover to 211 million tonnes compared to 206 expected last month and 202 at the end of 2014-15. Wheat stocks held by the five top exporters is expected to increase 14% to 74 million tonnes from 65 million. The wheat surplus condition is chronic and it might take two or three seasons of weather and crop problems to allow a return to wheat prices of 2012 and 2013. World coarse grain production was projected at 1.269 billion tonnes vs 1.268 last month, down 2% from 1.297 last year. Coarse grain use was estimated at 1.267 billion vs 1.269 last year, with carryover rising to 245 million from 241 last month and 243 million last year. (09/25/2015)


Forward bookings of canola exports appear to be weak, especially to China. In the first six weeks of the crop year actual shipments were 861,000 tonnes vs 840,000 a year ago, but orders for shipment in the December-January period are said to be thin. Chinese government reserves of soybean and canola oil are reported to excessive after officials over-estimated demand growth and domestic crush and oil imports continued heavy. Chinese government-managed vegetable oil reserves are estimated at 6 million tonnes, 20% larger than a year ago and at least 25% above intentions. Palm oil imports during August were 542,000 tonnes, up 75% from the 2014 month, though imports for the first eight months of 2015 were up just 3%. China takes 45% of Canadian canola seed exports and 27% of oil exports. Longer term, things appear more stable. The Chinese government recently eliminated a national support price for canola, leaving it to canola-producing provinces to determine floor prices and subsidy rates. Four provinces now have regional subsidy programs with support prices 5 to 15% lower than previous national rates. Lower prices may reduce plantings of winter rapeseed, which start in November. (09/25/205)


The Saskatchewan agriculture department reported that as of September 17, 52% of the 2015 crop was combined and another 30% in swaths or ready for straight-cutting, despite widespread rain interruptions. The 5-year average is 42% and 33%. Progress ranges from 29% in the northeast to 75% in the southwest and 73% in southeast districts. In Alberta, wet weather kept harvest progress during the week to just 7%, bringing it to 37% overall, with another 29% in swath. Peas were estimated at 96% combined or swathed, canola 74%, spring wheat 60%, barley 55%, oats 29%. Though delayed, completion is 11% ahead of year-ago. (09/18/2015)


Statistics Canada this week baffled the trade with the surprise release of a new set of 2015 crop estimates based on a new statistical model which adds satellite imaging information and climate data to aggregated farmer survey responses to improve accuracy. The agency said it is a different way to interpret estimates, adding that the new numbers should not be considered more or less accurate than the normal survey-based report. It could replace the legacy reports in the future but September crop estimates will be issued October 2 according to the usual methods. Traders did not know which to believe and mostly let it go. There is obvious value in improving the accuracy of crop production reports. StatsCan regularly revises production figures when more precise inventory surveys are conducted to make supply-demand balance sheets balance. Each of the three production reports issued annually is second-guessed in the trade but is the official benchmark. If the agency plans to change its survey methods it should have explained the process in advance and devised an orderly phased-in. The new method results in an estimate of production of the major crops of 72.39 million tonnes, 2.6% above the 70.53 million in the August report based on farmer responses only. Canola production of 14.44 million tonnes is indicated compared to 13.34 million under the traditional procedure, a variance of over 8%. (09/17/2015)


The United Nations Food & Agriculture Organization could apparently not be happier about world grain surpluses are demolishing commodity prices. It happily reported last week that its world food price index for August dropped 5% from July to 155.7, the biggest one-month fall in seven years. It raised its global wheat production forecast to 728 million tonnes from 723 million and coarse grains to 1.311 billion from 1.331 billion in 2014-15, which is the record. The forecast for global wheat was only 4.6 million tonnes or 0.6% off the 2014-15 record. Food consumption of wheat will rise less than 1% to 492 million tonnes in 2015-16 and livestock feed use by 1.4%, the slowest growth rates in two years. The FAO forecast cereal carryover at 12 million tonnes higher than a month ago at 643 million, only 1% under the record of the prior year. Global coarse grains carryover was predicted at 272 million tonnes, a new high and 7.4 million or 6.5% above the forecast last month. (09/17/2015)


Adding a new twist to the immigration debate in the US, the US Milk Producers Federation conducted a survey which showed that half of all workers on American dairy farms are immigrants. The survey did not ask about the immigration status of their foreign workers, but 71% of respondents were not sure that their employment documents were legitimate. A third of all American dairy farms producing 80% of the milk employ foreign workers. The loss of immigrant labor, as through more aggressive enforcement or by the mass deportation of illegals proposed by the billionaire buffoon Trump, one in six dairy farms would be forced out of business and dairy-sector employment would drop by 208,000. Retail milk prices could allegedly double and the US economy would lose $32 billion in GDP. (09/16/2015)


The US agriculture department&aposs monthly supply-demand report for September appeared to be hard on wheat, neutral for soybeans and slightly bullish for corn but price moves were small after its release. USDA’s all-wheat estimate was unchanged from last month at 2.140 billion bushels but 5% above last year's 2.030 billion. The wheat export projection was dropped to 900 million from 925 last month, up from 854 last year. The wheat carryover number was raised to 875 million bushels from 850 last month and 753 last year. Corn production was trimmed to 13.590 billion bushels from 13.690 in last month's report as average yield was reduced to 167.5 bushels per acre from 168.8, down , down 3.5 from the 2014 record of 171.0. Corn carryover was reduced significantly to 1.590 billion bushels from 1.710 last month and 1.880 last year. The corn export estimate was unchanged from August at 1.850 billion bushels vs 1.880 last year. USDA raised the soybean crop estimate to 3.935 billion bushels from last month's 3.916 and 3.969 in 2014, on an increase in average yield to 47.1 bushels per acre from 46.9. The soybean export estimate for 2015-16 was unchanged at 1.730 billion, down from 1.830 last year. Carryover at the end of 2015-16 is expected to be 450 million bushels vs 470 last month and 210 in 2014-15. (09/11/2015)


Minor changes were made in world estimates but none were bullish. World wheat production was raised from 726.5 million tonnes last month to 731.6 and wheat use was raised to 716.3 from 714.7 last month, but global carryover was up at 226.5 million from 221.4 last month. USDA estimated the coarse grain crop at 1.274 billion tonnes, down from 1.277 last month, with use unchanged at 1.281 billion and carryover down slightly at 224.8 million from 227.4. USDA reduced its global oilseed output estimate to 527.1 million tonnes from 529.0 last month and 537.2 last year, with 2015-16 carryover reduced to 94.8 million from 96.0 last month, though higher than 92.9 last year. (09/11/2015)


The weekly crop report from the Saskatchewan agriculture department put harvest completion as of September 8 at 40%, with 33% cut or ready to straight combine, vs the 5-year average of 25% combined. Completion was 61% in the southwest but just 20% in the northeast. Provincial yield estimates were raised significantly and are now closer to 2014 results. Spring wheat yield was projected at 35 bushels per acre (32 a month ago, 38 last year; winter wheat 37 (32, 42); durum 30 (25, 37); barley 56 (57, 57); oats 81 (84, 80); canola 31 (30, 32); peas 29 (29, 31). Soil moisture was 6% surplus, 80% and 14% short or very short. (09/11/2015)


There is no sign of the slowdown in Chinese agricultural and food imports that can be linked to its slackening economic growth rate. Fears of such a slowdown have weighed heavily on world commodity prices since June. Chinese soybean imports in 2015-16 are projected at 76 million tonnes, an 8% gain over 70.4 million in the preceding year and up 17% from 59.9 million in 2012-13. Chinese soybean imports were a record 9.5 million tonnes during July. China is the top global wheat consumer and is essentially self-sufficient, but recently announced it will import 2 million tonnes in 2015-16. During the last crop year it was the biggest buyer of Canadian canola seed and oil and barley and is expected to continue to import similar amounts in the 2015-16 year. Chinese pork imports are forecast to increase sharply in the months just ahead because of an over-reaction by Chinese hog farmers to low prices in late 2014, which caused excessive culling of herds. Chinese production will recover but will be hampered by low US prices which will make imports relatively cheap despite yuan devaluation. (09/10/2015)


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 the Statistics Canada 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 department’s 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 232.3 last season. 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. <

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