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Morning markets: Canada blizzards blow canola, spring wheat futures higher

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Most grain markets had a bit of that pre-data caution in early trading, with key US statistics due.

 

The US Department of Agriculture will later on release annual domestic production data for so-called small grains, ie the likes of barley and wheat, and a quarterly briefing on US crop inventories as of the start of this month.

 

The latter report in particular has a reputation for moving markets, offering a rare insight into US domestic grains use, which can be gauged only in part from data on the likes of milling, crushing and exports.

 

Signally, it throws light on feed use – how much livestock producers have been giving their animals, and of which crop, and which accounts for eg more than one-third of US corn consumption.

 

‘Snowstorm hit’

Still, two markets managed to escape the malaise, and for the same reason – the first snowstorm of the season in Canada, where considerable crop has yet to be harvested.

 

Agritel said that “in Canada, a snowstorm hit the country during the weekend,” where harvesting operation are “far from being completed.

 

“Losses will probably be recorded on spring wheat or canola.”

 

Canada weather reports from the weekend are littered with talk of heavy snow and blizzard-like conditions, and official advice to avoid travel, with Environment Canada warning of “hazardous conditions”.

 

And more such conditions are on the way, with Maxar cautioning of more rain and snow this week which “will cause delays to harvesting”.

 

Prices gain

The conditions prompted some reinjection of risk premium removed late last week after a weekly harvest report showing harvest pace in Saskatchewan having improved, albeit remaining well behind the typical pace.

 

Winnipeg canola futures for November stood up 0.6% at Can$448.30 a tonne as of 09:40 UK time (03:40 Chicago time), knocking on the door for a return above their 50-day moving average.

 

Minneapolis spring wheat futures for December stood up 0.7% at $5.51 a bushel for December.

 

‘Down considerably’

The spring wheat harvest has, of course, been somewhat slow too, south of the border in the northern US, where CHS Hedging cautioned that “for the most part, the spring wheat guys have moved on, and are focusing on their soybeans harvest”.

Not that there is so much worry over the quantity of US spring wheat harvested, with the USDA smalls grains report later expected to show some downgrade, by 12m bushels in the estimate for the “other spring wheat” crop, but to a 585m-bushel figure which would still indicate OK supplies.

 

Still, “any actual number below 575m bushels, in our opinion, would be bullish for Minneapolis-type spring wheat futures,” said Terry Reilly at Futures International.

 

And there is worry about the quality of what is harvested, with US Wheat Associates for instance on Friday noting that for US crop harvested “the average damaged kernel content is 0.4%, which is up from last year final average of 0.1%.

 

“Falling number average from samples analysed is 383 seconds, down from last year’s final average of 414.

 

“Average vitreous kernel content dropped to 63%, which is down considerably from last year’s final average of 90%.”

 

‘Unprecedented drought’

The buoyancy in spring wheat contrasted with a more modest gain, of only 0.3% to $4.88 ½ a bushel, in December prices of Chicago soft red winter wheat, the world benchmark.

 

Worries also remain of course about southern hemisphere crops, with CHS Hedging noting that “Argentina and Australia struggle with dryness”.

Agritel said: “In Australia an unprecedented drought is persisting and is raising big worries on the crop potential of this season.”

 

Maxar cautioned that this week “moisture will remain short across Western Australia, Queensland and New South Wales”.

 

‘Raising disease concerns’

However, movement in prices of winter wheat, as well as those of corn and soybeans, was constrained by the prospect of the USDA briefings, albeit with an upward bias thanks to Midwest weather threats.

 

“Wetness will increase in Iowa, Wisconsin, northern Illinois and Minnesota, raising disease concerns” for corn and soybeans, said Maxar.

 

“Frost is possible across far northern areas causing minor damage.”

 

In Iowa, Mike Mawdsley at First Choice Commodities said that “some places seeing too much rain the past couple days, and more predicted into mid-October”.

 

Corn futures for December gained 0.2% to $3.72 ¼ a bushel.

 

‘Should be monitored’

Soybean futures for November did a bit better, gaining 0.5% to $8.87 ½ a bushel for November, amid some disappointment at the pace of sowings in Mato Grosso, the key Brazilian producing state, where dryness has been an issue, although which did gain weekend rain, particularly in the north.

 

“Planting progress in Mato Grosso did not advance as much as we anticipated” last week, said Terry Reilly at Futures International, reporting a figure of 1.7% completion, “well down from 32 percent from a year ago.

 

“The recent rains should help but in the meantime, this should be monitored.”

 

Furthermore, there remains some optimism over demand for US soybeans from China, where some investors have a slightly less downbeat idea of feed use.

 

Benson Quinn Commodities, citing research from Shanghai JC Intelligence, said that “even with hog herd loses of 38% (August year-on-year numbers) and meal demand declining 6-7% for 2018-19, they see the potential for a recovery of 2.8% in meal usage for 2019-20 to 66.3m tonnes”.

 

‘Not beneficial’

Still, for cotton, US exports to China remain in the doldrums.

 

And, with talk of Washington mulling plans that would prevent Chinese companies from listing shares in the US, meaning fresh strain on US-China relations, New York’s December cotton contract shed 0.4% to 60.64 cents a pound.

 

Nonetheless, it remains towards the middle of its recent trading range, and ahead of its 50-day moving average, and with some potential cause for bullish feeling, if weather worries eventuate.

 

“West Texas and southern Kansas are expected to see significant to heavy precipitation this week, which is not beneficial for cotton yields at this point of the season,” said Louis Rose at Rose Commodity Group. The remainder of the Belt is expected to see most dry conditions this week.

 

Furthermore, dry conditions persist across Australia and South America, although the latter – especially Brazil – could see some relief from drought over the near- to medium-term.”

 

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