Spring wheat price tumble, as Canada's crop falls less than thought


Spring wheat futures dropped to two-month lows after Canada's harvest of the high-protein type was seen falling less than investors had expected – in a report which proved more supportive of canola values.

Minneapolis-traded spring wheat futures for December delivery, the best-traded contract, extended early losses to close at $6.40 Ѕ a bushel, down 2.3% on the day, and the lot's weakest price since June.

The decline – which took to 24% the contract's tumble from a high reached early last month on North American dryness worries, particularly in the northern US spring wheat belt – also gave the lot its first close below 100-day moving average in three months.

The markdown followed the release by Statistics Canada of harvest estimates showing a Canadian spring wheat crop this year of 18.89m tonnes.

While down 7.7% year on year, the figure was higher than that implied by an analyst survey ahead of the data.

Durum slump

In fact, StatsCan's all-wheat harvest estimate, at 25.54m tonnes, was some 700,000 tonnes below market expectations, as shown by the Reuters survey, besides representing a fall of 19.5% on last year's bumper crop.

Canada 2017 output estimates, change on year, (on market forecast)

All-wheat: 25.541m tonnes, -6.188m tonnes, (-0.7m tonnes)

Includes durum, 3.989m tonnes, -3.864m tonnes, (-1.0m tonnes)

Canola: 18.203m tonnes, -1.398m tonnes, (-0.4m tonnes)

Corn: 13.645m tonnes, +452,000 tonnes, (+0.1m tonnes)

Soybeans: 7.743m tonnes, +1.28m tonnes, (-0.2m tonnes)

Barley: 7.212m tonnes, -1.572m tonnes, (+0.2m tonnes)

Sources; Statistics Canada, Agrimoney, Reuters

However, the extent of the decline reflected in particular expectations for the durum crop, which StatsCan pegged at a seven-year low of 3.89m tonnes – down 50% year on year, and a figure 1.0m tonnes below that investors had pencilled in.

The data will add to ideas of what the International Grains Council last week termed a "tightening supply outlook" for durum, in a briefing which the organisation slashed its world durum output forecast by 3.0m tonnes to 36.9m tonnes.

The estimate for the harvest in Canada, the top durum exporter, was cut by 1.0m tonnes to 4.5m tonnes, and that for the US by 200,000 tonnes to 1.4m tonnes.

Indeed, the IGC noted that with the "early stages of the [US] harvest confirming below average yields, [US] export prices rallied by as much as US$70 a tonne month on month, to $375-400 a tonne", as measured by fob export values at Great Lakes ports.

Canola estimate

For canola, of which Canada is also the biggest exporter, StatsCan pegged Canada's harvest at a three-year low of 18.20m tonnes, a drop of 1.40m tonnes year on year despite record sowings.

Indeed, the forecast decline in the country's harvest of the rapeseed variant was bigger than that expected by investors, who had pencilled in a figure of 18.6m tonnes.

Winnipeg canola futures for November extended headway to stand 0.9% higher at Can$502.60 a tonne after the data, signally, digging in above the psychologically important Can$500-a-tonne mark.

In Paris, rapeseed futures for November stood up 0.5% at E369.00 a tonne.

'Very dry conditions'

With Canada's production of the likes of barley and lentils seen falling this year too, officials highlighted the role of dryness in depressing Canada's overall yield prospects.

 "Very dry conditions in southern parts of the Prairies have played a role in the production expectations," said StatsCan, whose data were drawn from a survey of farmers last month.

StatsCan highlighted a vegetation growth index which for a large swathe of the central and western Prairies showed levels "lower" or "much lower" than the 30-year average.


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