A surprisingly large corn production estimate from the U.S. Department of Agriculture gave North American grain and oilseed markets a jolt during the week ended Aug. 15.
Corn and wheat prices fell in response to the updated data, while oilseeds had a more subdued response.
After a soggy start to the U.S. growing season, investors had expected a cut to seeded corn acres and a reduction in average yields when USDA released much-anticipated production and acreage estimates on Aug. 12.
The agency pegged corn plantings in the country at 90 million acres — down slightly from the June report, but well above expectations. The agency raised its yield forecast to 169.5 bushels per acre and pegged total production at 13.9 billion bushels, with a harvested area of 82 million acres.
Corn futures posted limit-down losses in immediate reaction to the USDA report, but stabilized around the US$3.70- to US$3.75-per-bushel area in the December contract as the week progressed.
With development still running behind normal, many analysts still anticipate an actual corn crop closer to 13 billion bushels than 14 billion, with any weather concerns over the next couple of months likely to spark a corrective rally.
The wheat numbers from USDA were also a bit bearish, with an estimated world wheat crop for the year of 768 million tonnes well above the 730.5 million grown in 2018-19.
Soybeans had a more muted reaction to the latest USDA estimates, with spillover from the bearish corn projections countered by expectations for a 19 per cent decline in U.S. soybean production on the year. Soybean prices bounced around within a wide range during the week, but trended lower overall.
Canadian canola futures found themselves caught up in the swings in U.S. markets, with the November contract holding relatively rangebound as the market awaits the looming harvest.
Swathing was underway in Manitoba during the week, but producers in Saskatchewan and Alberta still need a longer window of frost-free weather to get the crops in the bin.
While areas of concern persist across the Prairies, expectations among traders seem to be that the crops will turn out decent overall if the weather co-operates through the harvest.
Barring a weather scare, the harvest pressure could keep a lid on the canola market heading into the fall. However, canola looks cheap compared to other oilseeds. Crush margins sit at about $90 above the November futures, nearly three times what they were at this time a year ago. Those large margins should keep domestic processors on the buy side, and keep the market supported if Chicago soybeans drift lower.