Highlights

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Situation report
July 2008

US crop area and grain stocks

The National Agriculture Statistics Service (NASS) an agency of the U.S. Department of Agriculture (USDA) released on June 30th its acreage report.  Corn planted area was estimated at 87.3 million acres, down 7.0% from last year.  Despite the decrease it was the second highest planted area since 1946 behind last year’s total of 93.6 million acres.  US farmers are expected to harvest 78.9 million acres in 2008, a 9.0% drop from 2007.  According to the USDA, a new survey would be needed to judge the full extent of recent flooding in the Midwest. Most of the data were collected before the flooding. On June 1, 2008 corn stocks totaled 102.4 million metric tonnes, a 14.0% increase from 2007.

Soybean planted area for 2008 was estimated at 74.5 million acres, up 17.0% from last year, and 1.0% below the record high acreage of 2006.  Area for harvest was up 15.0% from 2007 at 72.1 million acres.   Soybean stocks were at 18.4 million metric tonnes, down 38.0 % from June 2007.

All wheat planted area was estimated at 63.5 million acres, a 5.0% increase from 2007.  All wheat stocks were at 306.0 million bushels, a 33.0% decrease from a year ago.

US and World supply-demand

The USDA raised its forecast for 2008/2009 US wheat production by 0.8 million metric tonnes to 66.9 million metric tonnes based on new surveys showing strong winter and spring wheat harvests.  Durum wheat production was projected this year at 2.4 million metric tonnes, a 25.0% increase from 2007/2008.  US ending stocks were projected at 14.6 million metric tonnes, up 1.4 million metric tonnes from the June estimate.  World 2008/2009 wheat production was forecast at a record 664.0 million metric tonnes, up 1.3 million metric tonnes from last month’s estimate and 53.0 million metric tonnes higher that the 2007/2008 crop.  Higher production in Australia, the EU-27, and the United States were responsible for the increase.  World wheat ending stocks were projected at 116.1 million metric tonnes.

US corn production was projected 0.5 million metric tonnes lower than the June projections at 297.6 million metric tonnes because of lower yield projections. Ending stocks for 2007/2008 were increased to 4.2 million metric tonnes with lower food, seed and industrial use.  USDA lowered estimates for corn use by the US ethanol producers for both last year and this year in its July report. The 2007/2008 ethanol usage estimate was 74.9 million metric tonnes of corn.  World corn production was projected at 775.3 million metric tonnes.

U.S. soybean production for 2007/2008 was projected at 81.6 million metric tonnes, down 2.9 million metric tonnes from last month because of reduced harvested area and yield.  U.S. ending stocks were at 3.8 million metric tonnes, down 0.9 million metric tonnes from June.  World soybean production for 2007/2008 was projected at 237.8 million metric tonnes down 2.9 million metric tonnes from previous month.  World ending stocks were at 48.9 million metric tonnes, 1.5 million metric tonnes lower from June. 

U.S. Crop conditions

NASS published its last Crop Progress report of July on July 28th.  U.S. soybeans were rated good to excellent at 62.0% and corn at 66.0%.  According to the agency 59.0% of grain corn is at the silking stage and 62.0% of soybeans are blooming.  U.S. winter wheat harvest was 79.0% completed on July 27th, 2008, with most of the southern States done.

Argentinean labour dispute came to an end

After months of conflict the Argentinean government revoked the controversial sliding-scale grain export tax which the Senate refused to endorse.  Since March 2008, Argentinean farmers held strikes on and off which closed the country’s largest port and disrupted the grain market.  Farmers were asking the government to cancel the export tax increases imposed in early March.  Soybean export taxes will return to the fixed 35.0% level set in November 2007.

Dover Industries Ltd purchases Cereal Foods Canada Inc.

Dover Industries Ltd. reached a conditional agreement to purchase Cereal Foods Canada flour milling assets in Montréal, Québec. The acquisition will assist the attainment of Dover’s long-term strategic plans for its Food Products Division. Dover already has flour milling plants in Ontario, Nova Scotia and Saskatchewan, a paper products division and an ice cream cone and plastic plant in Ontario.  Cereal Foods Canada, Inc. was a wholly owned subsidiary of Cereal Food Processors Inc., the fourth largest flour miller in the United States. The transaction was expected to be completed on July 31, 2008. 

Soybean rust spores in Ontario

The Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) reported Asian soybean rust spores had been found in rainfall samples collected in early July from eastern Ontario through southern Manitoba.  Positive spore locations for the week of July 1 to July 8, 2008 included Woodslee, Ridgetown, Forest and Ottawa in Ontario, as well as Morden in south-central Manitoba.  OMAFRA emphasized that spores by themselves do not necessarily mean a disease outbreak and that no soybean rust infected plants had been found in Ontario.

Prices

In July, the Canadian Wheat Board (CWB) decreased its 2007/2008 wheat values $3 per tonne from May’s Pool Return Outlook (PRO) reflecting current changes in international market conditions.  Milling durum wheat values were $7 to $8 a tonne higher.  Designated barley were up $3 per tonne, while feed barley projections increased $4 per tonne from the June PRO.

For the 2008/2009 crop year, CWB lowered its wheat values by $11 per tonne from last month’s PRO because of improved world crop conditions. Durum, feed barley and designated barley values were all unchanged from June.

Corn futures’ prices started the month on a high note because of heavy rains concerns in the US Corn Belt throughout June.   In July, ideal corn-growing weather, which persisted for weeks, prompted a steady decline of corn prices. Other factors such as higher corn stocks and lower crude oil prices pulled down corn price even more. 

After reaching peaks in June, soybean futures’ prices declined in July.  Soybean prices were volatile for the first half of the month.  Prices dropped during the second half of the month, pressured by broad speculative selling linked to a large drop in crude oil prices, favorable near-term weather and the drop of the Argentinean export tax.  The downtrend was slowed down near the end of July after an increase of crude oil prices and lower trade in the US dollar index.

Wheat futures’ prices started the month on a high note but dropped during the first week of July, their biggest decrease since March 2007.  Again good weather conditions and lower crude oil prices were responsible for the decline.  Wheat futures’ prices bounced back after USDA crop reports met expectations by raising projections for 2008-09 U.S. wheat production and ending stocks and Iran reported its need for significant wheat purchases on a monthly basis. Wheat prices ended the month on the low side following corn, as wheat was priced as a feed grain.

Winnipeg canola futures’ prices followed the price downtrends established by the Chicago Board of Trade (CBOT) soybean complex for most of July.  A firm Canadian dollar, lethargic fresh export demand and lower crude oil prices also contributed to the canola price decrease.   By the end of the month, canola futures were slightly higher supported by an upswing in the CBOT soybean and soybean oil values and a weaker Canadian dollar.

North American field pea markets remained mostly unchanged as a result of a seasonal slowdown in grower deliveries and good seeding progress of summer pulse crops in India.  The fall export season received a boost by recent tenders for a total of 460,000 tonnes of yellow peas by the Indian government.

International chickpea markets continued to hold steady in light trading activity as markets watched the development of crops in Canada and the United States.  Mid-month brought increased trading interest for 8 mm and 9 mm Kabuli chickpeas from North America.  Current high prices have kept most buyers trading at minimum inventory levels until the new crop is harvested.

Markets remained steady for all classes of lentils as light trading conditions continued.  Export selling was limited in the face of light grower selling.

Canary seed markets continued to be quiet with little changes to old and new crop prices.  Slow demand and light grower selling interest has kept the market quiet.  Activity was expected to increase as the harvest draws near and post-harvest opportunities emerge.  Stocks for the current marketing year have tightened up.  With the decline in 2008/2009 acres, above-average yields are needed to prevent further stock reductions.

Oil-type sunflower prices dropped as a result of a general drop in oilseed values.  Losses on the CBOT in soybean oil pushed old and new crop sunflower prices lower.  World sunflower oil supplies remained tight with exports of sunflower seed and oil from the Black Sea at minimal levels.  Old crop sunflower supplies continued to draw down with strong demand from crushers and bird seed buyers.  New crop prices for oil and confectionary sunflowers remained at historically high levels.