As we near Wednesday's first production estimates for the 2019-20 Canadian crop year to be released by Statistics Canada, current estimates released by Agriculture and Agri-Food Canada (AAFC) this month for major grains fall within the range of pre-report trade estimates released by media this week, leaving the possibility that there may be no major surprises in Wednesday's data release.
This report follows the recently updated production estimates released by the USDA which have led to suspicion and debate. Statistics Canada's estimates are based on July producer surveys and the time lag could also lead to concern with the findings.
The attached chart looks at the move in canola futures, spring wheat futures and oat futures in Canadian dollars on the day of the August production report release over the past 10 years, measured in Canadian dollars per metric ton.
When the price movement is considered on the day of the report release over the past 10 years, the black line on the chart would indicate that the canola market has closed higher in eight of the past 10 years (2009-18). At the same time, the moves have been minimal, ranging from $0.60/metric ton on the November contract in 2018 to a high of $3.70/mt in 2012. Of the eight years where the market closed higher on report day, the average was a modest $2.08/mt. Over the 10-year period, there were two report days when futures closed lower, including a $4.60/mt move lower in 2014 and a $9.10/mt move lower in 2010. The extent of these moves exceeded the move realized in each of the eight years where the daily close was higher. Over the past five years, the average canola price increase on the day of the report is calculated at $0.20/mt, while this average is $0.29/mt on average over 10 years.
It may be less conceivable that the release of Canadian data would result in a significant move in U.S. spring wheat futures. Over the past 10 years, the December spring wheat contract finished higher on report day on only two of the 10 years. While the MGEX spring wheat contract finished $7.19/mt higher in Canadian dollar terms on Aug. 31, 2018, Canadian wheat production was estimated within the range of pre-report estimates and appears that this move had little to do with the Canadian report. Over the past five years, spring wheat has averaged $1.39/mt lower on report day, while averaged $2.31/mt lower over 10 years.
While it is conceivable that U.S. oat futures could be sensitive to the Canadian oat fundamentals, the price has closed higher on report day on four of the past 10 years. Over the past five years, the move lower has averaged $0.46/mt on report day, while averaging $0.47/mt lower over 10 years.
Whether or not there was a surprise in Statistics Canada data in any of the 10 years considered, the futures trade took the data release in stride in most of the past 10 years. The length of time between the data collection and the release of the data, which is close to a month, could be one factor. Markets are adjusting every day to the forces of supply and demand, while the Statistics Canada release could be viewed as old news.
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Cliff Jamieson can be reached at firstname.lastname@example.org
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