Canada's Soybean Exports Come to Life
Agriculture and Agri-Food Canada may have taken a cautious approach to its 2020-21 soybean forecast this month. Earlier this month, Statistics Canada reported Aug. 31 ending stocks at a record 721,000 metric tons, 277,000 mt higher than seen in previous AAFC forecast for the crop year.
This increased AAFC's estimate of crop year supplies by the same amount to 7.346 million metric tons, 253,000 mt or 3.6% higher than the estimate for 2019-20. At the same time, the demand estimates were left unchanged this month at 4.2 mmt of exports and 2.471 mmt of domestic use, with ending stocks for 2020-21 estimated at 675,000 mt, down only 46,000 mt from 2019-20. This would be the lowest stocks in three years but still 20.2% higher than the five-year average.
While 2020-21 exports are estimated at 4.2 mmt, up 17.4% from 2019-20, they are down 7.7% from the five-year average.
This comes at a time when U.S. stocks are forecast to fall to their lowest level in five years, while total export commitments for 2020-21 are reported up 145% from a year ago as of the week ending Oct. 22.
Prices are also favorable and support producer selling. This month, AAFC increased its forecast for the average return for No. 2 soybeans instore Chatham Ontario by $20/mt to $470/mt CAD, or $12.79 per bushel (bu). This is the highest average price reported by AAFC since $530/mt was reported for 2013-14, while compares to the five-year average of $430.60/mt, or just more than $1/bu higher than average.
This is consistent with a random ProphetX chart of Chatham soybeans showing an average since Sept. 1 of $12.93/bu. It is also close to the USDA's October crop year estimate of $9.80/bu USD for U.S. producers, which converts to $13.07/bu CAD using today's $0.75 CAD/USD exchange rate. At the same time, the Chatham chart on ProphetX shows a bid of $13.43/bu CAD on Oct. 29, down from a high of $13.73/bu on Oct. 23. The forecast price for the crop year will be pulled higher should prices hold at current levels for any length of time. Producers are seeing strong signals to sell which should pull grain out of bins.
The Canadian Grain Commission reported exports for the week ending Oct. 25 at 326,400 mt, almost 8% of the export forecast for the crop year. This is the highest volume shipped in 99 shipping weeks, or since the week ending Nov. 25, 2018. Just days after this shipping week, on Dec. 1, 2018, Canada arrested Meng Wanzhou in Vancouver, while China retaliated with the arrest of two Canadians on Dec. 10 and soybean exports have struggled since.
As well, commercial stocks of soybeans in licensed facilities are reported at 828,000 mt, with 63.6% of this volume instore bay and lake ports as well as terminals on the St. Lawrence. This volume is up 48.9% from the same week last crop year and 2% higher than the five-year average for this week, leaving shippers well-positioned for further exports.
As the CGC reports soybean movement on a shipping week schedule that matches other grains, starting with week 1 in the first week of August, we will look at soybean shipping as starting in week 5 for the 2020-21 crop year, consistent with the crop year for row crops. Cumulative exports from week 5 through 12 total 662,000 mt, which is the highest volume shipped for this period in seven years, up 122% from 2019-20 and 21% higher than the five-year average.
This is a good start to the crop year and bears watching.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow him on Twitter @Cliff Jamieson
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