Soybean Update

Jeff James

As per usual June has provided much to talk about for our 2017 production season.  The local picture could not have looked more different than the majority of the US.  Minimal soybeans had been planted in Ontario and Quebec as we started the month as we stretched to put in as much corn as Mother Nature would allow. Overall most of the intended acres got into the ground (or still plan to be) as the crop was planned. 5-7% of corn or spring cereal acres likely ended up into soybeans, adding to our record acreage for Eastern Canada. StatsCan reported these figures to be 980K acres in Quebec and 3.1 million up 23% and 14% respectively. Overall that’s an extra 500K acres in Ontario and Quebec than last year. Put this onto of the massive expansion of Western Canadian soybeans and we have an added 1.8 million acres or a 33% increase in soybean acres in Canada! We will need to have a better handle on yield before we can apply this same type of growth to production as we see on acreage and that will not come until August or early September this year.

As we talk about a record number of Canadian soybeans and its influence on basis the same of record acres has occurred in the U.S. While we ended the month on bullish note as US acres weren’t quite as high as expected, they are a still a record at 89.5 million acres. Same as here, yield will be the final supply story that is important to our 2017/18 ending stocks. If the US sees an average yield equal to last years 48bu/acre we could see US ending stocks head towards 500 million bu.  

Although the grain trade in June showed tremendous volatility, there was one market that traded almost linearly upwards in June. Unfortunately for the Canadian producer that was the Canadian dollar. It started the month off just slightly above 0.74 CAD/USD and finished off nearly 3.25 cents higher at 0.7725.  This was fueled early in the month with strong economic indicators where consumer confidence, employment and finally inflation outperformed expectations. These numbers have been strong enough to not only start discussions about the Bank of Canada lifting off from our 0% interest rates but has the market pricing in this possibility as early as July. This has been coupled with less than ideal US performance as well as a sentiment of an underachieving Trump administration.

As most of the above provide a fairly bearish sentiment for Canadian soybean prices keep in mind we are entering a crucial time for crop development. With that comes opportunity from weather markets. As we currently sit today a $460/mt or $12.50/bu is close and easily achievable with volatility. Producers should also look at potential opportunities for 2018 basis values with our loonie seeming quite content on heading towards that 0.78-0.80 “sweet spot” against the USD.