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Breakfast Brief

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Oct 22 – Corn Prices, Exports the Anomaly?

Good Morning!

Corn prices are leading grain markets this morning thanks to a strong start for 2018/19 exports, despite Harvest 2018 picking back up.

“Intelligence is the ability to adapt to change.”
– Stephen Hawking (US Physicist and Author)

 

Test your grain today!

 

 

Corn Prices, Exports the Anomaly?

Corn prices are leading grain markets this morning thanks to a strong start for 2018/19 exports, despite Harvest 2018 picking back up.  

In this afternoon’s crop progress report from the USDA, the market is expecting to see the U.S. corn harvest at 49%, up 11 points week-over-week, and the soybean harvest at 52%, up 14 points. For winter wheat planting, pre-report expectations are for 77% completion, up 12 points week-over-week.  

While Harvest 2018 is slowly coming off in the U.S., Plant 2018 is accelerating in Brazil. In the largest soybean-producing state, Mato Grosso, 62% of the crop has been seeded, way ahead of the 27% seeded by this time a year ago and the five-year average of 26%. The faster pace ties in with the idea that China will continue to source soybeans and other feedstuffs from non-American options. 

As reported by AgriCensus, CNGOIC said at a feedstuff conference in China last week that “in theory, China will not need soybeans before February 2019.” Further, COFCO ‘s Global Head of Oilseeds speculates that “there are enough physical beans in Argentina to get China through” the first quarter of the 2019 calendar year. While Brazil is basically out of beans, Canada has also emerged as an alternative buying option.  

If we’re honest with ourselves, we’ve heard enough rumors of U.S. soybeans making their way to China – be it in soymeal or unprocessed form – via the likes of Canada, Argentina, and a few other countries. [1] We also know that Black Sea rapemeal and sunseed meal and Canadian canola meal is on the menu for Chinese pigs.  

Corn Prices Not to Be Ignored 

Last week, grain prices, including corn prices, mostly ended the week in the red after some choppy trade on Friday. New crop 2019/20 corn prices barely held the psychologically-significant level of $4 USD /bushel in Chicago.  

Oct 19 - Corn prices futures close

One could easily argue that corn prices are factoring in larger U.S. corn acres in 2019/20. Conversely, November 2019 soybean prices are sitting just under $9.20 USD /bushel in Chicago.  

Last Thursday’s export data showed that 2018/19 U.S. corn exports are tracking about 80% higher than where they were at this point a year ago. 

2018/19 Week 6 U.S. Corn Exports - Weekly

AAFC Updates Their Forecast 

Last week, Agriculture Canada came out with an updated forecast for Canadian grain supply and demand. On the production side, the numbers matched Statistics Canada’s September satellite-based estimates, which, as a reminder, showed a big harvest. For demand, we dug into all the details for our GrainCents readers over the weekend.  

On the supply side, we estimate that heading into the 3rd weekend of October, there was still nearly 18 million acres of cropland in Western Canada yet to be combined, which represented about 24.5 million metric tonnes of production. Here are some of the notables: 

  • Barley: 29% or 2.38 million metric tonnes (MMT) across 1.64 million acres remaining;  
  • Canola: 41% or 8.54 MMT on more than 9.09 million acres; 
  • Durum: 20% or 982,000 MT across more than 1.03 million acres; 
  • Flax: 53% or 271,300 MT with 449,200 acres left to go;  
  • Oats: 27% or 903,500 MT off 661,400 acres;  
  • Spring Wheat: 27% or 6.29 MMT across more than 4.67 million acres. 


On the demand side, the most notable changes were seen in 2018/19 canola and non-durum wheat exports, which were raised to 11.5 MMT and 18 MMT, respectively. This would be a new record for canola and the third-largest number ever for non-durum wheat. The former seems less likely as, through Week 11, canola exports are tracking 16% below than last year’s pace. Conversely, non-durum wheat exports are up nearly 30% year-over-year so far. 

Prices haven’t necessarily reflected these export activities yet, but we see some strong values in oats, peas, flax, and feed barley. On the FarmLead Marketplace, oat prices delivered in Manitoba range between $3.75 to $4.00 CAD per bushel. In Saskatchewan, we’re seeing $3.40 CAD per bushel delivered, and in Alberta, $3.00 CAD per bushel picked up on the farm has been a regular deal made on FarmLead. 

For peas, we’ve been seeing yellow pea prices of $7 and green pea prices of $9 CAD per bushel return to bid sheets in Alberta and some parts of SW Saskatchewan. For flax, $13.00 CAD per bushel delivered (and sometimes FOB farm) is also regularly being contracted on the FarmLead Marketplace by farmers in Saskatchewan and Alberta.  

For feed barley, we’ve seen values dip a bit lower as freshly harvested crops are starting to move into the market. [2] Worth noting is that corn prices coming up from the U.S. are very competitive with Lethbridge-delivered cereals.  

Feed barley prices are still, on average, 25% higher than where a year ago and the best they’ve been in a very long time (and for most, the best). Cognizant of the fact that feed grain prices usually run in three-year cycles, we feel that there are more downside risks at this point for feed barley prices than there is upside potential.  

Keep this in mind as you’re getting those last few acres off; so much so that it’s worthwhile to post your feed barley, peas, flax, or oats today on FarmLead.

To growth,

Brennan Turner

President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

 

At 7:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3090 
CAD, $1 CAD = $0.7640 USD)

Dec Corn: 2.3¢ (0.62%) to $3.678 USD or $4.814 CAD
Jan Soybeans: 2.3¢ (0.26%) to $8.715 USD or $11.408 CAD
Dec Soybean Meal (per short ton): -$0.50 (-0.16%) to $312.70 USD or $409.31 CAD
Dec Soybean Oil (cents per lbs): 0.6¢ (0.21%) at 29.20¢ USD or 38.22¢ CAD  
Dec Oats: -1.8¢ (-0.61%) to $2.933 USD or $3.839 CAD
Dec Wheat (Chicago): -2.8¢ (-0.25%) to $5.113 USD or $6.693 CAD
Dec Wheat (Kansas City): -2.8¢ (-0.29%) to $5.123 USD or $6.706 CAD
Dec Wheat (Minneapolis): 0.3¢ (0.05%) to $5.885 USD or $7.703 CAD
Jan Canola: -$0.70 (-0.14%) to $11.381/bu / $501.80/MT CAD or $8.694/bu / $383.36/MT USD

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

About the Author
Brennan Turner

Brennan Turner is the President & CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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