Grain markets are mostly green this morning as new acres and production estimates from the USDA are consuming most of the complex’s attention.
“Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.” – Oprah Winfrey (American author & TV personality)
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More Corn & Soybean Acres in 2020. Says USDA
Grain markets are mostly green this morning as new acres and production estimates from the USDA are consuming most of the complex’s attention. Yesterday, the USDA’s annual Ag Outlook forum started with new forecasts for 2020 acres and trade implications. This morning, the USDA provided more detailed supply and demand tables, which notably included some large corn stocks.  More on this in a bit.
Quickly looking abroad, Coceral is expecting EU and UK combined grain and oilseed production to come in at 302.7 MMT in 2020, down about 6 MMT year-over-year.  The decline, centered in wheat production falling 5% to 137.9 MMT, is mainly blamed on the wet weather seen in the fall in Germany, France, the UK, and Denmark. Coceral is forecasting barley production to fall by 1.4 MMT to 60.8 MMT as yields return to their average, corn production is seen climbing by 6.5% to 65 MMT, and the rapeseed harvest is pegged at 17.1 MMT, up 400,000 from the haul of Harvest 2019.
Pushing east, ProAgro is expecting Ukraine’s grain harvest to fall 3.2% to 72.7 MMT from the record 75.1 MMT that came off in Harvest 2019.  This includes the wheat harvest dropping by 7.3% to 26.2 MMT but corn production likely staying flat with just under 36 MMT expected to be cut. Next door, the Russian wheat crop should be about 3-5% higher than last year’s 73.5 MMT, which would make it the second-largest wheat crop ever, according to the country’s Deputy Ag Minister.
Bigger U.S. Acres for Corn and Soybeans in 2020
The USDA annual ag outlook forum started yesterday, in which the government organization predicted a larger area of corn and soybeans will go in for Plant 2020, compared to a year ago.  Going into the Outlook forum, the trade was expecting to see 93.6M acres of corn, 84.6M acres of soybeans, and 44.9M acres of wheat.
Yesterday though, the USDA said that American farmers will plant 94M acres of corn, 85M acres of soybeans, and 45M acres of all types of wheat. Compared to last year, corn acres would be up 5%, soybeans acres would climb 12%, and the area planted with wheat would basically be the same. Arguably, the market has been pricing in these bigger acres the last few weeks as pretty much everyone and their mother have been expecting a major rebound from 2019, notably the record amount of Prevent Plant acres. 
It’s worth noting that the USDA has correctly predicted the direction of change for corn acres 9 times in the last decade. Conversely, the USDA’s track record of correctly predicting if soybean acres will go up or down (compared to the previous year) only 5 times out of the last 10 years. While the March WASDE report will come out on Tuesday, March 10th, the report that I and many other grain market participants will be watching for comes out 3 weeks later on March 31st in the form of the Prospective Plantings report. This report includes producer survey data and should be a bit more indicative of what acres get actually planted with what.
This in mind, the USDA is expecting 2020/21 U.S. soybean stocks to drop to a four-year low of 320M bushels (or 8.71 MMT if converting bushels to metric tonnes) but that’s on the basis that China buys more American beans. It’s the opposite story for corn though, with 2020/21 carryout expected to climb to 2.637B billion bushels (or nearly 67 MMT), the highest since the 1987/88 crop year! For wheat though, thanks to the lower acres and similar exports, wheat stocks are estimated by the USDA to fall to a 6-year low of 777M bushels (or 21.15 MMT).
From a trade perspective, the market is optimistic that China will soon start granting waivers on import tariffs of U.S. agricultural goods. And while the U.S. Secretary of Agriculture, Sonny Perdue, believes that Chinese buying will start “ramping up in the spring”, the USDA admitted yesterday that they only see $4 Billion more in U.S. agricultural sales to China in 2020.  Of course, this is nowhere near the projected $40 Billion that was part of the Phase One trade deal signed a little more than a month ago. With perfect timing though, a senior U.S. official reiterated that China has told them that they’ll honour their commitments to buy more U.S. goods. 
Logistics and Combyne Data
There was a blockade that was set up just outside Edmonton earlier this week on a CN line that stopped all rail traffic, but the enforcement of a court injunction was swiftly carried out and the disruption lasted about half a day.  How much of an impact have these protests really had? Available propane in Atlantic Canada has been within days of running out, while Via Rail and CN Rail have both temporarily laid off 1,000s of workers to reflect the stoppage in rail movement. 
The Canadian Grain Monitor Program from this week notes that the number of ocean grain vessels waiting in British Columbian ports is nearly double the normal average.  Specifically, through week 28 of the Canadian 2019/20 crop year, 40 boats were lined up in Vancouver (average is 24) while 10 boats were sitting in Prince Rupert (double its average of 5). While some elevators have gone no bid or have pushed back some deliveries, country elevator grain movement hasn’t dropped off too, too much.
All things considered, commodity markets have certainly pulled back since their highs about 6 weeks ago but are weather the storm of negative headlines fairly well.  The challenging dynamic that not many could’ve predicted was the torrid spread of the coronavirus and the subsequent negative economic impact both in China, and around the rest of the world. From a grain markets perspective, the USDA’s Chief Economist, Robert Johansson said yesterday that “coronavirus has pretty much shut down (China’s) economy for the first quarter. 
To wrap up, this week, we’ve seen Listings on our next-generation cash grain marketplace, Combyne, jump higher by two-thirds. Be it old or new crop, you can sharing the deal you’re looking to do w/ your trusted trading partners all at once (versus taking or making phonecalls to each individual, post your Listing and your Connections get automatically notified of this new deal. That said, you can either invite your trading partners to join Combyne (it’s free!) or share your Listing with them directly. Post the next grain deal you’re looking to do here.
Next week, you won’t see any Breakfast Brief emails come through as I’ll be out of the office.
Have a great weekend!
At 7:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3256 CAD, $1 CAD = $0.7544 USD)
May Corn: +0.8¢ (+0.2%) at $3.793 USD or $5.028 CAD
May Soybeans: +2.5¢ (+0.3%) to $9.035 USD or $11.976 CAD
May Soybean Meal (per short ton): -$0.10 (-0.05%) to $292.70 USD or $387.99 CAD
May Soybean Oil (cents per lbs): +0.14¢ (+0.45%) to 30.61¢ USD or 40.58¢ CAD
May Oats: +2.5¢ (+0.85%) to $2.998 USD or $3.973 CAD
May Wheat (Chicago): +6.5¢ (+1.15%) to $5.658 USD or $7.499 CAD
May Wheat (Kansas City): +4¢ (+0.85%) at $4.85 USD or $6.429 CAD
May Wheat (Minneapolis): +3.5¢ (+0.65%) to $5.435 USD or $7.204 CAD
May Canola: +0.5¢ (+0.05%) to $10.619/bu / $468.20/MT CAD or $8.011/bu / $353.21/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.