Sept 18 – Will the African Swine Fever Ever Be Solved?

Grain markets this morning are mixed as African Swine fever, Harvest 2019 progress, and trade war talks dominate the headlines.

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Will the African Swine Fever Ever Be Solved?

Grain markets this morning are mixed as African Swine fever, Harvest 2019 progress, and trade war talks dominate the headlines. It’s been suggested that Chinese and American trade officials are meeting this week in D.C. before talks between senior trade negotiators set for early October. [1] Staying in Washington, Reuters is reporting that President Trump is tentatively approved a plan that would increase biofuel blending requirements in the U.S. by another 10%, or about 1.35 billion gallons, in 2020. [2] This would This would include at least 500M gallons in additional blending for conventional biofuels (i.e. ethanol).

It would also somewhat alleviate the pressure that the White House received from U.S. farmers since handing out way more ethanol waivers than President Obama’s administration did. That said, while American farmers have taken a hit from his agenda/policies, Reuters report that President Trump’s support in farm country remains substantial. [3]

Staying in demand, Monday’s NOPA crush report showed that 168.085M bushels (or 4.575 MMT if converting bushels into metric tonnes) were processed in the United States in August. This is a new record for the month, well above the 162M bushels expected by the market, and a 6% jump year-over-year.  It also nearly beat the 168.1M bushels crushed in July (which was also a new record for the month). As a reminder, NOPA’s members represent about 95% of all soybean processing in the United States.

African Swine Fever & Pork Prices in Asia

According to China’s Ministry of Agriculture, China’s pig population is down nearly 40% year-over-year through August. [4] This is another record monthly decline (relative to the same month a year ago) as the country continues to have troubles managing the spread of African Swine Fever, which has now been found in every single Chinese province! Further, the Ag Ministry continues to categorize the African Swine Fever situation as still “severe”. As Arlan Suderman of INTL FC Stone (and probably many others) said yesterday, given the geographical scope and spread of African Swine Fever, it’s now basically “impossible to eradicate until/unless a vaccine is developed.” [5] To put the spread of African Swine Fever into perspective, Mercado Analysis notes that nearly one-quarter of the world’s pigs have had to be killed. [6]

The African Swine Fever continues to spread around the world

As I mentioned last Friday, pork prices in China jumped 50% in August thanks to the significant decline in inventories for a growing middle class. Compared to a year ago, pork prices are nearly 80% higher to now sit at a record of nearly $13 USD per pound! With higher pork prices, prices for other protein (i.e. beef, poultry, and fish) have also climbed, pushing the food price index to its highest since January 2012. This is likely why China is planning to exempt pork and soybeans from further tariffs on U.S. goods. [7]

On that note, South Korea confirmed yesterday that they’ve found their first African Swine Fever event in the country and were planning on culling 4,000 animals to stop its spread. [8] While South Korea accounted for 12% of all American pork exports last year, let’s hope that the South Koreans are better are managing the spread of the African Swine Fever than China has been. South Korea has also dropped Japan from its preferred trade partners, a step in the wrong direction of  creating the second-largest economic trade war (with the first being the U.S. and China). [9] Conversely, Japan and the United States are set to sign a new free trade deal in New York next month, albeit, the details are still being finalized as you read this. [10]

Australia’s Impact on Malt Barley and Wheat Exports

After more than a few days of the wet stuff, the Canadian Prairies and U.S. Northern Plains have dried down thanks to warmer temperatures and a little wind. That said, while combines are back in the field, quality – especially for cereals – is a bit more questionable now. This is especially true for malt barley as there’s more chitted product that’s coming off this year in the Canadian Prairies. [11] The more chitted (or pre-germination) barley there is, the sooner that it should be made into malt as quality will degrade faster if it sits in the bin for too long.

Accordingly, my guess is that we’ll see a few more bushels that were seeded for malt end up in the feed category. Take a look at how Statistics Canada is saying Harvest 2019 will shape up for barley production.

2019 Canadian barley production and yield estimates by Statistics Canada

Looking more globally, available malt barley around the world is said to be adequate, if not plentiful. [12] The European barley harvest is in the bin with no quality issues and the Australian harvest is looking bigger this year. However, Australian barley is currently being investigated for anti-dumping by its main market, China, with about 2/3s of all exports headed to the People’s Republic. [13]

Staying in Australia, we know that a third consecutive year of drought in the eastern states will seriously limit yields for wheat with higher protein. Intuitively, this will mean countries who normally buy from Australia will have to look elsewhere for that higher protein wheat. This year, Canada and the United States are the most likely/best options, given the size of their harvests, but some analysts believe, because of this, wheat prices won’t improve all that much. [14]

That said, Brazil is looking to import more wheat from the U.S., which should help a bit for wheat prices, but not a huge amount, since they’re only looking to buy about 750,000 MT that’s tariff-free. [15] While we’ll get updated numbers tomorrow from the USDA and the CGC, Canadian and American hard red spring wheat exports are tracking similar to last year’s numbers through Week 5 and 14 respectively.

Cumulative 2019/20 Canadian non-durum wheat exports through Week 5

Cumulative 2019/20 American hard red spring wheat exports through Week 14

Ultimately, if there’s a year to make sure you’re taking proper samples and getting your grain tested, this is it. For the former, we’ve built a simple cheat sheet to take proper grain samples. Even if you’re going to have to sell into the feed market, knowing disease levels will be a top priority for any grain buyer.

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

At 7:30 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3242 
CAD, $1 CAD = $0.7552 USD)

Dec Corn: -1¢ (-0.25%) to $3.67 USD or $4.86 CAD
Nov Soybeans: -1¢ (-0.1%) to $8.928 USD or $11.822 CAD
Dec Soybean Meal (per short ton): unchanged at $297.80 USD or $394.36 CAD
Dec Soybean Oil (cents per lbs): -0.04¢ (-0.15%) to 29.95¢ USD or 39.66¢ CAD  
Dec Oats: -0.8¢ (-0.25%) to $2.805 USD or $3.714 CAD
Dec Wheat (Chicago): +1.5¢ (+0.3%) to $4.858 USD or $6.432 CAD
Dec Wheat (Kansas City): +1¢ (+0.25%) to $4.003 USD or $5.34 CAD 

Dec Wheat (Minneapolis): -0.5¢ (-0.1%) to $5.06 USD or $6.701 CAD
Nov Canola: -0.9¢ (-0.1%) to $10.253/bu / $452.10/MT CAD or $7.743/bu / $341.40/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 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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