“To help yourself, you must be yourself. Be the best that you can be. When you make a mistake, learn from it, pick yourself up and move on.” – David Pelzer (U.S. author)
Despite some decent export numbers – namely wheat exports – grain prices are mostly in the red this morning, following last week’s down performance. Traders went more short on grain prices, sitting a record short position of more than 322,000 contracts in corn! They’re also now sitting at nearly 130,000 short positions in soybeans!
On the trade front, Chinese and U.S. negotiations continue this week in Beijing. There has been more optimism from both sides of the table but nothing about a leadership get-together between Presidents Trump and Xi has been announced. Conversely, President Trump is headed to Tokyo in May as the U.S. and Japan continue to talk their own trade deals since the U.S. is not part of the CPTPP.
A lot of Alberta got some snow over the weekend, bringing in some last-minute moisture just as farmers are getting ready to start seeding. There are already more than a few outfits that are running full-tilt closer to the U.S.-Canada border but the weekend weather system also slowed them down a bit. Granted, temperatures dropped a bit across Western Canada over the weekend, but warmer weather is mostly expected in the month of May.
China or Weather the Saving Grace?
With no lasting reversal having been seen for what seems like months, Jerry Gulke notes that there is some fear setting in and asking the question, “how low can we go?”  Between a fairly snowy winter, flooding in the Midwest, and a seemingly endless amount of rain, where do the bulls stand up and grab some traction? This is especially true for soybean prices as the complex is starting to recognize that, even with a trade deal made between the U.S. and China, any beans bought in the short-term will just go into China’s reserves.
In Friday’s FarmLead Breakfast Brief, I spoke about this weather, but also the pork issues in China. Demand for meat is strong in China’s growing middle class but they won’t be able to come close to meeting it themselves this year with the African Swine Flu culling herds left, right, and centre. This may mean for pork imports from the likes of the U.S., Canada, and South America, which in turn, means more feedstuffs demand from a domestic sense. That possibility isn’t enough through as some U.S. farmers are hesitant to make the bet on soybeans this year. 
Looking over at corn prices, there haven’t been a lot of opportunities to get some hedging in above that $4 USD/bushel mark on the futures board, but there have been some moments. Put more simply, $4 hasn’t come around all that often, but in deferred contracts, there are still some opportunities worth considering. While this is a long-term strategy, Bryan Doherty of Top Farmer notes that you should be selling in small, 5% to 10% increments up to about a third of total production and not overcommit sales too far in advance.  Put another way, Bryan says that in these current grain markets, “sell early, sell often, and cover with calls.”
Ultimately, I continue to think that weather premiums will start to creep up into grain markets but it needs to see more rain and not a whole lot of planting activity. That said, there is more rain in the forecast this week for the Midwest, which should keep the planting pace behind the normal average.  Going into today’s USDA crop progress report, traders are looking for corn planting to be at 15%-17% complete, close to last year’s pace but behind the 25% seasonal average. For soybeans, the market is expecting 5% (which would match last year and the average) while hard red spring wheat exports is expected to come in at just 15% (36% average).
Wheat Exports Shining Bright
While I said last week that wheat prices could be in a tough position for 2019/20, strong export volumes to end 2018/19 are hard to ignore. Canadian non-durum wheat exports through Week 38 are tracking 15% higher year-over-year with 13.2 MMT shipped out. Barring a significant geopolitical turn of events, it seems more and more likely that Agriculture Canada’s target of 18.7 MMT for the whole of the 2018/19 crop year will be eclipsed.
Comparably, both U.S. hard red winter wheat exports and soft red winter wheat exports have picked up considerably over the last few months. Through their week 46, SRW wheat exports are tracking nearly 30% higher-year over-year, but HRW wheat exports have been dealt with some tougher competition, now tracking nearly 18% behind last year’s pace.
Elsewhere in the world, Russian old crop wheat prices dropped more than 1% last week, now sitting around $221 USD/MT (or about $6 USD and $8.10 CAD per bushel if converting metric tonnes into bushels).  This is mainly a result of a strong Russian Ruble and a slowdown in old crop demand. This was referenced by SovEcon last week as they lowered their estimate of 2018/19 Russian wheat exports by 200,000 MT to 34.9 MMT. For new crop Russian wheat prices for delivery in June/July, values are sitting closer to $187 USD/bushel (or $5.09 USD and $6.85 CAD per bushel). Worth considering is that this more than $30 USD/MT below current U.S. HRW wheat prices for the same movement.
Of course, we’re at the time of year where the flip-flop between old and new crop grain prices is continuous so it’s worthwhile to ignore the noise where applicable. For example, if you’re sold out of old crop, why bother looking at old crop wheat prices?
On a logistical note, I have some travel and time away from the office the next few weeks so don’t expect the next FarmLead Breakfast Brief until next Friday (which will be right before the May WASDE report from the USDA at 11AM CST on May 10th).
Due to some travel this morning, there is no futures grain prices in today’s FarmLead Breakfast Brief, but you can find them here.
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.