Grain markets this morning are mostly in the green, but canola prices are not as Canadian canola exports took another negative hit from China this week.
“Talent hits a target no one else can hit; Genius hits a target no one else can see.” – Arthur Schopenhauer (German philosopher)
Grain markets this morning are mostly in the green, but canola prices are not as Canadian canola exports took another negative hit from China this week. Short-covering is also supporting the complex, but a stronger Canadian Loonie is also a factor weighing on canola prices. Before we get into that, with the bearish USDA reports from last Friday out of the way, the focus of grain markets has turned back to weather headlines and trade war negotiations between the U.S. and China. 
On the former, we already know the start of Plant 2019 in many U.S. Midwestern and Northern Plains states could be late due to flooding and ongoing rains. Simply put, a late spring means fields being seeded later than would ideally be the case, which means top-end yield potential is reduced a bit.  Historically-speaking, we know that anything that goes in after mid-May tends to see significant declines in yield potential. As such, one of the talking points more analysts are mentioning is don’t expect this year to be like the last few years. One thing we do know, unfortunately, is that there’s nothing the U.S. government can really do to compensate farmers who have lost or seen their stored grain damaged by the flooding. 
On the latter, a new U.S.-China trade agreement is reportedly 90% complete, something extremely positive after the last year of sparring.  The goal for the U.S. was to complete the trade war negotiations by the end of April, but there is some speculation that if something can’t be figured out this month, talks could be extended all the way out to the end of June when the G20 meets in Japan. A Chinese delegation is in Washington this week, which should give us a healthy idea of where the two sides sit by Friday.
Update on Canola Exports, Production, Demand
In Europe, Strategie Grains recently lowered some of their expectations for the 2019/20 rapeseed crop, namely area seeded, yields, and production. For seeded acres, Strategie Grain dropped their estimate by about 200,000 to 14.43 million acres, which would be a decline of more than 15% year-over-year. Yields are expected to rebound though to 59 bushels per acre (or 3.31 MT/hectare), which would be up 14% from last year’s 51.8 average yield. This all adds up to total EU rapeseed production coming in at 19.32 MMT for Harvest 2019, a drop of 3.3% from Harvest 2018.
On the other side of the world, the USDA’s attaché in Beijing noted this week that oilseed demand is expected to rebound a bit in 2019/20 after a slowdown in this current crop year.  Total rapeseed production in the People’s Republic in 2019/20 is forecasted to reach 13.1 MMT off 16.3 million acres seeded.
Total rapeseed/canola imports by China in 2019/20 are estimated by the USDA at 5.7 MMT, of which Canada is supposedly going to own about 93% market share. Through February 2019, Canada had exported 2.025 MMT of canola to China in the 2018/19 crop year, including a monthly record in January of 602,000 MT. Conversely, it’s been suggested that other than Canadian canola exports to Japan being steady, canola exports from the Great White North to all other markets are down 37% year-over-year.  This includes canola exports to the U.A.E., Pakistan, and the U.S. down a combined 50% compared to the same time a year ago.
We know that this above-average pace of Canadian canola exports to China is slowing down (alongside canola prices in general) especially since China has filed a quality complaint on canola exports against a third yet-to-be-named company.  Should this exporter lose its import certificate, they would join Richardson and Viterra who have lost their ability to ship Canadian canola to China. Richardson CEO Curt Vossen says that, with the disruption of canola exports activity to China, he thinks Canadian farmers will plant about 10% less canola this spring than originally planned. Final datapoint: through week 34, Canadian canola exports have topped 6.23 MMT, down about 8.4% year-over-year.
More U.S. Soybean Exports Sales to China
On the soybean front, the USDA’s attaché in China has that imports should rebound to 91.5 MMT in 2019/20, up from the 88 MMT forecasted for 2018/19. We know that U.S. soybean exports to China have certainly slowed down, but worth mentioning is Brazil’s soybean exports in 1Q2019 totaling 17.2 MMT. This would be a 30% jump compared to the 13.2 MMT shipped out in the same period in 2018. Of significance was February’s soybean exports from Brazil, which doubled year-over-year to 6.1 MMT. It’s expected that Brazil will export 70 MMT in their 2018/19 crop year.
Coming back to the U.S., it was confirmed last week that China bought another 816,000 MT of American soybean exports.  Then there was the announcement on Monday that China bought another 828,000 MT, bringing total sales of U.S. soybean exports to China to 1.644 MMT. That should help move the needle a little bit in tomorrow’s update for Week 30 for U.S. soybean exports. However, through Week 29, American soybean exports are still tracking nearly 30% behind last year’s pace, with just 29.24 MMT shipped out (or 1.074 billion bushels if converting metric tonnes into bushels).
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 = $1.3303 CAD, $1 CAD = $0.7517 USD)
May Corn: +2.8¢ (+0.75%) to $3.643 USD or $4.846 CAD
May Soybeans: +1.8¢ (+0.2%) to $9.018 USD or $11.996 CAD
May Soybean Meal (per short ton): +$0.50 (+0.15%) to $311.10 USD or $413.86 CAD
May Soybean Oil (cents per lbs): +0.08¢ (+0.3%) to 29.04¢ USD or 38.63¢ CAD
May Oats: +5.3¢ (+1.9%) to $2.833 USD or $3.768 CAD
May Wheat (Chicago): +5.5¢ (+1.2%) to $4.695 USD or $6.246 CAD
May Wheat (Kansas City): +2.5¢ (+0.6%) to $4.358 USD or $5.797 CAD
May Wheat (Minneapolis): +5.3¢ (+0.95%) to $5.47 USD or $7.277 CAD
May Canola: -2.3¢ (-0.2%) to $10.38/bu / $457.70/MT CAD or $7.803/bu / $344.05/MT USD
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