Grain markets this morning are all in the green as the complex tries to recover from yesterday’s sell-off as bears took over and bulls hit the sidelines.
“When you’re in a turnaround situation, you cannot incrementalize your way out of it.” – Steve Easterbrook (British businessman)
Grain Markets Stage Turnaround Tuesday
Grain markets this morning are all in the green as the complex tries to recover from yesterday’s sell-off. The complex had a tough day as bears took over the grain markets, and bulls took profits and headed for the sidelines. But they appear to buy the dip this morning’s grain markets!
That being said, grain markets continue to be reasonably divided, especially for the likes of soybeans. There are heavy inventories in the US and demand is behind last year, whereas, there’s a record crop coming off in Brazil and, thanks to some currency effects, prices are attractive, as is demand. We should note, however, that March 2018 NOPA crush numbers for US soybeans was 171.86 million bushels. This is a new record and more than 12% higher year-over-year and month-over-month.
Switching over to Brazil, while the USDA raised Brazilian production to a new record of 115 million tonnes, Safras & Mercado recently upped their estimate to 119.2 million tonnes. The USDA also raised Brazilian soybean exports to a new record of more than 70 million tonnes! This comes as Chinese customs data shows that they imported 5.66 million tonnes of soybeans in March. This is down 11% year-over-year and below expectations, but total imports for 1Q2018 are about 19.5 million tonnes, equal to 1Q2018.
But China just implemented new surcharges for US sorghum being exported to the People’s Republic.  Importers will have to pay deposits worth nearly 180% of the value of the US sorghum shipment.
While this comes as the market is hotly contesting a trade war between the US and China, this new rule is the conclusion of an investigation into whether or not US sorghum was being exported to China at an unfair price, relative to domestic producers. US sorghum exports to China grew 14-fold from 2013 to 2017 (5 years!), but the price dropped 31% over that same timeframe.
Despite Poor Crop Progress, Wheat Prices Fall
For the outsider looking in, yesterday’s grain markets were all about wheat prices. As Garrett highlighted in his afternoon recap, Grain Markets Today, wheat prices in Chicago fell by more than 2% while Kansas City HRW wheat prices dropped by more than 3%. Minneapolis hard red spring wheat prices dropped more than a dime. The rains and moisture (read: snow) that is hitting a lot of the major US wheat-growing regions is being seen as a net positive, without too much concern for the time of year that It’s coming.
Yesterday’s USDA crop progress report showed that the share of US winter wheat rated good-to-excellent (G/E) sits at 31%, down 1 point week-over-week, but also 14 points below the five-year average. Here’s a look at the top 10 winter-wheat producing states:
Meanwhile, just 3% of the American spring wheat crop has been seeded. It’s a stark contrast to where we were a year ago, let alone the five-year average (see the table below for the top 10 spring wheat-producing states).
Rounding out the USDA crop progress report, corn acres planted thus far are sitting at 6%, compared to the five-year average of 5%. Here’s a breakdown of corn crop progress in the top 10 producing states.
What’s Happening in Pulses, Durum Prices?
We’ve talked extensively to our durum GrainCents readers about the situation in Italy and the negative impact it’s had on Canadian durum prices. In a roundabout way, it also affects American durum prices as its pushing more Canadian durum into the American market and pressuring American durum prices. But one country not impacted by Italy’s rules that much is Australia. As such, durum produced in the Land Down Undaa is looking more attractive for the Italians.
In pulses, we continue to look to the likes of India and China for guidance regarding where prices are going. The grain markets in India are a different animal with a lot of political games being played, as I point out in a recent op-ed I wrote for the Western Producer.
It looks like another record crop of pulses in India, and while prices for chickpeas and lentils have certainly tanked, there is some stability that’s starting to show up. Conversely, yellow peas prices are bucking the trend a bit and are acting pretty healthy. In our regular Sunday morning GrainCents digest emails, we dig into these factors and more for each of chickpeas, lentils, peas (complete with price charts for all the pulses).
More notably though, 2018 monsoon rains will have a significant impact on where the prices for many pulses go next. With that in mind, yesterday, Adrian dug into the expectations for the 4-month rainy season in India that starts in June and supplies most of the moisture for the two growing seasons there. Read up via GrainCents on our expectations for potential price impacts for lentils, chickpeas, and peas.