Grain markets this morning are mostly lower, led by wheat prices, which continue to have a hard time finding any legs this month.
“The climb might be tough and challenging, but the view is worth it. There is a purpose for that pain; you just can’t always see it right away.” – Victoria Arlen (American Paralympian & sports reporter)
Apr. 22 – Wheat Prices in for Tough 2019/20 Crop Year
Grain markets this morning are mostly lower, led by wheat prices, which continue to have a hard time finding any legs this month. The complex is trying to rebound on a weak performance last week but is in tough getting any of the bearish grain markets participants to cover their very large (and for some crops, record) short positions. In fact, hedge funds are sitting on a record short position in corn of nearly 307,530 contracts. Maybe the one bright spot is that U.S. grain export volumes out of the pacific northwest ports are increasing, but that is mostly offsetting the slower movement of grain through to the Gulf of Mexico ports. 
There are also increasing concerns over the demand prospects from China for feed as their pork industry is shrinking thanks to the African Swine Fever there. Since first being found in August 2018, outbreaks have now been discovered in every province across China.
There is a theory that, with China’s hog industry literally having to be culled to stop the spread of disease, the People’s Republic will have to start to import more pork to meet the growing middle class’ insatiable demand for meat. The likely exporters to win in that game are South America, the Black Sea, and the United States. On the latter, the bullish possibility here is the increased feedstuffs demand would be needed to account for larger livestock herds that could grow based on more meat imports by China. Some residual demand might fall off into Canada, which would continue to support feed barley prices, something discussed in detail in last Monday’s FarmLead Breakfast Brief.
On the political front, apparently, China and the U.S. are closer than we thought on finalizing a deal to end their trade war.  We know that U.S. trade negotiators will be in Beijing this week, while their Chinese counterparts will be back in Washington the first full week of May.
Finally, we’ll get the weekly USDA crop progress report later this afternoon at 3PM CST, which is expected to show U.S. corn planted at 8% complete, soybeans at 2%, and hard red spring wheat at 8%. The 5-year averages for these 3 crops are 12%, 2%, and 25% respectively. As you can tell, hard red spring wheat acres are well behind the normal curve at this point; when will spring wheat prices reflect this?
Why Are Wheat Prices Fading with Plant 2019?
Wheat prices have been trying to find a spark to help push it higher, but the complex seems to be anchored in two major facts: abundant world supplies and a bearish outlook for potentially a bumper crop in the northern hemisphere. More specifically, wheat prices are taking note of the good growing conditions in the Black Sea, as well as the beneficial moisture that the U.S. winter wheat crop is receiving. I mentioned back at the beginning of March when grain markets were wandering that the potential of the 2019/20 wheat harvest was becoming a real threat for wheat prices. My position on wheat prices was timestamped three weeks earlier back in mid-February when grain prices were still focused on a U.S.-China trade war deal being found before the end of the month.
The critical timeframe that will really the dictate direction for wheat prices will be in May and June though, just ahead of the northern hemisphere’s winter wheat harvest. That said, on the futures board, the spread between old and new crop wheat prices is less pronounced for winter wheat than it is for hard red spring wheat prices. Usually, wheat prices find some strength towards the second-half of May once most of the American and Canadian spring wheat has been planted. These are when the real weather premiums start to show up, which means we might be waiting another month for wheat prices to find any legs.
On Wednesday morning, Statistics Canada will release its survey results for Plant 2019 in Canada at 7:30AM CST. We know that there’s likely going to be more wheat planted in the Great White North in Plant 2019, which is also weighing on wheat prices. While we mainly talked about canola exports in last Thursday’s FarmLead Breakfast Brief, we also shared the table below, breaking down Agriculture Canada’s April forecast for Plant 2019.
Plant 2019 Will Happen, No Matter the Weather
Ultimately, there’s certainly a lot of bearishness in the grain markets right now. Between the trade spats and grain supply, we know there are some macroeconomic components that are keeping the bulls from engaging aggressively. But there’s also the factor of weather and the potential impact on Plant 2019. Brian Doherty from Top Farmer posits some great questions on this subject: “Could it be the market is making a bold assumption that crops will be at trendline yield or higher? Is the rain-makes-grain mentality responsible for bearishness? Are planting delays of little concern?”
With the long weekend out of the way, indeed, the focus returns to Plant 2019 prospects. The University of Illinois reminds us that farmers in the Cornbelt (IN, IL, and IA) need about 2 weeks to plant their entire corn crop.  Ironically, their research suggests that investment in bigger/more precise planting equipment has not actually sped up the planting timeframe when weather allows farmers to get into the field. That being said, last year’s start to the U.S. corn planting campaign was also a bit delayed but the crop still mostly got in before May 20th, the date after which the UofI considers any fields seeded to be defined as “late”.
Calling a spade, a spade, every year is different and markets will move based on speculation of rumours, momentum of said rumours, and reversion due to facts coming out. When planting or crop conditions change abruptly, this will intuitively result in a similar reaction in the markets. Put another way, to jumpstart grain prices to move higher, we likely need prolonged challenges to Plant 2019.  But keep in mind that those rallies can easily be reined in by the large grain stocks that still exist not only in the U.S., but also around the rest of the world. As such, any rallies should not be ignored.
At 7:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3349 CAD, $1 CAD = $0.7491 USD)
July Corn: -2.5¢ (-0.7%) to $3.648 USD or $4.869 CAD
July Soybeans: -3¢ (-0.35%) to $8.913 USD or $11.898 CAD
July Soybean Meal (per short ton): -$0.50 (-0.15%) to $306.30 USD or $408.89 CAD
July Soybean Oil (cents per lbs): -0.18¢ (-0.6%) to 28.91¢ USD or 38.59¢ CAD
July Oats: -0.5¢ (-0.2%) to $2.778 USD or $3.708 CAD
July Wheat (Chicago): -5.5¢ (-1.25%) to $4.428 USD or $5.91 CAD
July Wheat (Kansas City): -4.3¢ (-1%) to $4.215 USD or $5.627 CAD
July Wheat (Minneapolis): -4.5¢ (-0.85%) to $5.25 USD or $7.008 CAD
July Canola: -5.7¢ (-0.55%) to $10.312/bu / $454.70/MT CAD or $7.725/bu / $340.62/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.