As we investigate vegetable oils and wheat exports this morning, grain prices are mostly higher as traders buy up some bargain prices.
“There’s something to be learned by listening and absorbing and watching before you start telling the people who have been there how to rearrange chairs.” – Anne Northup (American politician)
[maxbutton id=”4″ ]
Aug. 16 – Canola and Wheat Exports Musical Chairs
As we investigate vegetable oils and wheat this morning, grain prices are mostly higher as traders buy up some bargain prices after Monday’s WASDE debacle. Grain prices fell for the first 3 days of the week as the complex tried to ascertain what in the USDA numbers are legitimate and what’s not. As I told the team at RealAgriculture.com earlier this week while at AgSmart in Olds, AB, the market is still trying to make sense of the data from the USDA, something that’s still tough to do, this many days later. 
Since the large majority of the market was expecting corn acreage, yields, production, and ending stocks to fall in Monday’s WASDE report, that’s why you saw such an aggressive pull-back in prices as funds liquidated their long positions. From a technical perspective on front-month corn prices, the new line of support for corn prices in Chicago is just below $3.64, while resistance is nearly $3.93.  Considering that so many farmers chased corn prices and planted corn so late in June, there’s a lot of speculation that these acres won’t actually get counted as harvested since it’s more likely going into silage (but even that big “maybe”). 
As the U.S.-China trade war intensifies, its impact is starting to be felt by more than just farmers as John Deere cut their forward-looking guidance.  The tractor-maker said that their most recent financial results, “reflected the high degree of uncertainty that continues to overshadow the agricultural sector. Concerns about export-market access, near-term demand for commodities such as soybeans, and overall crop conditions, have caused many farmers to postpone major equipment purchases.”
Update on Wheat Exports Happenings
Speaking of new access, Germany is looking for some new destinations for its wheat exports as Saudi Arabia has relaxes its import specifications, a move that basically opens the door up to the Black Sea.  The German farmer’s co-op, the DRV said that they’re in talks with other countries interested in Germany’s wheat, including Indonesia, China, and Mexico, but admitted that access into these markets could take some time. 
More generally-speaking, it seems that there could be more wheat exports out of Europe as Strategie Grains just raised their forecast by 2.3 MMT to now sit at 142.9 MMT for the bloc’s wheat harvest.  This would also be 12% higher than last year’s drought-riddled crop and mainly a function of better harvests in France and the U.K. making up for losses in the south (especially Spain). From a wheat exports perspective, Strategie Grains pushed up their estimate by nearly 3 MMT from their last forecast to 24.8 MMT of soft wheat exports, with the logic behind the increase rooted in Black Sea wheat prices falling a bit, making EU wheat more competitive. However, while it’s only a few weeks into the wheat marketing year in Europe (which started July 1), EU wheat exports are tracking 30% behind last year’s pace.
Separately, the EU barley crop by 1.2 MMT to 60.5 MMT, again referencing France and Britain as the main catalysts forth upgrade. As mentioned two weeks ago, barley prices continue to soften as a better-looking crop emerges in Western Canada and (as just mentioned) elsewhere.
On that note, the crop year for Canadian wheat exports ended just 2 weeks ago and the Canadian Grain Commission says that total volume topped 18.24 MMT. This is up more than 12% year-over-year and likely part of the reason that the Port of Vancouver has shipped a record amount of commodities in the first half of 2019. 
Comparably, U.S. HRS wheat exports are tracking nearly 10% behind last year’s pace with just 1.06 MMT shipped out through Week 10 of its 2019/20 marketing season.
Morocco recently downgraded their total cereals production by 900,000 MT to 5.2 MMT due to rainfall being 23% less compared to last year.  At those levels, if realized, it would literally half the crop that Moroccan farmers produced in 2018/19. Breaking it down, Morocco’s Ag Ministry is forecasting 2.68 MMT of soft wheat production and 1.34 MMT of durum production. Accordingly, the USDA is estimating that total wheat imports by Morocco in 2019/20 will reach 4.8 MMT, a jump of 17% year-over-year and 11% above the five-year average.
Here’s a look at the most recent datapoints for Canadian & U.S. durum exports. Worth noting is that total U.S. durum wheat exports, through its Week 10, are up 226% year-over-year, albeit they’ve only shipped out 90,560 MT thus far. For Canadian durum exports, shipments topped 4.52 MMT, good enough for a bump of more than 13% year-over-year, mostly thanks to a late-season push of activity.
Canola Prices & Crush Data
NOPA data released yesterday showed us that 168.093 million bushels of soybeans were crushed last month, a new record. July’s crush is a little less than 1% better year-over-year but it is 13% more than June’s crush volumes. Soy oil and canola prices climbed yesterday though as this crush volume for July was much higher than the 155.83 million bushels that the market was expecting to see and it stops the slow production skid that May and June saw. As a reminder, the USDA felled their U.S. 2018/19 soybean crush forecast by 20M bushels in Monday’s WASDE report.
On that note, canola prices are also finding some strength this week on crush margins in Canada being some of the best of 2019.  You could say that this is likely because there’s more supply for the crushers to pick from as canola prices and exports have been subdued without China aggressively in the market. More specifically, through the end of the 2018/19 crop year on July 31, 2019, total Canadian canola exports finished at 9.28 MMT, down 9.3% year-over-year.
This data will likely be reflected in the data from Agriculture Canada in their monthly estimates next week. However, what I’m more interested in seeing is whether or not AAFC accounts for some better Canadian canola trade with Europe. Lachstock Consulting out of Australia suggests that Canadian canola exports to the EU in 2019/20 could come in between two to three million tonnes, if not more, given the EU’s weaker crop this year and smaller trade with other partners.  Viterra is expecting the EU rapeseed harvest to come in at 17 MMT, down 22% year-over-year. Further, as it continues to be dry in eastern Australia, Lachstock is expecting Australian canola production to only amount to 2.5 MMT, about 1 MMT below average. Ultimately, there is likely going to be a window of opportunity for canola exports in 2019/20 and it might be one through which canola prices climb up through.
Have a great weekend!
Due to some travel this morning, futures grain prices are not in the FarmLead Breakfast Brief, but you can review 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.