Sept 4 – Barley Prices Fall with Harvest, Corn Prices

While cash markets for the likes of canola and feed barley prices are suffering, futures grain markets are back in the green this morning after a bearish session yesterday.

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Barley Prices Fall with Harvest, Corn Prices

While cash markets for the likes of canola and feed barley prices are suffering, futures grain markets are back in the green this morning after a bearish session yesterday. A strong U.S. Dollar and weaker grain exports pushed December 2019 corn prices to a new contract low yesterday. For the month of August, corn prices were the biggest loser, tied with Kansas City HRW wheat prices. For context though, corn prices are still tracking nearly 4% higher than the price seen at this time a year ago. Hard red spring wheat prices also had a hard month, and notably, the December 2019 futures contract is sitting below $5 USD/bushel this morning.

Futures grain prices August 2019 monthly performance

Nothing much has changed on the quality front for U.S. corn and soybean crops, with yesterday’s crop progress report keeping good-to-excellent conditions at 55% for beans and raising it one point for corn to 58%. [1] 41% of the U.S. corn crop is in the dent stage, versus the five-year average of 63% while 86% of soybean fields are setting pods, down from the seasonal average of 96%. The American spring wheat harvest is now at 55% completed, and while that’s a good jump from last week’s 38% combined, it’s well behind the 78% five-year average for this week of the harvest campaign.

On the weather front, while Hurricane Dorian is grabbing most of the headlines, some rain is also expected to fall across the Corn Belt this week. Highs are expected in the 80s (Fahrenheit) and possibly even the 90s, which, combined with moisture, should help perk up those late-planted fields.

Soybean Demand & Brazilian Competition

Yesterday, the USDA said that 179.5M bushels of soybeans were used by U.S. crushers in July. [2] This came in a little above the pre-report average estimate of 178.5M bushels, 0.4% above volumes used in July 2018, but up about 14% from the 157.6M bushels used in June 2019. With one month left to report in the 2018/19 marketing year, U.S. crushers have processed nearly 93% of the USDA’s target of 2.065 billion bushels. This means that just 152M bushels are needed to have been crushed in August to satisfy the USDA’s full-year forecast.

Staying in soybeans, AgRural is estimating that Brazil’s soybean acreage for the 2019/20 crop year will grow by only 1.1% from last year, down from the 10-year average of 5.2% annualized growth rate. As Brazilian farmers will start seeding their 2019 soybeans in a few weeks, this increase still means a new record of nearly 90M acres will get seeded. From a weather standpoint, the Brazilian National Weather Service (Inmet) is expecting below-average precipitation for September in major-producing central states (Mato Grosso, Mato Grosso do Sul, Goias, Tocantins, & Para) but average rains are expected to return in October. [3]

For August, Brazil shipped out 5.33 MMT of soybeans, well below August 2018’s exports of more than 8 MMT. [4] As mentioned in last Friday’s FarmLead Breakfast Brief, Brazil seems to be running out of exportable soybean supplies and China will be holding its breath, looking for both good weather in Brazil but also elsewhere to find their soybeans in 4Q2019. That said, data released yesterday showed that American soybean inspections for the week ending August 29 were 1.28 MMT, the most for that week in the last 25 years! [5] This comes as new 15% U.S. imports tariffs on about $115B worth of Chinese goods went into effect this past Sunday. [6] On a related note, China announced on Monday that it had filed a case at the WTO against the U.S. regarding the additional tariff. [7]

Coming back to Brazil, the South American country exported 7.65 MMT of corn in August, more than double the 2.9 MMT exported in the same month a year ago. This has led to an updated local forecast for total corn exports for Brazil to reach a new record of 23 MMT. Comparably, with one week left to go in the U.S. 2018/19 crop year, total U.S. corn exports are standing at 48.54 MMT, down more than 13% compared to the same point a year ago.

Week 51 cumulative U.S. corn exports for the 2018/19 crop year

Barley Prices, Canola Continue Their Fall

As mentioned, corn prices took a pretty solid hit in August, and that decline has carried over into feed barley prices.  With harvest ramping up and new crop supplies coming to market, feed barley prices in Saskatchewan have dropped nearly 11% in the past month and more than 15% over the past 3 months. For feedlot alley in Southern Alberta, since the highs were seen at the end of June, feed barley prices have dropped nearly 25%, or about $75 CAD/MT, to $215.

Saskatchewan feed barley prices dropped significantly in August 2019

As a reminder, last Wednesday, StatsCan said that Canadian barley production for the 2019/20 crop year should come in at 9.64 MMT, a jump of 15% or 1.26 MMT year-over-year, and 19% above the five-year average. Also not helping barley prices is the slow start to the 2019/20 export campaign, as, through Week 3, a little more than 31,000 MT has been shipped. That’s about half of what Canadian barley exports were at this time a year ago.

Week 3 of cumulative Canadian barley exports for the 2019/20 crop year

Conversely, canola exports are starting the 2019/20 crop year well, with nearly 550,000 MT shipped out through Week 3, a jump of nearly 30% year-over-year. Unfortunately, this has not helped cash canola prices yet. Despite StatsCan forecasting the canola Harvest 2019 should come in 9%, or 1.89 MMT below Harvest 2018, average cash canola prices for spot movement are tracking more than 8% behind a year ago.

Average cash canola prices for spot movement in Western Canada through August 2019

Overall, we’re currently in a time of the crop year where supplies are abundant, and demand is relatively flat. Feed barley prices are going to continue to track corn prices, but if an early frost appears in the Canadian Prairies, more fields that were seeded for malt might end up in the feed column. On that note, we also know Western Canadian crops are 1-2 weeks behind a lot of places and for canola prices, what is already expected to be a small crop could get smaller. [8] While no one is hoping for frost any time soon, if it, or other weather issues come up, it might be the only thing that helps canola prices improve in the short term.

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

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 = $1.3317 
CAD, $1 CAD = $0.7509 USD)

Dec Corn: +1.8¢ (+0.5%) to $3.628 USD or $4.831 CAD
Nov Soybeans: +5.3¢ (+0.6%) to $8.738 USD or $11.636 CAD
Oct Soybean Meal (per short ton): +$1.90 (+0.65%) to $292.30 USD or $389.27 CAD
Oct Soybean Oil (cents per lbs): -10¢ (-0.35%) to 28.84¢ USD or 38.41¢ CAD  
Dec Oats: +1¢ (+0.4%) to $2.662 USD or $3.546 CAD
Dec Wheat (Chicago): +6.3¢ (+1.4%) to $4.598 USD or $6.123 CAD
Dec Wheat (Kansas City): +4.5¢ (+1.2%) to $3.868 USD or $5.15 CAD 

Dec Wheat (Minneapolis): +3.3¢ (+0.65%) to $4.903 USD or $6.529 CAD
Nov Canola: +1.8¢ (+0.2%) to $10.167/bu / $448.30/MT CAD or $7.635/bu / $335.63/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.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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