November 24 – Black Friday Grain Prices Risk Management

Good Morning!

Today’s Breakfast Brief looks at the per bushel comparison of wheat prices around the world, what happened while Americans got in a turkey coma yesterday, and why we’re watching Argentina.

“Some people see Black Friday as a much-needed break for their wallet. I see it as retail outlets showing the customers the full weight of their contempt.” – Henry Rollins (American actor)

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After yesterday’s closed day for Thanksgiving, grain markets have a shortened trading day today. Futures markets only open for a few hours before breaking for the weekend.

While everyone was crushing turkey leftovers and watching a terrible NFL primetime game last night, Chinese import data showed that they bought over 480,000 tonnes of vegetable oils in October.

That’s a 78% increase year-over-year. Intuitively, palm oil prices popped as they continue to try and recover from the bearish news of India’s import tax on vegetable oils announced earlier this week.

Canola prices haven’t reacted much to the news though other than heading lower this week as the Canadian Loonie has appreciated against the US Dollar.

JP Morgan is telling its institutional investors not to have a buy and hold strategy for commodities in 2018, but rather “take advantage of price swings.”[1] They do note though that they are bullish on Kansas hard red winter wheat prices. They also think that corn prices could improve as crop production prospects heading into 2018 are a bit smaller.

Rabobank also thinks corn prices could head higher. In fact, the Dutch bank stated that Chicago corn prices in the 2018/19 marketing year are “likely to spend considerably more time above $4.00 USD per bushel” than the last couple of years.[2]

At least one grain trader says that right now, “corn market is as close to death as I’ve seen a market since 1985.” [3]

Can it push lower? Even a bearish November WASDE report couldn’t do it so it seems like the logical direction to go is higher.

My grandfather, a lifelong farmer, used to say though, “Always expected the expected.”

What I’m getting at here is that there is still some possibility that the market goes lower, but there are more indicators that prices improve.

Like corn, soybeans continue to remain rangebound with the front-month contracts testing $10 USD per bushel on the Chicago Board of Trade. Then traders are taking profits and running like you see at the doors opening at a store for a Black Friday sale.

If soybean prices can push outside of their ranges, then it’s likely corn prices will go with them.

Comparing Exports & Grain Prices

Through mid-November, American corn exports are down about 44% from a year ago but they are tracking near 2015’s pace.

US soybean exports to date are at 19.2 million tonnes (or 705 million bushels if you converted tonnes to bushels at That’s 12.5% below what had been shipped out by this time a year ago. However, US port soybean prices are cheaper than Brazilian ports right now, which is keeping buyers fairly interested in “buying American.”

According to AgResource, soybean prices as FOB out of Brazilian southern ports Paranagua and Santos are sitting at $10.50 and $10.60 USD per bushel respectively. [4] Comparably, soybean prices out of US ports in the Pacific Northwest and the Gulf of Mexico are at $9.25 and $10.40 USD per bushel respectively.

As such, last week, the US shipped out 2.11 million tonnes of soybeans compared to Brazil’s 450,000. However, this is high-season for American exports whereas there’s only 10 weeks left in Brazil’s crop marketing year.

To date, a record 65.4 million tonnes of soybeans have been shipped out of Brazil. That’s up 28% year-over-year. The USDA’s full-year target is 65.64 million tonnes so it’s more than likely the number will be higher at the end of the next 2.5 months.

Global Wheat Prices (Per Bushel)

In the North American crop marketing year, wheat activity is tracking a bit better than last year.

In Canada, total wheat exports (including durum) are sitting at 6.78 million tonnes. That’s technically up only 2.5% year-over-year. However, if you just look at wheat exports not including durum, the 5.7 million tonnes shipped out thus far are tracking about 9% above last year.

Digging deeper, only 1.08 million tonnes of durum wheat have left Canada this year. That’s down 21% year-over-year.

Comparably, thus far this marketing year, the US has shipped out almost 12 mllion tonnes of wheat. That’s tracking about 7% below last year’s pace.

As mentioned in Tuesday’s Breakfast Brief, Russian has exported 14.8 million tonnes of wheat so far. That’s 28% higher than last year’s pace.

Prices are competitive around the world though (see chart below).

As you can tell, other than Argentina, Canada is competitively priced today. So why isn’t more wheat being exported? The answer is that this is FOB price. And unlike Russia, Egypt isn’t next door.

Just how competitive are world wheat prices (per bushel)?

Chickpeas in Argentina?

Staying in Argentina, the Grain Exchange of Cordoba says that the wheat harvest in the region is down 24% year-over-year.[5] Relatively-speaking though, is the crop actually that bad?

At 3.87 million tonnes of wheat coming off in Cordoba, that’s still the second-largest wheat crop in the past decade. Last year was tops at nearly 5.1 million tonnes.

This year in the province of Cordoba, 3.27 million acres of wheat were planted. That’s down about 11% from last year’s 3.67 million acres. Despite a lot of talk about negative rains, about 1.5% of acres – or about 50,000 acres – were lost this year, compared to last year’s 2%, or 72,000 acres. Average yields were also down 10% this year in Cordoba.

The state is also a major chickpeas producer!

In 2017/18 with record prices, chickpeas acreage in the major grain-producing state of Cordoba expanded 18% year-over-year to 162,100. It’s also double the five-year average of acres sown with chickpeas (just under 77,000 acres).

If you compare it to the acres in this week’s 2017/18 chickpeas FarmLead insights piece, Canada’s numbers aren’t much different from Argentina.

However, frost in June and July (winter time in Argentina) has severely impacted the crop in Argentina. Only about 90,000 acres able to be harvested. That’s down about 35% from last year.

Further, yields were nearly half of what they were a year ago at less than 20 bushels per acre. All this adds up to a chickpeas harvest in Cordoba of just 48,300 metric tonnes. That’s a 66% drop from last year’s 140,800-tonne harvest and 27% lower than the five-year average.

Overall, Argentina has some pretty high ambitions for its agricultural industry. Their goal is to the be “supermarket to the world”.[6] As such, in the next decade, they think they can increase grain production by a third to over 185 million tonnes.

With grain production seemingly not going down, will prices ever improve? We’ve been some healthy premiums being earned on the FarmLead Marketplace as buyers fill short positions.

Head into the weekend on the right foot, and start managing some price risk by shopping around. Post a lot of your grain on FarmLead today.

It is Black Friday after all!

Have a great weekend!

To growth,

At 7:25 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2713 CAD, $1 CAD = $0.7866 USD)

Jan Canola: +6.6¢/bu / +$2.60/MT (+0.55%) to $11.687/bu / $515.30/MT CAD or $9.193/bu / $405.34/MT USD

Pre-Market Open

Mar Corn at $3.57 USD or $4.539 CAD
Jan Soybeans at $9.973 USD or $12.678 CAD
Jan Soybean Meal (per short ton) at to $326.70 USD or $415.33 CAD
Jan Soybean Oil (cents per lbs) at 34.20¢ USD or 43.48¢ CAD  
Mar Oats at $2.665 USD or $3.388 CAD
Mar Wheat (Chicago) at $4.408 USD or $5.603 CAD
Mar Wheat (Kansas City) at $4.385 USD or $5.575 CAD
Mar Wheat (Minneapolis) to $6.413 USD or $8.152 CAD

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.

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