Grain markets are in the green as the strength of corn, soybean, wheat, & canola exports (both sales & actual shipments) continue to push the complex higher.
“Great things are not done by impulse, but by a series of small things brought together.” – George Eliot (AKA Mary Ann Evans, English author)
Strong Soybean, Canola Exports & a Smaller Wheat Harvest
Grain markets are in the green as the strength of corn, soybean, wheat, & canola exports (both sales & actual shipments) continue to push the complex higher. Front-month corn prices topped $4 yesterday and made a new one-year high, while Chicago SRW wheat futures contracts pushed back through the major psychological level of $6 USD/bushel, supporting the rest of the wheat complex. Soybean prices Kluis advisors noted yesterday that strong U.S. soybean export sales, namely to China, continue to “ignite the bull camp” 
Hog futures also touched new 10-month highs yesterday as U.S. slaughter capacity is likely maxed at a time when meat demand remains strong with COVID-19 lockdowns increasing again as the number of cases grows.  Not to get too political here, but it’s worth noting that America’s Center for Disease Control and Prevention (the CDC), last month, updated their fatality rates for COVID-19-infected persons, regardless if they had pre-existing conditions or not.  For context, the American National Safety Council estimated the lifetime odds of dying in a motor vehicle accident at 0.09%. 
- 0-19: 0.003%
- 20-49: 0.02%
- 50-69: 0.5%
- 70+: 5.4%
Obviously, the number for the senior age bracket is much higher so protecting them is important, but the trade-off of the current restrictions has some serious consequences for the global and local economies. In the U.S. alone, 13M people remain unemployed, including 4M people who have been out of a job for more than 6 months, which is an indicator of a very unhealthy labour market.  Ultimately, we’re 7 months into the pandemic here in North America and the economic, physical, and mental impact has been significant, be it individually and/or aggregately. The light at the end of the tunnel is that the CDC also announced this week that they expect a vaccine by the end of this year. 
Wheat Harvest in Argentina Gets Smaller
Argentina’s Rosario Grains Exchange said yesterday in its monthly update that the country’s wheat harvest will total 17 MMT, 1 MMT less than their previous forecast.  The agency blamed dry conditions and frost for their reduction, something that the Buenos Aires Grain Exchange also indicated in their weekly report, in which they also downgraded their forecast of the Argentine wheat harvest to 17.5 MMT. For perspective, the Buenos Aires Grain Exchange’s first estimate of this year’s wheat crop was for 21 MMT, which would’ve been a new record.
The bottom line is that these two local estimates are still well below the USDA’s own October WASDE report estimate of 19 MMT. Further, October’s print was 500,000 MT below their September WASDE report estimate. With La Nina-type conditions developing, more dryness is expected in the coming months, especially in central and northern wheat-growing areas in Argentina. Comparably, prospects remain elevated in southern areas of the country and that could make up for some of the abandoned fields to the north. Ultimately, in my opinion, it looks like the Argentine wheat harvest is getting smaller, not bigger, as we get closer to combines rolling down there.
Staying with wheat, international buyers seem to more than aware of the smaller wheat harvest in Argentina, as well as the Ukraine and Europe. With 3.9 MMT shipped out of Canadian ports through Week 10, Canadian non-durum wheat exports are tracking about 28% higher year-over-year. Worth noting, however, is that last week’s Canadian non-durum wheat export volumes were a marketing-year low of less than 200,000 MT.
While certainly not a trend, I continue to reiterate the reality that this strong pace of what I’ll call COVID-19 over-buying, this early in the marketing year won’t last forever, especially when you consider Australia’s wheat harvest is coming to market soon! Thus, as international demand for Canadian wheat exports (or from the U.S. for that matter) slows down, there’s obvious implications for prices.
Back in the Breakfast Brief from June 15th, I wrote, “this is a year where a downgrade to the wheat harvest – be it Ukraine or Canada – could have an amplified effect on the market, because of said demand.” It appears that we’ve priced in the smaller EU, Ukraine, and Argentine harvests. To be honest, the only bullish factor that could help drive wheat prices higher now is if a Black Sea country puts restrictions on their wheat exports.
If you’re looking to manage some of the downside risk and lock in a sale, be it for immediate movement or at a later date, I’d obviously encourage you to post it on the Combyne agricultural trading network. In fact, we just added a new feature that allows to post your Listing for only specific types of other Combyne users to see, regardless if they’re in your Combyne trading network of Connections or not. Try it out and post a new Listing on Combyne today!
Canola Exports Strength Overshadowed by Soybeans
My opinion of international oilseeds demand, however, is quite different than that of wheat exports, as demand remains strong and there are some great La Nina-related production implications for South American soybean crops. D’Arce McMillan of the Western Producer wrote a great piece this week outlining some of the different factors for the oilseeds market, but did note that upside potential for soybean prices is probably greater than that for canola prices.  Quite simply, I agree with Mr. McMillan that “oilseed prices, including canola, should be better supported than wheat.”
And there’s some solid evidence to back it up: So far, through Week 10 of the 2020/21 crop year, Canadian canola exports are tracking nearly 50% higher than a year ago with almost 2.3 MMT shipped, a new record for this time of year. This includes last week’s one-week shipment of more than 400,000 MT, the largest one-week shipment since Week 14 of the 2019/20 crop year! While I think that canola exports have a strong chance to maintain a healthy pace, I’m not sure we’ll hit a new record to top the 11 MMT shipped out in 2016/17. Accordingly, taking a look at the January 2021 canola prices chart, I’m cognizant of the highs made just a few weeks ago.
Much like canola exports, American soybean exports are performing very strong, continuing on my comments from last week that soybean exports are also on a record pace of shipments. China is the obvious main buyer, but supporting soybean prices is a proposal from Brazil that would temporarily eliminate import tariffs on corn and soybeans from countries not located within the Mercosur trade block. 
Also worth noting is that the NOPA crush report for September showed that 161.5M bushels were used (or nearly 4.4 MMT if converting bushels into metric tonnes), which was slightly above the trade’s expectation, and nearly 65% higher than September 2019’s volumes. Ultimately, while soybean and canola exports continue their record pace, the domestic crush volumes are accounting for a large portion of demand, and are obviously supportive of current levels!
Have a great weekend!
At 8:30 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3199 CAD, $1 CAD = $0.7577 USD)
Dec Corn: +4.8¢ (+1.2%) to $4.085 USD or $5.392 CAD
Jan Soybeans: +6¢ (+0.55%) to $10.68 USD or $14.096 CAD
Dec Soybean Meal (per short ton): +$1 (+0.25%) to $373.10 USD or $492.44 CAD
Dec Soybean Oil (cents per lbs): +0.46¢ (+1.4%) to 33.63¢ USD or 44.39¢ CAD
Dec Oats: +3.3¢ (+1.1%) to $2.97 USD or $3.92 CAD
Dec Wheat (Chicago): +9.8¢ (+1.6%) to $6.28 USD or $8.29 CAD
Dec Wheat (Kansas City): +4.8¢ (+0.85%) to $5.628 USD or $7.428 CAD
Dec Wheat (Minneapolis): +5¢ (+0.9%) to $5.638 USD or $7.441 CAD
Jan Canola: +5¢ (+0.4%) to $12.14/bu / $535.30/MT CAD or $9.198/bu / $405.57/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.