April 20 – Canola Prices, Other Grains Continue Erratic Ways

Good Morning!

Grain prices are all in the red this morning, driven by canola prices and wheat prices seeing profits taken off the table before the weekend.

“Growth is an erratic forward movement: two steps forward, one step back. Remember that and be very gentle with yourself.” – Julia Cameron (American artist)


Canola Prices, Other Grains Continue Erratic Ways

Grain prices are all in the red this morning, driven by wheat prices and canola prices on profit-taking. Yesterday, both wheat and canola prices saw healthy gains, but those are being erased as the speculative players take profits off the table ahead of the weekend. We continue to see a lot of volatility in the complex as weather, trade, and geopolitical risk are constantly competing for the position of what’s the greatest influencer of markets.

On that note, this week, for all our GrainCents readers, Garret dug into who’s running the show for US free trade deals. More specifically, Garrett examined today’s status of America’s major trade deals and partners around the world, and the potential impacts of changes, including NAFTA and obviously China.

Soybean prices in Brazil have seen significant volatility in the past few weeks as Argentina production concerns and then proposed import taxes by China on US soybeans have helped Brazilian supply look fairly attractive.

Over the course of the past month, Brazilian port prices for soybeans were sitting as high as $1.60 USD /bushel above CBOT futures values and $1/bu above US port soybean prices. This was mainly due to more interest from China in “buying Brazilian.” Also supporting the soybean prices rally was the Brazilian Real which has faced some challenges on political risk in the country. Today though, Brazilian soybean prices are 30¢/bu above US port prices.

That being said, yesterday’s export sales announcement from the USDA showed that combined new and old crop US soybean sales were a little more than 2.3 million tonnes! Ironically, China was a big buyer. However, actual shipments of American soybeans last week came in at just 402,300 tonnes, which was a marketing year low (and why soybean prices fell yesterday).

Garrett dug into all US grain export sales in yesterday’s Grain Markets Today update, but the highlight was wheat prices rallying again. The complex was led by Kansas City hard red winter wheat prices for the second straight day as updated reports showed the drought conditions across the US have declined for the 12 consecutive week!

Canola Prices Rally Short-Lived?

Yesterday, canola prices also jumped, up nearly $10 CAD/metric tonne on the Winnipeg ICE futures board! The rally has been a bit short-lived though as canola prices are down almost $4 already this morning. The reason for the one-day pop was continued decent domestic demand, the Canadian Loonie dropping back below 79¢ USD, and speculative short-covering.

The later was catalyzed by the possibility of a strike by CP railroad workers, as well as concerns over a late state to Plant 2018. Despite the lingering of Old Man Winter, much of the industry expects to see a record canola acreage number in next Friday’s estimate from StatsCan. Last year, Canadian farmers seeded a then-record 23 million acres. There’s also more buzz that China might import more Canadian canola instead of American soybeans, should a 25% import tax be imposed on the later. [1] We’ve previously noted for canola GrainCents readers what elevated demand for Canadian canola or canola meal by China would look like.

Switching continents, Adrian recently looked at the potential of the EU’s rapeseed crop in 2018/19, broken down country by country. There are certainly some political remnants that are impacting acres there, but the weather is an obvious factor that cannot be ignored, especially considering that the EU rapeseed crop is planted in the fall and harvested in June/July.

This week, Adrian also dug into what the Canadian oats balance sheet could look like in 2018/19, especially considering some additional commentary of late for more Western Canadian acres going into oats because of the late spring. This comes after last week’s assessment of what America might need in terms of oats in 2018/19. This comes as more of your oats are finding its way into lattes and coffee shops around North America!

South American Weather Update

This time a year ago, major safrinha corn producing states in Brazil of Sao Paulo, Mato Grosso do Sul, and Parana were fairly wet. Conversely, this year, April precipitation is currently forecasted to end up as low as 10% or as high as 30% of the average moisture. This is why we’ve seen production estimates for the Brazilian corn crop downgraded as of late.

Parana alone is responsible for about 30% Brazil’s second/safrinha crop but the wet season appears to be over though for the southern areas of the country. Conversely, looking west, moderate rainfall is expected in central regions of Argentina, which will slow soybean and corn harvest there. Through the end of the month, 1.5 – 3 inches are expected to fall, which, again is terrible for harvest, but good for the wheat and barley crops that are expected to get seeded in the next month.

On the harvest front though, about 25% of soybean fields in Argentina have now been combined, and yields are certainly disappointing (keep in mind though that the market has already priced this in). An interesting note was the Argentine Ag Minister saying yesterday that the country’s soybean harvest would likely end up at 37.6 million tonnes. This is between the USDA’s 40-million-tonne handle from last week’s WASDE report, and many private estimates are sitting around 33 million tonnes. A year ago, for the 2016/17 season, Argentine farmers took off a 55 million-tonne soybean crop.

FarmLead Operational Update

Turning more inward, we continue to put out some great new features and tools on FarmLead.com to make the business side of your farm or agribusiness operation easier, with the obvious focus on cash grain trade. Watch out for some new announcements next week!

On the flipside, there will be no Breakfast Brief written/published next week, but you can guarantee yourself the ability to stay on top of grain markets by bookmarking our Grain Markets Today page here. Our Garrett Baldwin continues to provide some valuable insight into what’s happening in grain markets, especially those on the futures boards.

Further, our GrainCents subscriber base has been growing exponentially, and I’d encourage you to try out the free 3-week trial. If you’ve liked reading the FarmLead Breakfast Brief in the past, then you’ll love being a GrainCents reader. We dig in and work through the bearish, the bullish, and the noise to help you understand what’s most relevant to the price direction of 12 different crops! It’s one thing just to read that the price is going higher or lower, but our goal at GrainCents is literally to help you make sense of why those moves are happening – we want you to become smarter at thinking through why prices could go up or down.

Sign up to your free GrainCents trial today to make sure you get Sunday’s GrainCents digest for your crop(s), which will include a bit of a preview of expectations for Friday’s acreage estimates from StatsCan.

Have a great weekend!

To growth,

Brennan Turner

President | CEO
TF: 1-855-332-7653
@FarmLead or @GrainCents on Twitter

At 7:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2654
 CAD, $1 CAD = $0.7903 USD)

Jul Corn: -2.8¢ (-0.70%) to $3.883 USD or $4.913 CAD
Jul Soybeans: -6.8¢ (-0.64%) to $10.423 USD or $13.198 CAD
Jul Soybean Meal (per short ton): -$2.30 (-0.61%) to $375.50 USD or $475.17 CAD
Jul Soybean Oil (cents per lbs): +0.04¢ (+0.01%) at 31.72¢ USD or 40.14¢ CAD  
Jul Oats: -1.5¢ (-0.63%) to $2.370 USD or $2.999 CAD
Jul Wheat (Chicago): -7.5¢ (-1.53%) to $4.833 USD or $6.115 CAD
Jul Wheat (Kansas City): -9.3¢ (-1.80%) to $5.053 USD or $6.394 CAD
Jul Wheat (Minneapolis): -7.0¢ (-1.13%) to $6.123 USD or $7.748 CAD
Jul Canola: -$4.00 (-0.75%) to $12.032/bu / $530.50/MT CAD or $9.508/bu / $419.228/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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