Grain markets are all over the place this morning (sort of like flax and chickpea prices!), with a lot of buzz about La Nina for wheat prices & China driving corn prices higher.
“Being forced to work, and forced to do your best, will breed in you temperance and self-control, diligence and strength of will, cheerfulness and content, and a hundred virtues which the idle will never know.” – Charles Kingsley (English priest & author)
Idle Chickpea Prices & China Fueling Corn Prices
Grain markets are all over the place this morning (sort of like flax and chickpea prices!), with a lot of buzz about La Nina for wheat prices & China driving corn prices higher. Last night, we had the last and final U.S. Presidential debate, and it was much more civilized than the last go around!  Former Vice-President Joe Biden got some good shots in, talking about actual issues and reform that he would introduce if he were President. However, it was hard to ignore President Trump’s go-to line “You’re all talk, no action” and how he’s had 47 years in politics, including 8 years as part of the Obama administration, to make things better, but didn’t (at least according to the Donald).
I’ll quickly mention flax prices, which have rallied very aggressively in the past 3 weeks, since we’re now seeing $17 CAD/bushel handles being agreed to on the Combyne agricultural trading network. When I last exclusively talked about flax prices, back at the end of August, values were trading in the $14s, but some poor quality out of the Black Sea, and a strong start to this year’s export campaigns, and we’re sitting at levels not seen since the 2012/13 crop year.
As farmers collectively tend to chase these prices, this unfortunately means that more acres will be get planted next year. Any guesses on how much average flax prices fell from 2012/13 to 2013/14? Well, acres climbed by about 15% and flax prices by nearly the exact same 15%. As I always say, sell incrementally into rallies (5% – 15% blocks); you can start by posting your Offer Listing on Combyne and let the market come to you.
Corn & Wheat Prices Battle for Top Performance
With corn prices on the front-month December 2020 contract toying with $4.20 USD/bushel, it’s worth mentioning that whenever we’ve got near these levels in the past, there’s been a lot of producer selling. But as Bob Linneman from Kluis Advisors noted yesterday, “the timing of these prior highs was during the summer rally (and) as long as the bull spreads in corn and soybean markets remain strong, this bull rally will stay intact.” 
Further adding support to corn prices was more export sales of 1.83 MMT reported yesterday, which was well above the trade’s expectations. Considering that China has bought about 12 MMT of corn from the U.S. now, and an estimated 5 MMT from the Ukraine, it’s widely expected that Beijing will raise their quotas for corn imports.  And they basically have to, given that the current quota is just for 7.2 MMT, and while companies can import corn as not part of the quota, Chinese government import tariffs of up to 65% can be applies. With nearly 5.4 MMT of U.S. corn exports so far through Week 6, shipments are now more than double what they were a year ago.
While corn prices are up more than 10% since the start of October, Chicago wheat prices are far behind, tracking nearly 9% higher over the same time frame. We don’t yet know where Chinese corn demand is going to be capped, and while it feels a bit top-heavy already at this point, I’m still cognizant of a cheap U.S. Dollar and record corn prices in China are suggesting the buying will continue. Comparably, even though SRW wheat prices on the futures board continue to sit at 6-year highs, they may have more upside as speculators are piling onto the La Nina train.
In that vein, in their weekly report, the Buenos Aires Grains Exchange dropped its Argentine wheat harvest estimate yet again, this time by 700,000 MT, down to 16.8 MMT. Competing firm, Rosario Grains Exchange is currently sitting at 17 MMT, while the USDA pegged the Argentine wheat harvest at 19 MMT in this month’s October WASDE report. Add in that Ukraine has already shipped about 57% of the quota that the government has suggested to the markets and there are quite few bullish factors we need to stay on top of. 
Chickpea Prices vs Fababean Prices
Relative to years passed, chickpea prices continue to feel somewhat depressed. However, that’s mainly attributed to record supplies in Canada for the 2020/21 crop year, thanks to another relatively large chickpea harvest and the large carryover of supplies from the 2019/20 crop year. The latter bearish factor was largely attributed to smaller volumes of chickpea exports going to traditional customers like India and Pakistan.
In the U.S. however, the garbanzo / chickpea harvest was estimated to be about 38% smaller year-over-year at just over 175,000 MT. Combined with decent size for the global chickpeas harvest, I don’t think there’s a lot of room to the upside for chickpea prices right now unless there some sort of major, black swan production or demand event that is impossible for anyone to foresee (i.e. production concerns during India’s winter/rabi crop growing season). That said, with kabuli chickpea bids sitting around 30¢ CAD/lbs on the Combyne agricultural trading network this week, it’s still better than the chickpea prices we saw a year ago.
On the flipside, it’s a demand issue that’s weighing on fababean prices. This is largely because the world’s biggest buyer, Egypt, has got a few extra months’ worth of supplies after the country’s food vendors were on COVID-19 lock down and couldn’t sell anything!  As a result, one Egyptian international trader has suggested that Egypt may import 100,000 MT less than they normally would; Canadian farmers grew about 122,000 MT of fababeans this year!
However, because of the current weakness in fababean prices, some substitution effects could start to take place, as fababeans slowly replace the increasingly expensive yellow pea prices (something I mentioned in Monday’s Breakfast Brief). We’re still seeing $8 CAD/bushel fababean bids listed on Combyne, which isn’t a bad price, but likely where we’ll be until some stronger demand returns. One factor that could help was the smaller, poorer quality crop in Europe this year, largely because of a new ban on certain insecticides that farmers have used previously with much success. Thus, human consumption quality fababean prices may have a little more room to the upside.
However, there’s one last factor to consider for fababean prices: the huge crop from the Land Down Undaa.  With a fababean harvest estimated to be somewhere between 520,000 MT and 600,000 MMT, the latter of which would match the current record set in 2016/17. Nonetheless, at even 520,000 MT, the Aussie fababean harvest would be about 60% higher than a year ago, and more than double what it was 2 harvests ago! Needless to say, supply should satisfy current demand but there could be some COVID-19-related buying sprees in the coming months so stay diligent, and perhaps set up a Combyne Market Alert (found in the Notifications section of your Combyne Profile).
Have a great weekend!
At 8:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3129 CAD, $1 CAD = $0.7617 USD)
Dec Corn: +1.3¢ (+0.3%) to $4.175 USD or $5.481 CAD
Jan Soybeans: -0.8¢ (-0.05%) to $10.715 USD or $14.067 CAD
Dec Soybean Meal (per short ton): +$3 (+0.8%) to $385.40 USD or $505.97 CAD
Dec Soybean Oil (cents per lbs): -0.07¢ (-0.2%) to 33.62¢ USD or 44.14¢ CAD
Dec Oats: -1¢ (-0.35%) to $3.025 USD or $3.971 CAD
Dec Wheat (Chicago): +6.3¢ (+1%) to $6.29 USD or $8.258 CAD
Dec Wheat (Kansas City): +5.3¢ (+0.95%) to $5.655 USD or $7.424 CAD
Dec Wheat (Minneapolis): +4.8¢ (+0.85%) to $5.793 USD or $7.605 CAD
Jan Canola: -8.8¢ (-0.7%) to $12.315/bu / $543/MT CAD or $9.38/bu / $413.60/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.