Grain markets this morning are mixed with soybean and corn prices continuing to look for demand indicators, notably from China meeting Phase One trade deal terms.
“You cannot afford to wait for perfect conditions. Goal setting is often a matter of balancing timing against available resources. Opportunities are easily lost while waiting for perfect conditions.” – Gary Ryan Blair (American author)
Soybean, Corn Prices Waiting on Demand
Grain markets this morning are mixed with soybean and corn prices continuing to look for demand indicators, notably from China meeting Phase One trade deal terms. That said, keep an eye out as U.S. President Trump is expected to announce some sort of new policies towards China today. In the meantime, soybean prices fell yesterday for second straight session on the concerns of U.S.-China trading relationship being under the knife. Conversely, corn prices are poised to have one of its best weekly performances in nearly a year! More on this in a bit.
On the macroeconomic front, new jobless claims in the U.S. shrank for the first time since COVID-19 lockdowns started. However, there’s still been nearly 41M Americans that have gone on this list in the last 10 weeks. That said, a couple University of Chicago economists have done the math and they estimate that more than two-thirds of all these unemployed Americans are receiving MORE in COVID-19-related benefits, than they earned at their old jobs!  It’s going to be a rude awakening when the government cheques stop coming and that old job still isn’t available.
More Lentil Exports to India?
India is also an economy that’s taken a pretty big hit, as its 8 core industries saw a combined 38% contraction in April.  This comes ahead of a new wave of locusts that are arriving just as the monsoon starts and will intuitively threaten the kharif summer crops.  I’ll admit, I don’t think this is too much of a bullish factor but we do know India is still in the market for peas and lentils as domestic supplies are a little tighter than officials were originally planning.  Worth noting is that Canadian lentil exports from licensed players are tracking nearly 3 times higher than a year ago, while Canadian pea exports are 36% higher than a year ago.
In that vein, we continue to see strong trading activity on completely free Combyne Marketplace for pulses, as well as durum and oats. As a reminder, tap the “Connect” button to join these buyers’ Combyne networks and you’ll automatically be notified when they update their Bids or post new Listings.
As a heads up, just like any publicly-available Bid, it’s a starting point for a conversation. Further, just because the price may not make sense for you today, or you don’t have grain left to contract, you will eventually, so don’t be naïve and instead, start building your trading network today. Here are a few Listings from credit-verified buyers to add to your Combyne Connections.
- 35¢ CAD/lbs old crop large green lentils – central Saskatchewan
- 26¢ CAD/lbs new crop small red lentils – central Saskatchewan
- 5¢ CAD/lbs old crop small red lentils – central Saskatchewan
- $3.85 CAD/bu old crop milling oats – east-central Saskatchewan
- $15.50 CAD/bu old crop brown flax – east-central Saskatchewan
- $5.50 CAD/bu old crop feed wheat – east-central Manitoba
- $4.55 CAD/bu old crop feed barley – east-central Manitoba
- $230 CAD/MT old crop feed barley – southern Alberta
- $200 CAD/MT old crop feed barley – northern Alberta
- $6 CAD/bu old crop CPS wheat – northern Alberta
- $6.60 CAD/bu old crop winter wheat – Peace region Alberta
CCP Thinks World Should Act Like Them
The Chinese government continues to be on the hot seat for their handling (read: censorship) of the COVID-19 virus, their continued advancement across internationally recognized borders, and crackdown on democratic process. With the CCP annexing Hong Kong (much like Russia did to Crimea back in March 2014), this new takeover law will allow Beijing to squash free speech, freedom of assembly, and a free press.  And the world has condemned the move, further weakening China’s image abroad. 
On that note, on Wednesday, a B.C. court ruled against Huawei CFO Meng Wanzhou in her bid to avoid U.S. persecution through a “double criminality” clause. Ms. Wanzhou and her lawyers argued that what the U.S. was accusing her of (lying to HSBC about ties to Iran via a subsidiary there), was not a crime in Canada, but the judge said otherwise. There are obvious expectations that China will retaliate economically in someway as they’re clearly unhappy that Canada’s judicial system and politicians didn’t meet their wishes.  As discussed in Wednesday’s Breakfast Brief, there are many expectations that Canadian canola exports could be further restricted.
Quite openly, Chinese state-media showed their emotions and is pissed that she wasn’t released, saying this decision will “make Canada pathetic clown and a scapegoat in the fight between China and the United States.  For the record, the Canada-China trade relationship is worth about $100 billion, with about $75 Billion of Chinese goods exported to Canada and $25 Billion of Canadian goods exported to China. 
On the Hong Kong issue, the U.S. government declared that Hong Kong is no longer autonomous from China & that their special trading status with the U.S. is no more. The U.S. is expected to announce some punitive measures against China for the takeover of Hong Kong, which, legally, was allowed to happen in 2047, 50 years after Britain gave up the city state. Now, China’s heavy-handedness will likely result in Hong Kong Also, it’s worth mentioning that the U.S. government will start putting restrictions/sanctions on Chinese officials for human rights abuses against minorities. 
After reading the last few Breakfast Briefs, you’re likely noticing the increased discussion about China. The reason I’m discussing it this much is first and foremost, I’m a big believer in democracy and am not a fan of bullies who don’t like said freedoms. Second, there are some major shifts in the geopolitical tectonic plates that are happening as we speak. This could significantly challenge trade routes, supply chains, and manufacturing that have been put in place over the last 3 decades. Hal Brands, the Henry Kissinger Distinguished Professor of Advanced International Studies at John Hopkins University, probably put it best in a Bloomberg op-ed:
“China has used its growing influence to bully institutions such as the World Health Organization and to win the silence or acquiescence of countries that rely on its money and goodwill. The crisis is thus a warning that if the U.S. neglects the balance of power, the contours of international action to address global problems will increasingly be set by others.” 
Corn Prices Waiting on (Any) Demand Headline
Unfortunately, while the Chinese consumer helped weather the storm of the last global recession in 2008, consumer confidence is way down in the People’s Republic as spending habits have drastically changed.  This could put pressure on how much China needs to import: the CARD think tank at Iowa State University is predicting that China will only import about half of the $36.5 Billion of agricultural products that they promised they would in the Phase One trade deal. 
That said, China continues to talk the good talk about buying more U.S. commodities, but they haven’t been really walking the talk. Instead, this week, China bought over 10 cargoes of Brazilian soybeans for August, September, and October delivery, which is usually exactly when a lot of U.S. soybeans are supposed to be headed to China.  Many analysts are suggesting that this is a hedge against dwindling relations with the United States.
One bullish dynamic that’s starting to gain voices is contrasting starts for the 2020 corn crop. In many places across the Midwest, the early start to Plant 2020 has helped get the crop going, but wet weather and flood warning in the Northern Plains have stalled progress.  This has helped cash corn prices in North Dakota inch up a bit (with this North Dakota corn Bid on Combyne here as an example; heck even White Corn prices in Wisconsin are finding a better bid). Further, in Ontario, many farmers are debating if they should replant after more than few days of extremely hot weather baked seeds barely getting out of the ground. 
This in mind, Fitch Solutions said last week that they’re betting corn prices will outperform the likes of soybeans, wheat, and other crops over the next 6 months, thanks to ethanol demand rebounding. Conversely, Rabobank says that, as economies weaken, global meat consumption is likely to fall and that will weigh on corn prices. Dryness in Europe and Ukraine could help corn prices out a bit though, as well as U.S. corn exports (since they are tracking 27% lower year-over-year).
Nonetheless, domestic cash corn prices have taken a serious hit on both the ethanol and feed demand line items but it is inching back to pre-COVID-19 levels.  Further, with demand so depressed, hedge fund managers have gotten unseasonably ultra-bearish on corn prices at a time when weather premiums are usually pushing them to get long. That said, corn prices could see a healthy pop if there’s any sort of short-covering by said money managers. 
If this happens and corn prices do benefit from a short-covering rally, these next few weeks might be the best opportunity to make sales for the entire 2020/21 crop year. Accordingly, now is the time to review some target pricing and/or get your Listing posted on Combyne so your buyers understand your indications and can snap up as their own trading screens and hedges will allow.
Have a great weekend and see you in June!
@Combyne or @FarmLead on Twitter
At 8:25 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3767 CAD, $1 CAD = $0.7264 USD)
July Corn: -0.5¢ (-0.15%) at $3.27 USD or $4.502 CAD
July Soybeans: -4.5¢ (-0.55%) at $8.425 USD or $11.599 CAD
July Soybean Meal (per short ton): -30¢ (-0.1%) to $284 USD or $391 CAD
July Soybean Oil (cents per lbs): -0.02¢ (-0.05%) to 27.37¢ USD or 37.69¢ CAD
July Oats: unchanged at $3.295 USD or $4.523 CAD
July Wheat (Chicago): unchanged at $5.143 USD or $7.083 CAD
July Wheat (Kansas City): +1.3¢ (+0.25%) at $4.653 USD or $6.405 CAD
July Wheat (Minneapolis): -0.8¢ (-0.15%) to $5.185 USD or $7.138 CAD
July Canola: +2.9¢ (+0.3%) to $10.478/bu / $462/MT CAD or $7.611/bu / $335.57/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.