Grain prices this morning is mostly in the red with just corn and canola prices able to sit in the green ahead of the holiday break and end of 2018.
“Holidays are about experiences and people, and tuning into what you feel like doing at that moment. Enjoy not having to look at a watch.” – Evelyn Glennie (Scottish musician)
Grain prices this morning is mostly in the red with just corn and canola prices finding green ahead of the holiday break and the end of 2018 trading. The sell-off in grain prices is accompanying the broader liquidation seen in the equity markets, with the S&P 500 seeing its worst performance in the month of December since the Great Depression in 1931! 
One of the factors that is spooking investors is U.S. President Trump threatening a government shutdown if he doesn’t get funding for his new wall on the U.S.-Mexican border. 
Coming back to the grain markets, yesterday, we got the USDA’s weekly export report. Wheat prices are lower this morning on the news that there were just 313,580 MT of U.S. wheat export sales, below the 500,000 MT – 700,000MT that the market was expecting. U.S. corn export sales though hit a new record for this past week of the crop year, with 2.517 million metric tonnes (MMT) sold! In terms of actual shipments, U.S. corn exports have totaled 16.7 MMT through week 15 of the 2018/19 crop year, up 76% year-over-year.
Some big news hitting the ag world this week was the sale of Cargill’s malt barley business to global malting business Boormalt.  The company is a subsidiary of French co-operative Axereal and will be acquiring Cargill’s malt processing facilities on 4 continents, including locations in Biggar, SK and Wisconsin. As a reminder, Cargill closed down its other North American malt barley plant in Spiritwood, ND this past April. That decision was said to be due to reduced demand for six-row malt barley.
On that note, Canadian barley exports had a poor Week 20 of their 2018/19 crop year, but at 914,400 MT in cumulative crop year shipments, that’s still up 26% year-over-year!
Soybean Prices Drop Despite Chinese Buying
For yesterday’s USDA exports report, like corn, soybean sales for the week were also a record of 2.963 MMT, topping the high end of the markets’ expectations.
The last two weeks, despite the trade war still firmly in place (albeit in a status of “truce”), we’ve seen Chinese buyers go after U.S. soybeans at a more regular pace. It’s been rumored that China will continue buying soybeans over the holidays, with one source of Reuters suggesting another 2 MMT could be bought before Christmas Day. 
In yesterday’s grain exports report, the USDA shared that export sales to China last week totaled 1.675 million metric tonnes (MMT), or 61.55 million bushels if converting metric tonnes into bushels using FarmLead’s Grain Unit Converter tool.
However, in terms of actual U.S. soybean exports to China, just 341,000 MT (or 12.53 million bushels) have been shipped to the People’s Republic through week 15 of the 2018/19 crop year. Comparably, at the same time a year ago, nearly 18 MMT of U.S. soybeans had officially made their way to China by Week 15 (or 660.7 million bushels).
Cumulatively, total U.S. soybean shipments to all destinations is sitting at 15.41 MMT, down 41% year-over-year.
This week, soybean prices have fallen, despite bullish headlines of fresh Chinese soybean buying. This is mainly attributed to the authenticity of how much China has actually bought and speculation that this week’s purchases were hedged last week (meaning they’ve already been “priced in” by the market).
What’s slightly positive for soybean prices are the rumors circulating that the Chinese government might suspend the 25% import tax for a handful of private crushers to make some one-off purchases.
That being said, the cheaper soybeans from Brazil are starting to come off and it’s being said that the freight differential for movement in February 2019 and beyond clearly sits in Brazil’s favor.
Where do Grain Prices Go in 2019?
I will be taking a hiatus from writing the FarmLead Breakfast Brief for the last week of December (next week) and the first week of January. In its place, FarmLead will be publishing our crop-by-crop recaps of 2018 grain prices, as well as what our outlook for 2019 grain markets.
On that note, you’ve heard me and everyone else talk about the trade war between China and the U.S. these past 2 months. While that’s important, we also need to mindful of some of the other macroeconomic factors being overlooked in the current sea of geopolitical risk, namely monetary policy.
For the U.S., the Federal Reserve just raised interest rates for the fourth time in 2018, despite some signals that the American economy is softening. As such, the Fed indicated in their December minutes that a more “patient approach” to raising interest rates would be taken in 2019. 
In Canada, further interest rate hikes are anticipated in 2019 after keeping things idle this month. The Bank of Canada has cited that the neutral range is between 2.50% to 3.50%, but we’re a bit skeptical of that being the case. With a higher interest rate, you tend to see that country’s currency strengthen at the same time. However, a stronger Canadian Dollar would, in turn, would negatively affect the attractiveness of Canadian grain exports.
Overall, geopolitical risk will continue to be the first drivers of grain markets as we turn to 2019, followed by fundamentals like export activity and 2019 acres. For the likes of corn, soybean, wheat, and canola, be cautious of hoping for prices to keep going higher and sell into those rallies; after all, there’s a healthy amount of supply for all of these crops still available at home and around the rest of the world.
Merry Christmas & Happy Holidays!
At 7:35 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3531 CAD, $1 CAD = $0.7391 USD)
Mar Corn: +1¢ (+0.25%) to $3.763 USD or $5.091 CAD
Jan Soybeans: -2¢ (-0.2%) to $8.915 USD or $12.063 CAD
Jan Soybean Meal (per short ton): unchanged at $307.70 USD or $416.35 CAD
Jan Soybean Oil (cents per lbs): -0.08¢ (-0.3%) at 28.12¢ USD or 38.05¢ CAD
Mar Oats: -2.5¢ (-0.9%) to $2.758 USD or $3.731 CAD
Mar Wheat (Chicago): -6.5¢ (-1.25%) to $5.17 USD or $6.995 CAD
Mar Wheat (Kansas City): -7¢ (-1.35%) to $5.025 USD or $6.799 CAD
Mar Wheat (Minneapolis): -1.5¢ (-0.25%) to $5.665 USD or $7.665 CAD
Jan Canola: +2.7¢/bu (+0.25%) to $10.854/bu / $478.60/MT CAD or $8.022/bu / $353.71/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.