Grain prices are all in the green this morning as the complex rebounds from a relatively quiet WASDE report, albeit most numbers were viewed as bearish.
“Notice the small things. The rewards are inversely proportional.” – Liz Vassey (American actress)
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Dec. 12 – Anyone Notice Yesterday’s WASDE Report?
Grain markets are all in the green this morning as the complex rebounds from a relatively quiet WASDE report, albeit most numbers were viewed as bearish. 
Heading into the report the market was mostly expecting a slight increase in wheat and corn ending stocks in the U.S., while soybeans were supposed to have a slightly smaller carryout out than what the November WASDE report showed.
Overall though, the market seems to moving past this month’s WASDE report rather quickly as it heads back to watching South American weather and geopolitical relations between the U.S., China, and now Canada.
Will the WASDE Report Help Wheat Prices?
As reminder, in last month’s WASDE report, the USDA adjusted production and carryout numbers for China, which boosted corn and global wheat stocks significantly.
Globally, if we didn’t count a significant increase in Chinese wheat numbers from the November WASDE report, the total 2018/19 global harvest would’ve been lowered by 1.9 MMT. But again, with China, global wheat ending stocks were raised up to nearly 267 MMT.
Global wheat carryout for the 2018/19 crop year were raised by nearly 1.5 MMT from the last WASDE report, but this was mainly attributed to U.S. and EU wheat ending stocks climbing as a result of less exports.
On the bullish side, Russian wheat exports were raised by 1.5 MMT but Australian wheat exports basically offset that, as they were lowered by 1 MMT from last month, thanks to their smaller crop. Last Friday, we discussed how canola prices might be impacted by Australia, but we’re seeing some healthy activity for wheat prices thanks to the smaller crop in the Land Down Undaa.
With bigger Russian wheat exports, this will put some pressure on U.S. wheat prices for similar protein levels. Currently, Russian wheat exports are flying out of the ports, but it’s expected that the amount of exportable supplies are quickly dwindling. This likely translates to a window of opportunity opening up in 1Q2019 for other major wheat exporters. 
Technically-speaking, wheat prices are looking to end the 2018 calendar year pretty strong. Currently, soft red winter wheat prices on the Chicago futures board are up 23% since January 1, 2018, making it the best performer in the grain and oilseed complex. Worth noting is that oats futures are up nearly 22% while corn prices are sitting 10% better.
However, Rabobank is looking at 2019 as a bad year for wheat prices.  Pretty much every major wheat producer/exporter is expected to plant more of the cereal for the 2019/20 crop year. Thus, while you and I are thinking about better marketing opportunities for wheat prices in 1Q2019, we should also be just as quick to consider 2019/20 wheat sales at the same time.
Soybean Prices Back to Watching South America, China
In the December WASDE report, the USDA raised production of soybeans in Brazil to a new record of 122 MMT. For comparison, the Brazilian oilseed processors association, ABOIVE, is pegging the 2018/19 soybean crop in Brazil at 120.9 MMT. They’re also expecting a new record amount of exports at 82.7 MMT. Comparably, the USDA’s estimate in the December WASDE report for Brazilian soybean exports in 2018/19 was raised by 4 MMT from last month to 81 MMT.
Should the weather conditions maintain their current ideal patterns over the next 6-8 weeks, we could certainly see Brazil challenge the American production mark of 125.2 MMT (or 4.6 Billion bushels if converting metric tonnes to bushels at GrainUnitConverter.com). We are watching some dry patterns emerging though in southern states of Parana and Mato Grosso du Sul, where little-to-no moisture has been seen for 2-3 weeks. 
The biggest question mark (other than the weather) in the soybean equation is China. The USDA held Chinese soybean 2018/19 imports at 90 MMT in this month’s WASDE report. However, a rumour has started to spread that China will start to buy U.S. soybeans again soon as part of their commitment to better trade relations with the U.S., albeit most will be destined for Chinese state reserve stockpiles. 
Chinese trade negotiators recently extended another olive branch to their American counterparts, as they’re willing to lower tariffs on U.S. automobiles to 15%, down from the current 40%.  As such, this is why you’re seeing soybean prices leading grain markets higher this morning, as it seems that Beijing and Washington are starting to get on the same page. It’s also why it seems like yesterday’s December WASDE report from the USDA doesn’t even matter!
One last thought: should a deal be found by China and the U.S. to end the trade war, it’s likely that you won’t see a significant amount of U.S. soybeans start flying out of American ports. Very concretely, the Brazilian crop is still looking large and attractive to Chinese buyers. Thus, the 955 million bushels of U.S. soybean carryout might only drop below 800 million, or maybe even 750 million bushels. However, this still means that we still have a large supply of American soybeans to work through. Do grain markets recognize this yet?
At 7:55 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.336 CAD, $1 CAD = $0.7485 USD)
Mar Corn: +0.8¢ (+0.2%) to $3.855 USD or $5.15 CAD
Jan Soybeans: +5.8¢ (+0.65%) to $9.208 USD or $12.301 CAD
Jan Soybean Meal (per short ton): +$1.20 (+0.4%) to $312.10 USD or $416.97 CAD
Jan Soybean Oil (cents per lbs): +0.22¢ (+0.75%) at 29.18¢ USD or 38.99¢ CAD
Mar Oats: +1.8¢ (+0.6%) to $2.938 USD or $3.925 CAD
Mar Wheat (Chicago): +3.8¢ (+0.7%) to $5.248 USD or $7.011 CAD
Mar Wheat (Kansas City): +3.8¢ (+0.75%) to $5.085 USD or $6.794 CAD
Mar Wheat (Minneapolis): +2.3¢ (+0.4%) to $5.775 USD or $7.715 CAD
Jan Canola: +1.8¢/bu (+0.15%) to $11.029/bu / $486.30/MT CAD or $8.255/bu / $364/MT USD
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