Grain markets are all in the green this morning except for wheat prices as the complex seems to be following their performance from Friday.
“I have always been driven to buck the system, to innovate, to take things beyond where they’ve been.” – Sam Walton (founder of Wal-Mart)
Feb. 19 – Wheat Prices Bucking Rest of Grain Markets?
Grain markets are all in the green this morning except for wheat prices as the complex seems to be following their performance from Friday. Following national holidays in both the U.S. and Canada, grain markets are working on a shortened 4-day trading week. Trade war negotiations continue between the U.S. and China with the Chinese Vice Premier, Liu He, planning to visit Washington later this week on Thursday and Friday.
On the acreage front, Informa put out some fresh estimates for Plant 2019, suggesting that the area across the United States seeded with corn will come in at 91.6 million acres, up 100,000 from their previous estimate. Comparably, Informa’s soybean acreage estimate was lowered by 200,000, down to 86 million (Today, I’m still sitting at 84 million acres). Finally, for wheat, Informa thinks that total wheat acreage for the 2019/20 crop year in the U.S. will be 46.8 million acres, down 400,000 from their previous estimate.
Later this week, on Friday, February 22nd, we’ll get a first look at the USDA’s first estimates of the 2019/20 crop. They’ll also be releasing U.S. grain export numbers for the past number of weeks that the USDA has been trying to catch up.
Soybean Prices Maintain Volatility
Soybean prices continue to receive some domestic support as NOPA said that its members crushed 171.6 million bushels of soybeans (or 4.67 MMT if converting bushels into metric tonnes) in January 2019. This was 2 million bushels above the average analysts’ pre-report guesstimate and the largest crush ever for the month of January. It was also the 4th-largest monthly crush volume ever, for any months.
In last Friday’s FarmLead Breakfast Brief, we looked at the volatility for grain prices, namely soybean prices, and some of the factors that are driving the aggressive ups and downs. For example, the Rosario Grains Exchange bumped up its estimate of Argentina’s soybean harvest to 52 MMT, up 2 MMT from their previous estimate despite heavy precipitation forcing some lost. For perspective, the USDA downgraded Argentina’s soybean harvest by 500,000 to 50 MMT in the February WASDE report.
Next door in Brazil, the soybean harvest is picking up pace with 36% of the crop now combined. This is up from 19% a year ago but the speed of combines has recently slowed due to some rainfall in the regions that are rolling.
Wheat Prices Now Overpriced?
Wheat prices on the March 2019 contract in Chicago lost 2.7% for the week, to fall to its lowest level in more than year as traders eyed weaker cash markets and some bearish technical signals. This could also have something to do with market participants rolling over from the March contract to the May contract.
On the cash front, Algeria’s purchase this week of 600,000 MT of milling wheat was for about $15 USD / MT cheaper than what they bought for back in January! With wheat prices contracted at $247 USD / MT delivered into Algerian ports (or $6.72 USD and $8.90 CAD per bushel if converting metric tonnes into bushels), this has forced European, namely French, wheat prices lower to get the business. 
In turn, this is forcing cash wheat prices in other markets also lower. In fact, AgriCensus is reporting that 11.5% protein milling wheat from Russia is now competitive with French wheat of similar quality on a FOB port basis at $233 USD / MT (or $6.34 USD and $8.39 CAD per bushel). Furthermore, Russian wheat prices for 12.5% protein have dropped about 12 USD / MT (or 33¢ USD and 43¢ CAD per bushel) in the past week or so. The decline has been mainly attributed to less offers coming to the market, but a weaker Russian ruble has kept things competitive.
Back in North America, we’ve seen cash wheat prices also start to pull back a bit. This is applicable to both hard red spring wheat and CPS wheat prices.
Overall, the corn and soybean prices seem to be tracking the direction of trade war talks more than anything else, whereas wheat prices are sticking to the fundamentals. The simple question to ask (and answer) is where or not the highs of the wheat market been found? It’s hard to perfectly predict a top but knowing that there are a lot more wheat acres getting planted in 2019, including in Australia. That in mind, ABARES dropped its estimate of the 2018/19 wheat harvest by 200,000 MT to 17.3 MMT.
Due to travel, there are no futures data in today’s Breakfast Brief but you can find them here.
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