Grain markets are mixed this morning after yesterday’s ABARES report of a smaller harvest helped wheat prices find fresh one-week highs.
“You can put handcuffs on people who push the envelope. When they break the law, they deserve to have handcuffs.” – Elizabeth Warren (United States Senator)
ABARES Gives Good Push for Wheat Prices
Grain markets are mixed this morning after yesterday’s ABARES report of a smaller harvest helped wheat prices find fresh one-week highs. However, wheat prices have pulled back and instead, it’s the oilseed complex that is leading grain markets this morning. Soybean prices are up on the NOPA crush report for January, which showed nearly 177M bushels (or nearly 4.82 MMT if converting bushels into metric tonnes) were processed last month. That’s up 1.2% from December’s volume and 3.1% improvement year-over-year.
Other than what we’ll get into below, most eyes later this week will be on the USDA’s Annual Ag Outlook forum that takes place in Washington, DC. Before we get into these other headlines, I wanted to share some of the positive happenings on our next-generation cash grain marketplace, Combyne. New Combyne users authenticating their account more than doubled last week, as grain buyers are farmers alike are building their Connections. Who, in your trusted cash grain trading network, should be in the know of the next deal you might be looking to make? Even if you’re not looking to buy or sell today, being on top of where your trading partners are sitting is incredibly important.
ABARES Softens Its Wheat Harvest Estimate
Yesterday, Australia’s version of the USDA, ABARES, came out with their updated estimates of their Harvest 2019.  The new report from ABARES made some subtle changes to their expectations of what Aussie farmers pulled off for chickpeas (-8,000 MT to 281,000 MT), peas (-22,000 to 225,000 MT), oats (-35,000 MT to 900,000 MT), and barley (+18,000 MT to 8.85 MMT). It was the canola and wheat harvest numbers though that surprised the market a bit. For canola specifically, ABARES raised their estimate by 23,000 MT to 2.33 MMT.
The bigger surprise was in the wheat harvest as ABARES reduced their estimate of the 2019 Aussie wheat harvest by nearly 700,000 to new figure of 15.17 MMT. That said, Sydney-based brokerage shop, IKON Commodities, thinks that the actual number could be even lower, closer to 14.5 MMT.  Regardless, at the current new estimate from ABARES, it would be the smallest wheat harvest in Australia in the last dozen years. Accordingly, this would suggest that available exportable supply (after domestic needs are met) of 7 – 7.5 MMT. Intuitively, this has helped wheat prices recover yesterday but we are seeing some profit-taking this morning.
ABARES noted that summer crop planting in the Land Down Undaa has been a struggle, due to ongoing soil moisture challenges from three straight years of drought. More specifically, ABARES is estimating that total summer crop acreage will have dropped by 66% year-over-year to just 882,000 acres. This is also a 33% reduction from what ABARES was forecasting back in December. As a reminder, these summer crops are mostly allocated to cotton, rice, and sorghum. Looking forward though, Australia will need some more rainfall as Australia’s Bureau of Meteorology says that moisture potential remains below average over the next 3 months (March to May 2020) as shown in their expectations below. 
The bottom line is that Australia needs more rain and with their Plant 2020 winter cropping campaign starting up in a few months, the prospects remain a bit dim. That said, to help meet domestic needs, Australia continues to buy Canadian wheat, averaging about 60,000 MT a month since May 2019.  That said, Canadian wheat exports need that sort of business as shipments of non-durum wheat are tracking about 15% behind a year ago through Week 27.
Communist Controversies in China, Canada
The global death toll from the coronavirus unfortunately has climbed above 2,000 people.  While the majority of cases have been confined to mainland China, cases of the coronavirus has been confirmed or suspected in 29 countries since the beginning of 2020. That said, the Chinese government is busy trying boost its image as they’re teetering on the edge of a public fallout as citizens have voiced negative opinions of how scientists have been censored and the facts being shared are misleading. 
That said, in an unprecedented move, three Wall Street Journalists were expelled from China yesterday because of an opinion piece they wrote that the Chinese government viewed as “discriminatory”.  Some may view this as a response to the U.S. State Department declaring five Chinese state-run media agencies as effective extensions of the Chinese government.  All this in mind, it’s a bit ironic that the current Chinese government is a result of a revolution that started in Wuhan back in 1911.  Are we on the cusp of a witnessing a new uprising in China? I don’t think so but China certainly has some work to do to make up for some poorly-timed actions.
Unfortunately, this sort of dictator-esque activity is being seen here in Canada as yesterday, Prime Minister Trudeau refused to have Conservative party leader Andrew Scheer in a meeting of the Canadian party leaders regarding the climate protests that are block railroads.  More specifically, Scheer called out the Prime Minister for “the weakest response to a national crisis in Canadian history.” In turn, Trudeau’s bruised ego was on display as he told reporters that “Mr. disqualified himself from constructive discussions with his unacceptable speech earlier today.”
It seems ridiculous for me to ask this but do I live in communist China or the democracy of Canada? What’s more concerning to me is that the inaction of the Prime Minister and his government continues. While “patience” is being asked for by them, this is clearing an “extraordinary disruption” to Canadian supply chains and the government has all the authority it needs, via the Canada Transportation Act, to give police the direction required to finally enforce the law. 
In the meantime, Canadians remain hostage. To be fair, I should also be pointing out that the Democratic Presidential nominee might just be bought by candidate Michael Bloomberg as he’s recently surged in the polls and will be on stage tonight in Las Vegas for the next Democratic Party debate.  All things being equal, leadership is not easy, and neither are democracies for that matter. While there are laws in place that act as benchmark to keep bad apples in check, I’m starting to recognize that society’s demands of a democracy are unfortunately diverging, and it will continue to slide unless some better leadership shows up.
Due to some connectivity issues, futures grain markets data isn’t available in today’s Breakfast Brief but you can view them here at your convenience.
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