Grain markets this morning are trying to rebound on some rebound buying, amidst a challenging corn exports environment, another big soybean harvest in Brazil, and the economic impact of the coronavirus.
“The reason why it is so difficult for existing firms to capitalize on disruptive innovations is that their processes and their business model that make them good at the existing business actually make them bad at competing for the disruption.” Clayton Christensen (American academic & business consultant)
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Competing Grain, Corn Exports & Another Soybean Harvest
Grain markets this morning are trying to rebound on some bargain buying, amidst a competitive corn exports environment, another big soybean harvest in Brazil, and the economic impact of the coronavirus. Concerns about the coronavirus spreading remain but markets are bouncing on reports that quarantines are starting to slow the spread.  Regardless, those watching global economic activity continue to be concerned with the disruption in logistics and demand as hundreds of millions of people change their normal daily habits. This includes me, as, this Friday, I was supposed to be headed to India for 8 days but the trip was (rightfully) cancelled over concerns of the coronavirus!
Canadian Grain Exports Looking for More
Canadian 2019/20 grain exports are tracking 11% below a year ago (or about 2.5 MMT lower from the same week in 2018/19) and most analysts are putting the blame on lower demand from China.  Through Week 25 of the 2019/20 crop year, Canadian grain exports of all crops are down 11% year-over-year. While we know China is buying a lot of peas, shipments of other products like wheat, barley, and flax are tracking below where we were a year ago.
The USDA’s Canadian attaché believes that Canadian wheat exports (including durum) will end 2019/20 down 9% year-over-year due to “competition from large global supplies”, as well as “large U.S. (durum) stocks, which has reduced durum shipments across the border.  Conversely, last week at FarmTech in Edmonton, David Mielke of Oil World said that he believes China’s canola oil demand will remain strong, albeit Canadian product is getting through the UAE, who’s literally acting as the processing vehicle. 
New Crop Flax Prices on Combyne
Looking on the value side of things, prices for Canadian wheat and barley are reflecting some of the reduced demand, whereas flax prices continue to sit at an elevated level. More specifically, flax prices in Western Canada continue to sit above $13 in most places with some $13.50 and even a $14 trading a couple weeks ago. On the flipside, flax prices for new crop are starting to appear, including this new crop brown flax bid for north central Saskatchewan on our next generation cash grain marketplace, Combyne for $12.50 CAD/bushel. There is some buzz that flax prices will trade sideways in the near term. 
As a reminder, in last Monday’s Breakfast Brief, Agriculture Canada said that they’re expecting Canadian flax acres to jump up 175,000 year-over-year to 1.112M acres for Plant 2020. As that’s just 3.5% above the five-year average, and with current flax prices (both old and new crop), I think this flax acreage number could actually increase to 1.2M, maybe 1.25M acres, possibly even 1.3M. As I mentioned in our 2020 outlook for flax prices, with sort of acreage potential, I think flax prices are likely to push back down below $12 CAD/bushel. Some of the other bids worth mentioning that I’ve seen lately on the Combyne cash grain marketplace include:
- $7.15/bu yellow pea prices in northeastern Alberta
- $6.00/bu feed wheat prices in southern Alberta
- $5.25/bu feed wheat prices in central Saskatchewan
- $7.80/bu feed chickpea prices in southwestern Saskatchewan.
- $4.00/bu oats prices in south central Manitoba
As Combyne is still relatively new to most of you, here’s a few things to understand. First, every Listing on the Combyne cash grain marketplace expires after 7 days. It is easy to re-post though: Just (1) tap on My Listings, then (2) tap “Inactive”, and then (3) click the “Active Listing” option.
Second, Combyne only notifies you of deals from your current network of trusted trading partners. Put another way, you should be checking out Combyne regularly to make sure you’re not missing out on new deals from people you’re not yet connected with. This brings us to the third thing about Combyne to know: if you have no one in your network, you will not be notified of any new deals on Combyne. Start adding Connections and manage your relationships more efficiently on Combyne. Final reminder: Combyne is free to use! Read more on the Combyne.ag website or download the mobile app on your iOS/Apple or Android device today!
Corn Exports, Soybean Harvest Update
As mentioned, part of what’s weighing on soybean prices is the soybean harvest in Brazil starting to pick up. Most estimates for this year’s soybean harvest in Brazil is around the 123 – 124 MMT level, which would be a new record. Conversely, Gro Intelligence’s real-time Brazilian soybean yield model suggests this year’s soybean harvest will produce 120.3 MMT.  To date, the soybean harvest is tracking a little bit behind last year’s pace but last year’s crop was planted very early and thus came over very early so we should keep that in mind (and I think soybean prices are keeping it mind as well!). That said, some rains have kept combines out of the field but overall, early yield numbers of this year’s Brazilian soybean harvest are being viewed as positive. 
Next door in Argentina, weather has been supportive for a strong planting pace with 100% of the soybean crop planted, and corn acres not far behind from being finished.  In terms of the Argentine soybean harvest, the Buenos Aires Grain Exchange is forecasting a haul of 53.1 MMT, up 2.1 MMT from their first estimate earlier in the year. This does line up with the USDA’s forecast from the January WASDE of the Argentine 2019/20 soybean harvest for 53 MMT to be taken off.
With 2019/20 corn crop nearly all planted in Argentina, estimates from the USDA’s attache there are that farmers will take off 48 MMT.  This is 2 MMT below the official USDA forecast, but whereas the head office is expecting Argentine corn exports to hit just 33.5 MMT, their office in Buenos Aires thinks Argentine corn exports to hit a new record of 38 MMT, mainly because of attractive export prices. Further, many Argentine farmers forward contracted more corn this year as they tried to get something on the books before export taxes went up with the new federal government elected in December.
We know that there’s a lot of competition in corn exports right now. For example, after a massive record campaign of corn exports by Brazil in the 2018/19 crop year, corn exports are expected to fall in 2019/20.  Picking up the slack now is Argentina and Ukraine (who’s shipments of all grain exports are up nearly one-third compared to year ago, including 16.5 MMT of corn exports). With Brazil’s corn exports pulling back, American corn exports might be able to find some more homes and improve from where they’re currently tracking: down 50% year-over-year with just 10.51 MMT sailed (or 413.8M bushels if converting metric tonnes into bushels).
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 = $1.3272 CAD, $1 CAD = $0.7535 USD)
Mar Corn: +1¢ (+0.25%) to $3.833 USD or $5.087 CAD
Mar Soybeans: +7¢ (+0.8%) to $8.865 USD or $11.766 CAD
Mar Soybean Meal (per short ton): -$0.10 (-0.03%) to $288.40 USD or $382.77 CAD
Mar Soybean Oil (cents per lbs): +0.90¢ (+2.95%) to 31.63¢ USD or 41.98¢ CAD
Mar Oats: +0.3¢ (+0.1%) to $3.083 USD or $4.091 CAD
Mar Wheat (Chicago): +6.3¢ (+1.1%) to $5.635 USD or $7.479 CAD
Mar Wheat (Kansas City): +5.3¢ (+1.1%) at $4.725 USD or $6.271 CAD
Mar Wheat (Minneapolis): +5¢ (+0.95%) to $5.368 USD or $7.124 CAD
Mar Canola: +11.6¢ (+1.1%) to $10.433/bu / $460/MT CAD or $7.86/bu / $345.59/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.