Grain markets this morning are again in the green as new forecasts for acres and weather are keeping the bulls in charge.
“Think ahead. Don’t let day-to-day operations drive out planning.”
– Donald Rumsfeld (former US Secretary of Defense)
Soybean Prices Drive Monday Grain Markets (Again)
Like clockwork, soybean prices are driving grain markets into the green to start the new trading week off. We’re near the end of the month, and so more volatility in soybean prices are expected, especially since we could see some profits come off the table.  $12 USD /bushel continues to be discussed by the talking pundits but let’s get to $11 first, shall we?
Corn prices are along for the soybean prices rally ride, but winter wheat prices are acting the most impressive. U.S. corn demand continues to look pretty strong but we’re watching a few factors in GrainCents hat may turn the tide here (AKA keep corn prices in check).
Later today, for our GrainCents soybean and canola readers, Garrett will be publishing a deep dive on the historical activity of soybean prices and production disruptions (i.e., the one we’re seeing in Argentina right now).
If you haven’t signed up for your free 3-week trial, today is the time to do so.
Additional GrainCents Must Reads
Our GrainCents subscribers received their Sunday morning market wrap-up for each of the 12 crops we cover. They also would’ve noticed a few additional articles that we pushed out on Friday afternoon once markets were closed.
Specifically, we dug into the International Grain Council’s 2018/19 estimates and what it could mean for prices moving forward. This included an assessment of 2018/19 corn production, canola production in 2018/19 broken down, and a look at the correlation between barley prices and barley production. I also dug into the demand structure of international barley and what the recent relatively expensive purchase of 960,000 tonnes by Saudi Araba means for barley prices.
With Canadian Prime Minister Trudeau’s trip to India wrapped up, there was a promise made by the Indian government to look into a science-based approach to stop the fumigation exemptions by the end of 2018. Read my two cents on the subject and the Canadian delegation’s trip here for peas GrainCents subscribers, here if you’re a lentils reader, or here if you’re subscribed to chickpeas on GrainCents.
Finally, we also took a look at the quality and protein of the Australian wheat crop, and how it can explicitly compete with Canadian or American high-protein wheat. Further, we explained some of the dry conditions in the U.S. Southern Plains and its impact on winter wheat production and wheat prices.
2018/19 Wheat Crop Quality (and Wheat Prices)
On Friday, we got an update from the French government as to how the wheat crop there is performing. According to them, 85% of the French soft wheat crop is in good-to-excellent health. These ratings are a four-year low for this time of year and obviously lower than last year’s 93% G/E ratings at this time.
79% of the 2018/19 French durum crop is in good-to-excellent shape, down 2 points week-over-week and 6 points year-over-year. Keep in mind that the key growing spring and summer months for the French durum crop is yet to come and these months will drive final crop yield and quality.
Wheat prices are seeing a good push this morning as the market is accounting for new weather forecasts, but also fresh data points that are coming out in the next week regarding U.S. winter wheat quality and the state of the drought. Currently, the dry spell in the U.S. is affecting the most wheat acreage since 2013, albeit there is still a good amount of time for rains to recharge soil moisture levels. 
Expectations for Canola Prices, Soybean Prices
Canadian canola exports through February 18th (or week 29 of the 2017/18 crop year) were the worst they’ve been since September 2017 with just 129,000 tonnes getting shipped out. The previous five-week average was 194,800 tonnes/week. This put total-crop-year canola exports at 5,908 million tonnes or about 4,000 tonnes behind last year’s pace of 5.922 million tonnes.
Intertek says that Malaysia’s palm oil exports through the first 25 days of February are up 5% month-over-month to 1.065 million tonnes. This and the push by soybeans are supporting canola prices to hit new multi-month highs.
While everyone has focused the rally in soybean prices and canola prices thanks to factors in South America, what continues to be ignored is the facts back here in North America.
The USDA just put out its forecast for the 2018/19 U.S. soybean crop, expecting a record 4.875 Billion bushels to get harvested! This doesn’t account for a few extra fringe acres that could make their way into the market thanks to the rally in soybean prices that we’ve seen lately.
Further, canola acres in Canada are expected to be a record 24 million. This combined with an average growing year would suggest a 21.7 million-tonne crop, also a record. With consistent demand, this would push 2018/19 ending stocks up to 2.25 million tonnes.
The point behind writing out these data points and making you read them is not to be negative. It is, instead, intended to make you think about downside risk.
This is what we do in GrainCents – weigh the different variables and try to account for the pressure of psychological bias in our price expectations. If you’re a GrainCents subscriber to either of these crops, it’s worthwhile to read up on our soybean prices expectations, as well as what we’re expecting for canola prices here.