As we flip into a new month looking at feed barley prices and pork prices, futures grain markets are mixed to start the month of December.
“One sees great things from the valley; only small things from the peak.” G.K. Chesterton (English philosopher)
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Peak Feed Barley Prices & Pork’s Long Road Back
As we flip into a new month looking at feed barley prices and pork prices, futures grain markets are mixed to start the month of December. What’s green and what’s red this morning reverses what we saw on Friday, which was a shortened trading day due to the U.S. Thanksgiving holiday. To end November, corn gained 8 cents while Chicago SRW wheat futures jumped 15 cents on Friday alone, helping the complex end the month on an upbeat note. However, for the month of November, corn, soybeans, and Minneapolis HRS wheat saw significant losses. Specific to soybean prices, unless the U.S. rolls back existing tariffs (and not the planned ones set to take effect on December 15th), only then will China sign the Phase One deal to stall the trade war between the two countries. 
In some agricultural industry news, John Deere cut guidance last week, with CEO John May not making any predictions about the future, given that they believe it’s a function of politics and not the usual game of supply and demand.  Meanwhile, Louis Dreyfus is undergoing a review for “cost and productivity gains” in order to rein in costs in challenging global grain markets.  As many readers already know, Parrish & Heimbecker reached a deal back in September to buy 10 of Louis Dreyfus’ Western Canadian grain elevators. 
Stability in Pork Prices is Unlikely
As we flip the calendar into December (and as I discussed back in September), there continues to be no real solution to the African Swine Fever issue (except for culling animals). The disease that ran rampant in China and saw the herd size drop by an estimated 50%, is now pushing its way across Asia and even into Europe. The problem, as described by Bloomberg recently in a excellent deep dive into the ASF virus, is that it’s extremely tough.  More specifically, they said, “The germ is hardy, capable of remaining active in water for a month, in meat and blood at room temperature for several months and for six years in cold, dark conditions. It’s resistant to temperature extremes, and can survive a day in vinegar-strength acids.”
The USDA is currently estimating that China’s pig supply in 2020 will fall to a 27-year low. Considering that pork is a staple animal protein in China, pork prices are expected to continue to climb in the People’s Republic, something I expected back in October. Higher pork prices are also providing price support for other meat, thanks to substitution effects. That said, pork prices in China dropped about 20% in November as consumers opted for these other protein options. The government also imported a lot of meat in November, in addition to selling off some of its own reserves. However, recent cold weather has added an additional catalyst for pork prices to continue to climb, thanks to increased consumption. 
For example, in Germany, it’s expected that they’ll have a Schnitzel shortage this winter due to global pork shortages increasing prices.  Accordingly, if international demand and prices are better than domestic ones (which they are right now), pork producers are more likely to sell to that international market instead of the domestic one. That said, China is on course to more than double its pork imports year-over-year to more than 3 MMT as it tries to meet domestic demand and ensure reliable (and affordable!) supplies ahead of the Lunar New Year holidays in January. 
Are Feed Barley Prices Peaking?
A month ago, we looked at feed grain prices, notably feed barley prices amidst some of the tougher quality coming off late for Harvest 2019. Further, 2 weeks ago, we noted some better feed grain prices as stronger barley and wheat exports were helping level out some of the demand from just being focused on domestic use. That said, after a slow week 15, Canadian barley exports hit a new season high again last week in Week 16 with 115,600 MT sailed. For the 2019/20 crop year, this puts total barley exports at just over 606,000 MT. While this is technically a 4.4% decline over the pace seen at this time a year ago, Canadian barley exports also picked up aggressive at this time.
That said, there are similar demand functions to that a year ago, which are supporting feed barley prices. While we’d like to see a bit more consistency, with barley exports starting to pick up, this is creating some price competition for feed barley prices in Lethbridge and elsewhere. Notably, in the past month, across Alberta, feed barley prices have rallied about 7.5% in the past month. We’ve seen trades on our Marketplaces with values above $230 CAD/MT delivered into Lethbridge, AB / feedlot alley, helping push feed barley prices to their highest since early August and when Harvest 2019 supplies starting to come to market. In Saskatchewan, however, feed barley prices haven’t rallied as much, mainly thanks to more competition for feed wheat supplies.
The CN Rail strike that last 8 days helped support feed barley prices and trucks were a little tougher to come by.  And while animals tend to eat more grain in the winter months, and farmers tend to sell around the new tax year, more market analysts expect some stability to creep into the market in the coming weeks.  To say though that feed barley prices will see another rally like it did at this time a year ago is extremely tough to predict. What we do know, however, is that there is a lot more feed grain supplies available this year than last year and that will put pressure on feed barley prices and other feedstuffs.
We’ll get a better download of exactly how much supply later this week from Statistics Canada as they put out their final crop production estimates for Harvest 2019 on Friday morning. Before that, tomorrow, we’ll get ABARES’ estimates of what Harvest 2019 in Australia is going to be finalized as, with many expectations that numbers will be lower due to the 3rd straight year of drought for the Land Down Undaa.
At 7:40 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3298 CAD, $1 CAD = $0.752 USD)
Mar Corn: -0.3¢ (-0.05%) to $3.715 USD or $4.94 CAD
Jan Soybeans: +5.5¢ (+0.65%) to $8.823 USD or $11.732 CAD
Jan Soybean Meal (per short ton): +$1.20 (+0.4%) to $294.30 USD or $391.36 CAD
Jan Soybean Oil (cents per lbs): +0.09¢ (+0.3%) to 30.67¢ USD or 40.79¢ CAD
Mar Oats: +0.5¢ (+0.15%) to $3.103 USD or $4.126 CAD
Mar Wheat (Chicago): -1.5¢ (-0.3%) to $5.403 USD or $7.184 CAD
Mar Wheat (Kansas City): -2¢ (-0.45%) at $4.45 USD or $5.918 CAD
Mar Wheat (Minneapolis): -2.8¢ (-0.55%) to $5.118 USD or $6.805 CAD
Jan Canola: +3.9¢ (+0.35%) to $10.394/bu / $458.30/MT CAD or $7.816/bu / $344.64/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.