Jan 8 – Grain Markets Cautiously Watch Middle East

Grain markets are mostly lower as the complex weighs Middle East tensions while jockeying positions ahead of Friday’s USDA reports.

“I will always be an advocate in terms of wars of necessity. I am just much more cautious on wars of choice.” – Robert Gates (former U.S. Secretary of Defense)

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Grain Markets Cautiously Watch Middle East

Grain markets are mostly lower as the complex weighs Middle East tensions while jockeying positions ahead of Friday’s USDA reports. Oil prices continue to be volatile as a result of the increased tensions in the Middle East thanks to yesterday’s missile attack by Iran on Iraqi locations where U.S. troops are based. [1]

Put simply, there’s plenty of uncertainty in all markets, not just grain markets, with another major military conflict in the Middle East on the horizon. Grain markets are also watching for headlines surrounding the approval of the USMCA trade deal by the U.S. Senate; expectations are that it’ll pass on Friday. [2]

Of course, there’s the usual weather monitoring and while some snow is in the forecast for parts of North America through the end of the week, it is South America weather that will be driving grain markets this time of year.

Grain Markets in 2020: An Outlook on Wheat Prices

As mentioned in Monday’s FarmLead Breakfast Brief, grain prices this week are positioning ahead of Friday’s report dump from the USDA: WASDE, grain stocks, and winter wheat acres. Specific to the latter, it’s expected that the USDA will report 30.664M acres of winter wheat were seeded this autumn on American land. This would be a 1.6% reduction from last year and smallest winter wheat area since 1909 (or 110 years!).

Undoubtedly, U.S. winter wheat prices have found some solid gains of late, but all of Kansas City HRW wheat’s rally was in December, once it was understood just how little winter wheat acres were seeded in the U.S. this year. That said, the rally in SRW wheat prices has been more elongated, starting in late 3Q2019, as we knew right from the beginning of fall that the wet conditions across the Midwest would reduce the number of SRW wheat acres that could even be planted!

Hard red winter wheat prices December 2019 monthly futures performance

Grain markets soft red winter wheat prices Q4 2019 futures quarterly performance

On the flipside, the winter wheat crop in the Black Sea is looking bigger than once first expected with Russia’s planted acreage reaching a new record while Ukraine’s winter wheat area will match last year’s. Leaning into Ukraine, it was initially thought that acreage could fall 10% year-over-year, but with weather conditions looking favourable, it’s likely that the Ukrainian 2020 wheat harvest could best the 2019 haul of 28.1 MMT. [3]

Wheat prices are also being cognizant of what’s happening in the Middle East, as well as the Land Down Undaa. For the latter, there does not seem to be much optimism for rain or cooler weather in Australia according to the country’s Bureau of Meteorology. [4] Intuitively, this puts a larger area at risk to the ongoing fires, as well as dims the harvest 2020 prospects for Australian farmers. For the Middle East, increasing tensions may reduce that ability for American wheat to get shipped into the area. [5] These are just some of the factors that grain markets are watching for wheat prices.

You can get the full download of what I’m expecting for winter wheat prices in 2020 here. You can also see my expectations for spring wheat prices and durum prices in 2020, also published yesterday. Throughout today, we’ll be publishing my 2020 expectations for soybeans, canola, and flax so look to our social media channels (Facebook, Twitter, or LinkedIn) for the outlooks. This Thursday, I’ll share my expectations for corn, oats, and barley markets, and then finally, on Friday, amidst the USDA reports, we’ll look into lentils, peas, and chickpeas.

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

Due to travel this morning, grain markets futures data is not shown but you can review them here at your convenience.

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.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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