Nov. 6 – Grain Markets Ignoring Battle for the White House

Grain markets this morning are mostly in the green as the U.S. Presidential election continues to dominate headlines

“Everyone knows the more you chase something the faster it runs and the more you ignore something the faster it comes.” Roshon Fegan (American actor)

Grain Markets Ignoring Battle for the White House

Grain markets this morning are mostly in the green as the U.S. Presidential election continues to dominate headlines. I haven’t written a Breakfast Brief this week since (1) I’ve been focused on helping users on our Combyne Agricultural Trading Network – both buyers and sellers – build their trading networks and (2) there’s no point speculating on who’ll win the White House since it’s clearly now going to be a legal issue.

Trading notes on all the question marks surrounding Tuesday’s vote, my business partner and FarmLead COO, Alain Goubau, noted to me last night that both sides need to show actual physical evidence that corroborates with their accusations. I trust Alain’s judgement here as, in addition to being a great navigator of our ship here at FarmLead, he is also the owner of a law degree from Harvard University!

In other news that makes me pull my hair out, Whole Foods Canada is not allowing its employees to wear poppies, on the basis that, under its recently-updated uniform policy, wearing a poppy is considered to be “supporting a cause”. [1] No kidding Whole Foods; the cause is called freedom and the poppy is a symbol of respect for the millions of soldiers, especially the Fallen, who have sacrificed more than you’ll ever comprehend (and just so that you can sell over-priced groceries too!).

I’m not going to lie – I don’t shop at Whole Foods but not being able to wear a poppy at this time of year is, to me, the equivalent of spitting on the tombs of the deceased soldiers. I am honestly disgusted by Whole Foods’ ignorance and you should be too. The poppy is above political affiliation, and at a time where society seems to be so divided, the poppy helps bring people together.

Soybean Prices Top $11

Soybean prices on the futures board in Chicago topped $11 USD/bushel for the first time since July 2016 (nearly 4.5 years ago!) on expectations that the balance sheet is tightening up. Part of the reason for the push up above the psychologically important level is the U.S. Dollar will continue be weak, relative to other currencies, as long as there’s uncertainty in terms of who’s going to be in the White House for the next 4 years. Keep in mind that this currency uncertainty is applicable to all portions of the grain markets, not just soybean prices.

Also supporting soybean prices though is that data from the U.S. Census Bureau suggests that U.S. soybean exports to China hit 7.8 MMT in September, which is 1.3 MMT more than what the USDA’s export data is suggesting. This is certainly bullish news on top of bullish news, as soybean exports to China have already set new records for the months of August and September, as reported by Reuters. [2] AgriCensus’ math suggests that U.S. soybean 2020/21 ending stocks could be revised down to 6.5 MMT (or 238.8M bushels if converting metrics tonnes into bushels) which is logical when you consider that, compared to the USDA’s total year forecast for soybean exports in their October WASDE, already 80% of this estimated volume has been contracted. [3]

The other factor supporting soybean prices is the delayed planting in Brazil due to dry conditions, which means that China and other major importers would rely on U.S. soybean exports longer than usual. The long range forecast for Southern Brazil is notably concerning as fields there are already suffering from severe moisture shortages. [4] Conversely, we do know that farmers in Mato Grosso, the largest soybean-producing state in Brazil – are running their planters 24/7 to get the crop in. [5] Nonetheless, because of the small amount of soybeans there that carried over from 2019/20 to their 2020/21 crop year, tradable inventories in Brazil are extremely tight and domestic soybean prices (and that of corn) continue to set records in the cash market. [6]

China Loves Corn, Hates Australia

Grain markets are also recognizing that higher global prices for corn are also supporting that of feed grains like wheat and barley, and in that line of thinking, we continue see healthy contracting activity on the Combyne Agricultural Trading Network for all 3 of these crops. Supporting corn prices this week was an updated report from the USDA attaché in China that they increased their forecast for corn imports by the People’s Republic from 7 MMT to 22 MMT. The Beijing office of the USDA cited a small harvest, smaller carryover form 2019/20 and high domestic prices for the reason. On that last point, you’re rolling in profit if you’re a corn importer in China right now!

On the flipside, China continues to put political pressure on Australia, now threatening to ban wheat imports from the Land Down Undaa, adding to Beijing’s existing embargoes on Australian barley, sugar, red wine, timber, coal, lobster, and copper. [7] Further, any cargoes that are already enroute to China from Australia with any of the aforementioned goods will be turned around, due to “commercial reasons”. This all started 7 months ago after Australia officials pushed for an international inquiry into the origins of COVID-19 in China. [8]

That said, the Aussie wheat harvest is starting to hit the market, and with an abundant crop this year (after 3 years of drought), domestic wheat prices are now below that of Black Sea wheat of comparably protein. [9] While the USDA will update their estimate of the Australia wheat harvest from their October WASDE estimate of 28.5 MMT, IKON Commodities is estimating that this year’s haul now looks closer to 32 MMT. Thus, as cheaper Aussie wheat gets exported to other Asian markets, this likely opens the door for more U.S. and Canadian wheat exports to fill the void.

Combyne Ag Trading Network: What’s Moving

On that note, in the cash grain markets, export demand continues to compete with buyers with a domestic agenda, which intuitively supports the current levels we’re at for many crops. This week, on the Combyne Ag Trading Network, feed barley bids across all of Western Canada are trading up above $5 CAD/bushel, making it more attractive than selling into the malt market right now. Feed wheat is trying its best to match up against #1 and #2 HRS wheat bids, but at $6 CAD/bushel or more in many places, that’s a really good price! Meanwhile, $4 CAD/bushel milling oats is available in a few areas (albeit for deferred delivery).

In other crops, some $12 CAD/bushel canola is still trading around Edmonton, while we saw $18.50 CAD/bushel brown flax trade in central Alberta, which is the highest we have seen in a long time! $10 CAD/bushel green peas are returning to many parts of Saskatchewan after a few months while large green lentils being bid at 37¢ CAD/lbs is the best I’ve seen so far this year.

I’d encourage you to post your Listing on Combyne so that (1) your current trading partners know the deal you’re looking to do next and (2) you can connect with some new potential trading partners. Earlier this week, I published a blog post on the Combyne website on how we use social networking tools to get solicit help in tackling certain jobs or even selling equipment. This ability to reach out to many people in our network at the same time – a “one-to-many” approach if you will – is something that I argue you should be doing more with your grain and/or hay trading network. Are you working harder in a one-to-one approach or working smarter with a one-to-many strategy?

Your Grain & Hay Trading Network "Combyned"

Have a great weekend!

To growth,

Brennan Turner
CEO | FarmLead
TF: 1-855-332-7653

At 8:25 AM CST in the North American futures grain markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3064 CAD, $1 CAD = $0.7655 USD)

Dec Corn: +0.5¢ (+0.1%) to $4.055 USD or $5.381 CAD
Jan Soybeans: +0.5¢ (+0.05%) to $11.043 USD or $14.426 CAD
Dec Soybean Meal (per short ton): +$0.70 (+0.2%) to $388.50 USD or $507.55 CAD
Dec Soybean Oil (cents per lbs): -0.20¢ (-0.55%) to 35.27¢ USD or 46.08¢ CAD
Dec Oats: +0.8¢ (+0.25%) to $3.038 USD or $3.968 CAD
Dec Wheat (Chicago): +4¢ (+0.65%) to $6.133 USD or $8.012 CAD
Dec Wheat (Kansas City): +4¢ (+0.7%) to $5.67 USD or $7.407 CAD
Dec Wheat (Minneapolis): +3.8¢ (+0.65%) to $5.648 USD or $7.378 CAD
Jan Canola: -3.2¢ (-0.25%) to $12.451/bu / $549/MT CAD or $9.531/bu / $420.23/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.

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