Sept 20 – India, China Top Trade Talks, Grain Export Options

Grain markets this morning are mixed as India and China jockey for trade status with the U.S. and Harvest 2019 rolls along amidst weather concerns.

“If you want to achieve something, you’re going to run into roadblocks, but you have to learn how to pivot and explore your options.” – Hannah Bronfman (American entrepreneur)

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India, China Top Trade Talks, Grain Export Options

Grain markets this morning are mixed as India and China jockey for trade status with the U.S. and Harvest 2019 rolls along amidst weather concerns.

For the latter, there is some late-season severe weather that’s likely to put some quality and quantity pressure on fields in the Northern Plains through the weekend as the system is expected to “bring abundant moisture”. [1] This comes on top of some heavy rains that hard red spring wheat and durum fields in the area have received the last few weeks, creating some serious quality issues (as per a few Twitter admissions). [2] Accordingly, Minneapolis hard red spring wheat prices are finding some strength this morning on the adverse weather forecast and quality concerns. [3]

Who Needs American Corn Exports?

The American corn crop is also expected to start receiving some fall weather this weekend, while the long-range forecast is calling for a wetter October. [4] Intuitively, Harvest 2019 will be a challenge this year and the likes of Ukraine are looking to take advantage on the corn exports front. [5] Harvest 2019 in Ukraine is seeing corn yields climb 8% from last year to 95 bushels per acre, suggesting a record crop of more than 36 MMT that the USDA said in their September WASDE report. There is some suggestion that South Korea, Japan, and China could all buy more corn exports from the Black Sea country this year. [6]

That said, the Chinese Ag Ministry says they still have about 56 MMT corn in their strategic reserves but will probably import 4 – 4.5 MMT this year. [7] In last the September WASDE report, the USDA said that China will have nearly 200 MMT in corn stocks by the end of the 2019/20 crop year. However, the China’s strategic reserves would not be enough to meet the nationwide mandate of ethanol-blended gasoline in 2020, bringing the whole plan into question (namely supply).

Through Week 2 of American corn exports 2019/20 crop year, a little less than 870,000 MT of the coarse grain has been shipped out. That’s down 37% year-over-year and not the start that you’re looking for. However, yesterday’s sales report showed 1.53 MMT of corn purchased, which was at the top end of pre-report trade expectations of 500,000 MT to 1.55 MMT.

American corn exports through week 2 of the 2019/20 crop year

Also worth mentioning quickly is that soybean export sales last week came in at 1.72 MMT, well above the top end of the range of pre-report estimates. It’s been suggested that with Brazil’s exportable supplies of soybeans starting to dwindle, China is coming back to buy American, something that I mentioned at the end of August that the People’s Republic would probably do. It comes just as Chinese and American officials are gearing up for another big round of trade war negotiations in early October. [8]

On a somewhat related note, Prime Minister Narendra Modi of India is coming to the U.S. for some meetings and big rally in Houston that President Trump is expected to speak at. [9] There is buzz that India is willing be America’s trade/manufacturing huckleberry if China doesn’t compromise on some major trade war issues.

India Gets Rain as Canadian Pea Exports Soar

A report from the USDA’s attaché in China suggests that China will produce 4MMT of pulses this year, down about 10% year-over-year due to less acres harvested and some poor growing conditions. [10] Specific to peas, production is estimates at just 200,000 MT, down about 15% from last year, mainly because of poor returns, thanks to lower-priced imports challenging the market. It’s been estimated that China will need to import 1.7 MMT of peas in 2019/20, a 10% decline from 2018/19, mainly because of bigger stocks being carried over from the last two years. [11]

The USDA is reporting that Canada continues to be the major supplier of peas to China, especially since the trade war with the United States started up. Through the first 7 months of 2019, U.S. pea exports to China were half of what they were in 2018, whereas Canada has basically accounted for all Chinese pea imports. That said, through Week 6 of the 2019/20 crop year, Canadian pea exports are tracking nearly three times higher than the same week in 2018/20, with 311,500 MT shipped out. This comes on the heels of 230,000 MT of Canadian peas heading to China in July to end the 2018/19 crop year, as reported by Chuck Penner of LeftField Commodity Research. [12]

India & China are top destinations for Canadian pea exports through Week 6

According to last week’s StatsCan report, Harvest 2019 for Canadian peas is looking larger than first expected. In it, StatsCan said that total 2019 pea production in the Great White North is expected to hit 4.67 MMT, a 20% increase from the 5-year average and 30% jump from last year’s 3.58 MMT harvest. That said, the Canadian peas harvest is close to being wrapped up, albeit sales of the lower quality bushels (i.e. bleached or sprouted) being sold into the market first. [13] Notably, through earlier this week, 79% of the Saskatchewan peas harvest is complete, with the provincial government estimating that 31% will be a #1 grade, 58% a #2 grade, and 10% falling into the #3 category.

Canada pulses production estimates for Harvest 2019

Elsewhere, the monsoon season in India saw a good recovery of rains in August, and with September precipitation looking plentiful, this would mean India should have above-average moisture for the first time in 6 years. [14] Intuitively, what this translates to for pulses is that the current kharif harvest in India should be okay (albeit planting has been a bit behind last year’s place). Further, the rabi winter crop should be set-up well, pending normal temperatures in India this winter.

However, if the weather issues in North America during Harvest 2019 are more of a problem, we might see buyers – be it from India, China, or elsewhere – start to pick up their socks and get a little more aggressive to ensure they have both the quality and quantity. In fact, wrinkles and colour loss is already a bit of an issue for this year’s Canadian lentils crop. [15] That said, like pea exports, Canadian lentil exports have started out strong as through Week 6, nearly 110,000 MT have been shipped out, including 57,100 MT last week, topping even last year’s best week.

Canadian lentil exports through Week 6 of the 2019/20 crop year

On that note, there have been some volatile, but spotty storms passing through Western Canada, some of which have included the white combine, which obviously is frustrating this close to using a real combine. [16] For those dealing with some less than ideal options after these types of storms, feel free to reach out to me to talk about best marketing options, and/or if you just need someone to vent to.

Regardless, I hope you have a great weekend and make some progress in the field!

To growth,

Brennan Turner
TF: 1-855-332-7653
@FarmLead on Twitter

At 7:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3261 
CAD, $1 CAD = $0.7541 USD)

Dec Corn: -1.3¢ (-0.35%) to $3.715 USD or $4.926 CAD
Nov Soybeans: -2.5¢ (-0.3%) to $8.905 USD or $11.809 CAD
Dec Soybean Meal (per short ton): unchanged at $296.10 USD or $392.65 CAD
Dec Soybean Oil (cents per lbs): -0.25¢ (-0.85%) to 29.72¢ USD or 39.41¢ CAD  
Dec Oats: +0.3¢ (+0.1%) to $2.77 USD or $3.673 CAD
Dec Wheat (Chicago): +0.5¢ (+0.1%) to $4.885 USD or $6.478 CAD
Dec Wheat (Kansas City): -0.3¢ (-0.05%) to $4.093 USD or $5.427 CAD 

Dec Wheat (Minneapolis): +3.8¢ (+0.7%) to $5.24 USD or $6.949 CAD
Nov Canola: -1.4¢ (-0.15%) to $10.213/bu / $450.30/MT CAD or $7.701/bu / $339.57/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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