Grain markets are in the green this morning – including canola prices inching back towards $485 CAD / MT – as the complex tries keep Thursday’s rally going.
“It’s no good kicking progress In the teeth – there’s nothing wrong with a tractor.” – Murray Head (English actor)
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Grain markets are in the green this morning – including canola prices inching back towards $485 CAD / MT – as the complex tries keep Thursday’s rally going. What’s certain is that there has been a lot of ups and downs, most of which has been attributed to trade war discussions.
There has been some suggestion from the U.S. side of the table that they will start lifting tariffs on Chinese goods in an act of goodwill towards the ongoing negotiations.  Also supporting grain markets is the fact that China’s so-called economic czar, Vice Premier Liu Hie, will head to Washington at the end of January in an effort to accelerate trade war negotiations. 
As a reminder, futures markets will be closed on Monday for Martin Luther King Jr. Day.
Buzz on Wheat, Oats, and Barley Prices
With some of the colder weather recently, the usual headlines are making the rounds about whether or not the U.S. winter wheat crop will have enough snow cover to guard against the frigid temperatures. Usually, this helps support wheat prices for a few weeks before the story runs its course and some data defends the fact that the winter wheat crop will be just fine.
The Russian Agriculture Ministry put out its first estimate of their 2019/20 harvest, pegging total production of all grains at 114.3 MMT. This would be larger than the 2018/19 harvest and mainly attributed to the increase in wheat and barley acres seeded this past fall.
For barley prices in North America, values have started to pull back a bit lately.  This has prompted our call-to-action for FarmLead users to post on the Marketplace for the nearly 150 credit-verified feed barley buyers we have to deal on. The goal would be to contract before the end of the month and get movement before early March, before road bans come on.
There’s still more U.S. corn and feed wheat making its way into the Canadian feed grain market, and that’s obviously weighing on feed barley prices. That being said, Canadian barley exports continue to rock and roll, now tracking 33% higher than this time a year ago. Thanks to last week’s strong shipments, 1.12 MMT of Canadian barley has now been shipped out through Week 24 of the 2018/19 crop year.
This gives rise to my theory that Agriculture Canada will have to revise its 2018/19 barley exports forecast higher from the current 2.45 MMT it has penciled. From where I’m standing today, I think we could see values match, if not top last year’s record shipments of 2.824 MMt.
As we mentioned earlier in the week for grain prices, we’ve been expecting oats prices to pull-back and more analysts are echoing that sentiment.  General market nervousness over the direction of trade with China and the U.S. are some of the reasons cited.
Canola Prices Whimpering Through the Week
Canola prices continue to lack a major demand headline to help drive new buying interest. Lately, the Canadian Loonie has been a fallback answer for as to why canola prices have fallen but that storyline has now been fully baked in.
There is some buzz over colder weather impacting deliveries. However, based on the really strong attendance at Crop Production Show I saw in Saskatoon this past week, I’m pretty sure this rationale for stronger canola prices will fall flat on its face.
The big question mark for canola prices is the current export environment, most reservations being attributed to some weaker geopolitical relations between Canada and China.  More specifically, the Chinese government has explicitly stated that they will retaliate against Canada if Huawei Technologies are banned from participating in Canada’s 5G networks. 
On that note, through week 24 of the 2018/19 Canadian crop year, total canola exports now sit at 4.63 MMT, down 8.5% year-over-year.
With the current environment for canola prices and some questionably long-term demand issues related to China (not just for raw canola seed but also canola oil and meal), 2019 acres are quickly becoming a pretty important topic. But so are rotations! 
Clubroot disease issues are starting to emerge more frequently across the Canadian Prairies. Thus, the immediate question I ask is whether or not Western Canadian farmers should fall back to the 20 million or so acres they were seeding before 2017’s 23 million and 2018’s 22.8 million acres?
As the Western Producer reported this week, “once in a field it’s basically impossible to eradicate because the spores can survive for two decades.” The Canola Council of Canada does counter on their website though: “Many of the resting spores appear to become inactive or non-viable after a two-year break from a host crop.”
Soybean Prices Eyeing Brazilian Weather
The Commodity Weather Group is expecting dry weather to continue to linger over at least 20% of Brazil’s soybean crop for the next two weeks.  The weather forecaster is expecting temperatures to languish in the mid-to-upper 90s through central and northeastern areas of Brazil through the end of the month. Some rains are also in that forecast but they are relatively spotty. For those thinking about Brazil’s corn crop, this area also encompasses about 30% of the first-crop corn acres.
In the meantime, we continue to see more and more analysts downgrading their expectation of the 2018/19 Brazilian soybean harvest. Here’s a breakdown of some of the current estimates:
- CONAB now at 118.8 MMT
- AgroConsult at 117.6 MMT
- Celeres: 117.2 MMT
- AgRural at 116.9 MMT
For perspective, in their December WASDE report, the USDA pegged Brazil’s soybean harvest at 122 MMT. While we won’t get updated USDA data until the US government shutdown ends, one can likely assume we’ll see the USDA start to match some of the local estimates in Brazil.
Even though, this would still be the second-largest soybean harvest in Brazil and the implications of 2019 U.S. soybean acreage are starting to swirl. This gets even more complicated without data avalabile for U.S. soybean exports, as discussed in a recent FarmLead Insights piece. Further, without a trade deal with China, more American growers might have to hold off until its gametime in the spring to determine what their actual soybean acreage should be. 
Have a great weekend!
Due to travel, there are no futures market data in today’s FarmLead Breakfast Brief but you can review them here.
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