Jan. 25 – Are Corn Prices Going to Slow Barley Exports?

Grain markets are mixed this morning with the wheat complex in the red, but corn prices are continuing to find a way to squeak out some gains. Will that impact barley exports?

“Everybody starts at the top, and then has the problem of staying there. Lasting accomplishment, however, is still achieved through a long, slow climb and self-discipline.” 

– Helen Hayes (American actress)

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Grain markets are mixed this morning with the wheat complex in the red, but corn prices are continuing to find a way to squeak out some gains. There continues to be a general lack of headlines, which is keeping most traders on the sidelines or from making large, heavy bets.

Even without the USDA releasing data thanks to the ongoing government shutdown, as we get closer to the spring time, there are going to be more estimates coming out on acreage expectations. Right now, there’s some heavy consensus that you could see less soybean acres in fringe states like North Dakota and Kansas. [1] Further, you have seen the likes of Missouri drop soybean acres by more than one million acres in just one year, back in 2015. Could it happen again?

Today, I’m looking for 2019 U.S. soybean acres to come in somewhere around, if not a little below 84 million acres. A recent estimate from Farm Futures is pegging 2019 American soybean acres at 84.6 million. Of course, this could change to a higher number if Brazil continues to stay dry and we see soybean prices make more gains, but those hoping for a significant move to the upside will likely be disappointed. That being said, officials from Brazil’s second-largest soybean producing state, Parana, cut its estimate of their region’s harvest from 19.1 MMT in December to 16.8 MMT today.

Are Corn Prices Undervalued?

Coming back to acres, for corn, Farm Futures is estimating 90.3 million acres of corn to get planted. Comparably, I recently said that if soybean exports remain weak and corn exports remain strong, we could see U.S. corn acres jump up to 93.5 million! From a chart made on Tuesday, corn prices are actually tracking 7.6% higher year-over-year. Worth noting is the incremental gains made through the middle of May in the 2017/18 crop year.

Front Month Corn Prices -  January 20198

There is some speculation that corn prices could top $5 on the Chicago futures board in 2019, but I, along with more than a few participants at the Top Producer Summit in Chicago this past week don’t think that’ll happen. [2] One of possibly the more interesting headlines behind corn prices is Chinese ethanol needs. They don’t really have the processing capacity today, which means a finished product would likely need to be sold to them. [3]

At a more macro level though, there is a significant amount of dollars being invested by car companies into electric vehicle research. This basically translates to concerns over the longevity of an ethanol market in China, but that’s pure speculation and also likely 6 – 10 years away. In the meantime though, there is some optimism that China’s renewable fuel needs will help corn prices.

Meanwhile, U.S. wheat acres (all types) are forecasted by Farm Futures to hit 46.6 million, which would be down year-over-year. This, however, when everyone else and their mother are planting more wheat in 2019. This includes more acres in Russia. On that note, the International Grains Council recently raised its estimate for the 2019/20 global wheat harvest by 8 MMT to 1.076 billion.

Are Barley Exports, Prices on the Highs?

We’ve seen feed barley prices continue to perform well through the winter months, mostly holding the record values seen in the fall. This is because we’ve continued to see strong domestic demand and Canadian barley exports tracking 40% higher year-over-year with nearly 1.18 MMT now shipped out through Week 25 of the 2018/19 crop year.

Current feed barley prices delivered into Lethbridge, AB on the FarmLead Marketplace area hovering around that $255 – $257 CAD / MT (or about $5.55 to $5.60 CAD per bushel). This is basically near the top of feed barley prices from just a few months ago.
That being said, if you’ve got any barley in bins left over, the smart money move is to get it contracted and moved before mid-March (or when road bans come on). Click here to post it on the FarmLead Marketplace; there are over 200 credit-verified FarmLead buyers looking for feed barley today!

The reason for this call-to-action from me is that we’re starting to see international barley prices pull back, and there seems to be a slowdown going from one of the world’s biggest buyers. Specifically, China’s barley imports in December 2018 – for both feed and malt purchases – totaled just 140,000 MT. [4] This is down 75% year-over-year!

For the total 2018 calendar year, China’s barley imports topped 6.82 MMT, a decline of 23% year-over-year. For perspective, Australia accounted for about 75 %, or about 5 MMT of that total, but that’s unlikely to happen this year, given production from the Land Down Undaa barely reached 7 MMT this year. While the USDA is currently forecasting Aussie barley exports to touch 5.4 MMT, I’m extremely doubtful of that (and not just because this data is from all the way back in December).

Feed barley prices are the other factor in all of this. Recently, AgriCensus reported that Jordan’s state grain-buying agency, MIT, recently bought new crop feed barley for June 2019 delivery for around $223 USD/MT (or $4.86 and $6.47 CAD per bushel if converting metric tonnes into bushels). This is $35/MT less than what it paid last week. That’s a drop of more than 13%. In one week!

It’s also 20% less than the $276 USD/MT paid by Jordan for feed barley back in October, the high of the trading campaign. Probably one of the subtler, but significant indicators for being cautious of for barley prices here was that Jordan only bought half of the tonnage that they were actually looking to buy. Granted, they’ve done this before, but this could be indicative that they think prices could fall further. And with less competition from China right now, it seems somewhat believable.

To growth,

Brennan Turner

CEO
FarmLead
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contact@FarmLead.com
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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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