After being closed for Martin Luther King Jr. Day, grain futures markets are back trading again – mostly in the green – but pea prices and the broader pulse complex caught our attention on the day off.
“Since you cannot do good to all, you are to pay special attention to those who, by the accidents of time, or place, or circumstances, are brought into closer connection with you.” – Saint Augustine
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For those not involved in the trading of pulses, the broader grain market continues to watch the U.S. government shutdown debacle and updates on trade negotiations between the U.S. and China.
Before getting into those details, soybean prices have been continuing to find strength in hot weather in Brazil. As mentioned on the FarmLead Breakfast Brief last Friday, the dry weather in Brazil is also supporting canola prices a bit, and thus, we’re close to seeing $485 CAD / MT on the March 2019 contract.
For corn prices, Stewart-Peterson notes that more factors are pointing towards a rally. More specifically, the firm states that “when indexed to history, we see an 83% chance that December (2019) futures will trade above $4.25 during the calendar year 2019.”  While the likelihood of new crop corn futures getting to $4.25 looks strong, what’s your plan to maximize your cash return on that position? Let us know on Twitter and/or Facebook, or send us an email! We want to hear from you!
China, America, and other Macroeconomic Factors
For the former, the end of the shutdown would mean that we would start to get information finally out of the USDA. This would include export sales and shipments and previously unreleased reports like U.S. winter wheat acreage and the January WASDE report.
Meanwhile, the trade talks between China and the U.S. are settling in on talking about the trade imbalance between the world’s two largest economies.  The trade disruption between the two countries, as it stands today, is easily the biggest discussion topic at the World Economic Forum this week in Davos, Switzerland. 
As I said in my outlook for 2019 grain markets though, there are a lot of other economic headwinds that has caused concern by some very smart people – including Ray Dalio, founder of the largest hedge fund in the world – for what may lay ahead in financial markets.  Even the International Monetary Fund says that there are increasingly more risks to “downward corrections”. 
One of the asterisks in the U.S.-China trade talks is on telecommunications. Right now, the U.S. is not a very big fan of Chinese telecom giant, Huawei. The U.S. government is currently in the process of trying to extradite the Huawei CFO (and the daughter of the founder of the company) from Canada to try her on charges of violating U.S. sanctions against Iran.  On that note, Huawei is on an unprecedented media blitz to try and sharpen up their image as countries, including the U.S., are seriously considering banning the company from participating in their respective 5G networks. 
Pea Prices Head Higher, Not Acres Though
Production of pulses in the U.S. is expected to drop in the 2019/20 crop year as the Northern Pulse Growers Association is expecting less acres to get planted.  This is mainly due to the large 2018 harvest and the fact that India still has their import tariffs in place. From their quality survey, the NPGA says that the American harvest of all pulses totaled 1.46 million metric tonnes (MMT), a 12% jump over the drought-riddled 2017 harvest.  Here’s a breakdown of U.S. production of pulses by crop type:
- Peas: 636,000 MT (-2% YoY) off 836,400 harvested acres (-28% YoY);
- Lentils: 398,570 MT (+4.6% YoY) off 758,000 harvested acres (-21% YoY); and
- Chickpeas: 425,870 MT (+78% YoY) off 651,300 harvested acres (+37% YoY).
This sort of harvest of pulses, combined with the relatively large Canadian harvest, and, again, India’s import tariffs, this points to lower prices (or what you’ve been seeing the last few months). As such, SaskPulse is estimating a 40% drop in a Canadian farmers income from pulses.  Since SaskPulse’s levies are not a flat fee like most other crops but a percentage of sales, this is forcing the producer organization to cut some things in their budget for 2019.
On that note, however, we’ve started to see some slight improvement of pea prices and lentil prices over the last few months. Yesterday, on the FarmLead Marketplace, we saw green peas trade back up to $11 CAD / bushel in Alberta and $10.50 in Saskatchewan and Manitoba. Yellow pea prices have also seen some better values of late, with trades in Alberta around $7.50 and then trailing down to $7 – $7.25 in Saskatchewan and Manitoba. Get your peas posted on the Marketplace this morning to take advantage of the current rally by selling into strength. Also, check out our recap of 2018 pea prices and markets.
Values of lentil prices have also improved over the past month, with small red lentils touching 20¢ CAD / lbs a few times over the past few weeks, while large green lentils have traded up to 24¢. Keep in mind that these are not average lentil prices, but the highs traded on the FarmLead Marketplace. Worth checking out: the 2018 recap of lentil prices.
Before chasing prices ahead of Plant 2019, here’s a reminder though of where Agriculture Canada is currently expecting the 2018/19 crop year to end in terms of inventory. (Sidenote: these charts are from December’s outlook but we should be getting an update this week from AAFC).
Of course, the drought conditions in India suggests that their rabi winter harvest of pulses might not be as big as previously forecasted, but I continue to support the narrative that their trade policy – namely import tariffs – won’t be going away any time soon (as in the next 6-9 months, or until after the 2019 monsoon rains have been realized).
At 7:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3309 CAD, $1 CAD = $0.7515 USD)
Mar Corn: -0.5¢ (-0.15%) to $3.803 USD or $5.06 CAD
Mar Soybeans: -0.5¢ (-0.05%) to $9.16 USD or $12.19 CAD
Mar Soybean Meal (per short ton): +$0.40 (+0.15%) to $314.70 USD or $41.79 CAD
Mar Soybean Oil (cents per lbs): +0.02¢ (+0.05%) at 29.21¢ USD or 38.87¢ CAD
Mar Oats: -0.8¢ (-0.25%) to $2.973 USD or $3.956 CAD
Mar Wheat (Chicago): +1¢ (+0.2%) to $5.19 USD or $6.907 CAD
Mar Wheat (Kansas City): +1.5¢ (+0.3%) to $5.075 USD or $6.754 CAD
Mar Wheat (Minneapolis): +1.3¢ (+0.2%) to $5.74 USD or $7.639 CAD
Mar Canola: +2¢/bu (+0.2%) to $10.966/bu / $483.50/MT CAD or $8.24/bu / $363.33/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.