Grain markets – especially soybean prices – continue to accumulate losses as economic and grain demand concerns weigh on investors.
“As in nature, as in art, so in grace; it is rough treatment that gives souls, as well as stones, their luster.” – Thomas Guthrie (Scottish minister)
Grains (Especially Soybean Prices) Finally End a Rough Month
Grain markets – especially soybean prices – continue to accumulate losses as economic and grain demand concerns weigh on investors. As we talked about the impact of the coronavirus on grain prices in Wednesday’s Breakfast Brief, the same cautionary approach to a trader’s next move continues to hang over the market like a thick spring fog. There are many trying to trace the impact of the SARS virus outbreak in 2003 and what happened to grain markets then. 
The big different between then and now is China’s economy: it accounted for just 4% of global GDP in 2003, versus today’s 16% share of the global economy! In trying to calm some of the fear, the CEO of ADM has said that there’s been no “significant” impact on their business so far from the coronavirus.  Staying in all things China, there’s been a new African Swine Fever vaccine developed by U.S. government and academic researchers that’s showing a lot better response that previously developed solutions. 
As part of the trade negotiations between the European Union and United States, U.S. Ag Secretary Sonny Perdue said recently that the former will have to update its food safety rules in order to make something work with America. More specifically, when asked about the bloc’s agricultural policies, Secretary Perdue was quoted this week in Brussels, saying “Their producers are going to be at a huge disadvantage if they choose to have a technology free zone.”  Seems like it could be another tough trade deal negotiation!
On a related “technological” front, Kellogg’s recently published on their website that they’re going to phase out glyphosate in its oats and wheat supply chain by 2025.  Looking further, glyphosate-resistant wild oats have been found in Australia. 
Combyne Grain Marketplace Tip of the Day
We continue to see farmers and grain buyers across north America join our next generation cash grain marketplace, Combyne. This open tool is really about your leverage your personal network of trading partners, with the key world here being “personal”.
In your Combyne profile, you can personalize what both current and potential trading partners see. This includes a (1) profile photo, (2) any licenses or certifications, and (3), and payment terms, namely frequency and type (i.e. direct deposit). This lets said current and potentially new trading partners understand who they’re dealing with and what kind of operation they run. Personalize your Combyne profile today and make the most out this next generation cash grain marketplace for your farm or grain-buying operation!
Soybean Prices Still Waiting…for Anything
With just a couple of hours left to go in the month of January, soybean prices are down about 8.5%. It’s also worth mentioning that soy oil prices have lost about 13%. Front-month soybean prices have now dropped to their lowest levels since the end of November, right before optimism of a trade war deal started to climb. Similarly, front-month canola prices are sitting back at the levels seen in the second week of December. Without China stepping up and buying more American soybeans, it’s not hard to understand how soybean prices have pulled back!
Yesterday’s grain exports sales report showed just 471,000 of U.S. soybeans were contracted by international buyers last week. And while this was near the bottom end of the range of pre-report expectations, it’s nowhere near the level the market was expecting, especially with the trade deal signed. But with the possibility of U.S. agricultural exports to China returning to pre-trade war levels starting to dwindle, should we be resetting our expectations of where soybean prices go now?
My answer is no. I think the market has been a little impatient and frankly, now with soybean prices about $1/bushel below the highs seen just before the trade war deal was signed, you might think that China would start to ramp up their buying. It’s certainly a possibility but we have to be mindful of the Brazilian soybean harvest, as well as the general slowdown this time of year. Put another way, soybean prices are in tough spot but it’s likely that we’re near the lows, if not already at them.
Ironically, corn prices are in a bit of a different trajectory, especially in the eastern Corn Belt where basis is unseasonably strong.  With basis levels in the positive territory in Ohio and Indiana and many parts of Illinois, farmers seem to be waiting for some very specific psychologically-important values to be hit (namely $4.00 cash corn!) before pulling the trigger and unlocking those bin doors. Their rationale behind this is made up by a couple of factors:
- 8% of the U.S. corn crop is still in field;
- Quality is down (due to late planting, early freeze, and thus drydown issues; and
- Stronger feed demand than what the market was expecting.
Something to keep in mind that’s weighing on corn markets elsewhere is that U.S. corn exports continue to drag. Right now, 2019/20 U.S. corn exports through Week 21 are down 50% from the same week a year ago, with just 10.51 MMT sailed (or 413.8M bushels if converting metric tonnes into bushels). However, it’s worth noting that last week’s actual shipments of corn exports were the second-highest of the crop year. On the flipside, the poor quality of U.S. corn this year – especially in the Northern Plains – could potentially limit corn exports sales to China. 
Overall, the market continues to wait for something, anything to help get out of this rut that we’ve been on. Put another way, I think we can all agree we’re happy that January is over after today!
Have a great weekend and see you next month!
At 8:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3237 CAD, $1 CAD = $0.7555 USD)
Mar Corn: -0.3¢ (-0.05%) to $3.793 USD or $5.02 CAD
Mar Soybeans: -1¢ (-0.1%) to $8.753 USD or $11.586 CAD
Mar Soybean Meal (per short ton): +$0.30 (+0.1%) to $291.80 USD or $386.26 CAD
Mar Soybean Oil (cents per lbs): -0.27¢ (-0.9%) to 30.36¢ USD or 40.19¢ CAD
Mar Oats: +0.3¢ (+0.1%) to $3.058 USD or $4.047 CAD
Mar Wheat (Chicago): -0.3¢ (-0.05%) to $5.603 USD or $7.416 CAD
Mar Wheat (Kansas City): -1.3¢ (-0.25%) at $4.678 USD or $6.192 CAD
Mar Wheat (Minneapolis): +2¢ (+0.35%) to $5.385 USD or $7.128 CAD
Mar Canola: -2.7¢ (-0.25%) to $10.324/bu / $455.20/MT CAD or $7.799/bu / $343.88/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.