Ahead of some major reports from the USDA on Friday, grain markets this morning are mixed with only cereals trying to lead the complex back up, along with canola trying to steady itself.
“The best things in life are often waiting for you at the exit ramp of your comfort zone.” – Karen Salmansohn (American author)
Mar. 27 – Grain Markets Wait on USDA Yet Again
Ahead of some major reports from the USDA on Friday, grain markets this morning are mixed with only cereals trying to lead the complex back up, along with canola trying to steady itself. These new numbers though are exactly what grain markets area looking for, especially since there hasn’t been a lot of fresh headlines coming out of the trade war talks between the U.S. and China.
In Monday’s FarmLead Breakfast Brief, I talked about canola prices at length and the impact China’s abrupt halt to purchasing has caused. Yesterday we learned that Viterra has joined the company of Richardson in having its import certificate revoked.  There’s been some buzz that with the uncertainty with canola prices, mustard might be a more attractive option for those who can choose between canola and the less popular oilseed. 
Canola prices ended up dropping another $5 CAD/MT yesterday on that Viterra news, as well as some further selling on recent domestic demand data showing the least amount of crush in over a year and a half.  635,526 MT of Canadian canola was crushed in February 2019, down 25% from January’s volumes and about 18% from the 2018/19 crop year average. While causation should not support correlation, the smaller crush demand is eerily coincidental with China’s departure from the market.
Switching continents, the EU’s crop monitoring agency, MARS, is forecasting wheat yields and production rebound in 2019, climbing about 7.4% year-over-year to 90 bushels an acre, which would be slightly above the 5-year average.
Staying in wheat, the USDA recently updated its winter wheat conditions report. In Kansas, 52% of the crop is in good-to-excellent (G/E) while Oklahoma is seeing 74% of the winter wheat there in G/E health. The winter wheat crop is weakest in Texas, where just 39% is rated G/E, but Texas does tend to veer to the lower end of the scale for this time of year.
USDA Takes Spotlight from Flooding
That said, Friday’s quarterly stocks report will not account for losses from flooding. Despite knowing that these numbers might be smaller than what the USDA shares on Friday, we have to go with what is presented. Ahead of the USDA reports, the average analyst’s guesstimate for corn stocks is at 8.34 billion bushels (or 211.85 MMT if converting bushels into metric tonnes), which would be down about 6% from the same time a year ago. For soybeans, the market is expecting to see 2.68 billion bushels (or 72.94 MMT), up 27% year-over-year thanks to China and the lack of exports to the People’s Republic. Finally, wheat inventories are expected to total 1.56 billion bushels (or 42.46 MMT), up about 5%.
We’ve seen export basis levels improve a bit for wheat, corn, and soybeans as it’s widely expected the record snowpack and flooding will slow grain transportation for the next few weeks. We might start to see basis and futures start to improve for new crop grain prices as well, especially in hard red spring wheat as a delayed start to Plant 2019 seems imminent. This is especially true for the likes of North Dakota, where farmers will have to choose what to plant first in a smaller window of opportunity.  Usually spring wheat is planted before corn or beans.
In addition to the wetness on the ground, there’s a heck of a lot of grain in that bin that’s at risk.  The Farm Bureau estimates that there’s about $76 Billion USD worth of corn and soybean sitting in bins in the upper Mississippi-Missouri basins, or right where the NOAA says some unprecedented flooding is expected this spring. Looking back to the last quarterly stocks report, about 60% of stored corn is sitting in Illinois, Iowa, Nebraska, and Minnesota! While we’ll get the updated quarterly stocks report as of March 1st this Friday, there’s still a lot of all types of grain sitting in bins in the path of some flooding. It doesn’t help that the Northern Plains are expected to get some above-average precipitation over the next 10 days.
Overall, while we might get some headlines tomorrow about how trade talks are going in Beijing, the focus of most of the complex will likely be on the USDA reports on Friday. Of course, it’s a little bit different for Canadian grain markets as they’re waiting for some action on the canola issue with China, namely someone from Ottawa to actually fly across the Pacific to accelerate the dialogue.
At 7:45 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3373 CAD, $1 CAD = $0.7478 USD)
May Corn: -2.8¢ (-0.75%) to $3.745 USD or $5.008 CAD
May Soybeans: -4.3¢ (-0.45%) to $8.965 USD or $11.989 CAD
May Soybean Meal (per short ton): -$1.90 (-0.6%) to $309.10 USD or $413.37 CAD
May Soybean Oil (cents per lbs): +0.01¢ (+0.03%) to 28.66¢ USD or 38.33¢ CAD
May Oats: +0.3¢ (+0.1%) to $2.733 USD or $3.654 CAD
May Wheat (Chicago): +1¢ (+0.2%) to $4.703 USD or $6.289 CAD
May Wheat (Kansas City): +1.8¢ (+0.4%) to $4.45 USD or $5.951 CAD
May Wheat (Minneapolis): -1.5¢ (-0.25%) to $5.658 USD or $7.566 CAD
May Canola: +0.9¢ (+0.1%) to $10.253/bu / $452.10/MT CAD or $7.667/bu / $338.06/MT USD
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