Grain markets this morning are quite mixed (just like wheat exports you could say) as, with flipping the calendar to March, the hope is that grain prices can rebound from the last few days of selling.
“Set your course by the stars, not by the lights of every passing ship.” – Omar Bradley (U.S. Army General)
Mar. 1 – Wheat Exports Mixed, Oilseeds Look for Direction
Grain markets this morning are quite mixed as, with flipping the calendar to March, the hope is that grain prices can rebound from the last few days of selling. Some strong U.S. grain exports couldn’t stop the slide as the complex continues to be concerned over the trade war negotiations and competition out of non-U.S. markets (i.e. Brazil for soybean exports and Russia for wheat exports).
China Pushing Back on Soybean, Canola Prices
Canola prices are diverging from soybean prices, as the latter continues to be fairly resilient, whereas the former is making new contract lows. More specifically, canola prices hit new contract lows literally every day this week through yesterday. Put simply, end-users are well-supplied and canola exports are inching along behind last year’s pace: 5.65 MMT of Canadian canola has been shipped out through week 30 of the 2018/19 crop year. That’s 7% below the same pace last year.
It makes one question how, if at all, Canadian canola exports are going to top 10.8 MMT this year, which would be a 4% increase from 2017/18’s volumes. My bet though is this slow activity is exactly why Agriculture Canada recently downgraded their forecast of total 2018/19 crop year canola exports, a drop of 200,000 MT from their January estimate.
We all know that U.S. soybean exports have been abysmal without China buying much. However, in Monday’s FarmLead Breakfast Brief, we mentioned how, amidst all the data coming out from the USDA, China had said they were committed to buy 10 MMT of American soybeans. That’s why we saw a marketing year high of 2.27 MMT of U.S. soybeans shipped out last week. That puts total U.S. soybean exports at 25.5 MMT (or about 937 million bushels if converting metric tonnes into bushels). That’s technically down more than 32% from the same time a year ago.
Could it be more in next Thursday’s report from the USDA? Potentially, but we also know that the China-U.S. trade war negotiations are ongoing. U.S. Trade Representative Robert Lighthizer says that there’s still much to be done to get a trade deal with China done. 
If we come back to the fundamentals though, demand for feedstuffs in China is lower this year. Most recently, state agency CNGOIC said that they’re expecting soymeal demand to fall 5% year-over-year to 66.8 MMT as a result of a smaller pig herd size. It’s been estimated by analysts that China’s 400 – 600 million-head pig market could fall anywhere between 15% and 30% as African swine fever outbreaks have made it not only difficult to breed safely but also created higher hesitation from farmers to do so. On that note, China is looking to overhaul the country’s hog industry with different regulations and zoning as an attempt to stop the spread of disease. 
Wheat Prices in Tough Spot
Staying in China briefly, Beijing just lowered its minimum support price to $325 USD / MT (or $8.85 USD and $11.63 CAD per bushel)  While this hasn’t provided significant fundamental pressure to wheat prices, Chicago SRW wheat futures are looking like they could post their biggest weekly loss since August 2018. Bottom line: there doesn’t seem to be much demand for U.S. wheat: through Week 38 of the 2018/19 crop year, total U.S. wheat exports are sitting at 15.6 MMT, which is down 6% year-over-year.
One factor impacting U.S. wheat markets continues to be Russia. We mentioned the mild weather in Russia in Wednesday’s Breakfast Brief, but it’s rumoured that Russia has up to 5 MMT left in supply to export.  This would suggest that they have enough product to satisfy their wheat exports responsibilities before their 2019/20 crop starts to come to market in late June/early July.
One of the other bearish factors is that wheat imports by Indonesia are slowing.  The southeast Asian nation is the world’s 2nd-largest importer of wheat but demand is braking since the government introduced a quota system for wheat imports. Also, with main supplier Australia dealing with a drought, Indonesia has been shifting to some other feed alternatives, but is also buying more from the Black Sea.
I should mention though that U.S. hard spring wheat exports are performing well, tracking 15% higher than last year with 4.76 MMT shipped out. Similarly, Canadian non-durum wheat exports continue to flourish with 10.4 MMT shipped out through Week 30. That’s up more than 17% year-over-year. You could easily say that there continues to be strong demand for higher protein/quality wheat and that’s why wheat prices on the Minneapolis exchange have been more resilient than its brethren in Chicago or Kansas City.
That in mind, this is why I continue to believe that Ag Canada’s forecast for total crop year wheat exports of 18.7 MMT is still low. My gut says this number could top 19 MMT (and a new record).
Overall, while wheat prices have seen some pressure, one could argue that this more seasonality and/or headline-phishing that anything. Put another way, at this time of year, the market is desperately looking for anything that’s bullish and without it, the complex drifts lower. We might see another few weeks of this before the push into a focus on Plant 2019 (and weather premiums) perks up traders.
P.S. Speaking of focus, you’ve had a few weeks off from your New Year’s resolution. If you thought it was a lost cause, now that we’re starting March, I challenge you to get back on track!
Have a great weekend!
At 8:10 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3228 CAD, $1 CAD = $0.756 USD)
May Corn: +0.3¢ (+0.05%) to $3.71 USD or $4.907 CAD
May Soybeans: +5.8¢ (+0.65%) to $9.16 USD or $12.116 CAD
May Soybean Meal (per short ton): +$1.10 (+0.35%) to $307.10 USD or $406.22 CAD
May Soybean Oil (cents per lbs): +0.29¢ (+0.95%) to 30.54¢ USD or 40.40¢ CAD
May Oats: +0.5¢ (+0.2%) to $2.645 USD or $3.022 CAD
May Wheat (Chicago): -4.3¢ (-0.9%) to $4.553 USD or $6.022 CAD
May Wheat (Kansas City): -3.8¢ (-0.85%) to $4.408 USD or $5.83 CAD
May Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.598 USD or $7.404 CAD
May Canola: -1.6¢/bu (-0.1%) to $10.625/bu / $468.50/MT CAD or $8.033/bu / $354.19/MT USD
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