With the production of Argentina soybeans likely set, grain markets this morning are quietly mixed as they weigh other supply headlines.
“Losing an illusion makes you wiser than finding a truth.”
– Ludwig Borne (German political activist)
Are Argentina Soybeans Losing Impact on Grain Markets?
Grain markets this morning are quietly mixed as participants weigh supply headlines, like the Argentina soybeans crop versus where demand and rains for the US winter wheat crop.
Some new headlines hitting the airwaves are the likes how Ukraine is having a problem moving grain.  Sounds a bit similar to the dynamic in Canada, eh? For all of our GrainCents subscribers, we did a deeper dive on Canadian grain movement earlier this month. Later today, around noon EST, we’ll be publishing the impact and expectations of movement and prices of Canadian spring wheat, durum wheat, canola, barley, and oats.
Also continuing to be trumpeted in the news is the potential for US soybeans tariffs from China.  Garrett has dug into this subject significantly and has probably one of the better outlooks on the likelihood of a steel-for-soybeans trade war between China and America. It could be a nightmare though for the average soybean farmer.
Yesterday, Grain Markets Today noted how wheat prices dipped a bit. This is despite a relatively bullish USDA crop condition report late on Monday afternoon.
It’s certainly dry in the likes of Kansas, Oklahoma, and Texas where the winter wheat crop’s good-to-excellent ratings sit at 12%, 7%, and 13% respectively. A year ago, those numbers were 40%, 42%, and 35%. This is significant considering these three states produced nearly 3/4s of the American winter wheat crop last year.
Some rains are in the forecast about a month out for the region, but coverage will be sporadic. Nonetheless, it does present an opportunity for a much-needed drink for the region.
The USDA noted in their daily round-up of trading activity yesterday that, “last week’s lower prices brought a bearish change in momentum that may serve as an early warning to non-commercials that turned bullish.”
The State of the Argentina Soybeans Crop
Moving from one dry area to the next, Dr. Cordonnier of Soybean and Corn Advisor recently cut his Argentina soybeans production number to 43 million tonnes. This is 4 million below the USDA’s March WASDE report estimate but 1 million above the Buenos Aires Grain Exchange most recent number.
From a crop rating, Argentina soybeans aren’t looking too healthy. Dr. Cordonnier notes that 75% of the Argentina soybeans crop is considered to be in poor or very poor (P/VP) condition.  62% of the crop is filling pods, and 16% is mature. The harvest of said mature Argentina soybeans should be happening soon.
Cordonnier notes that about 70% of the Argentina soybeans crop was considered early planted, with 30% being planted later. For those later-seed crops, they’ll need about two inches of moisture per week to help fill pods. Considering that 85% of soil moisture in Argentina soybeans-producing region is considered to be short or very short, that pod-filling moisture isn’t coming from the ground.
Without that moisture, average yields on these later-planted fields of Argentina soybeans will likely be half of their five-year average. Further, some of these Argentina soybeans fields could just be outright abandoned!
End all, be all, it’s going to be a smaller Argentina soybeans crop this year. But, to weigh the other side of the coin, more than 90 million acres of soybeans are likely getting planted in the US, and the Brazilian soybean crop will likely come in near last year’s record of 114 million tonnes.
Reviewing Additional Forecasts for Grain Prices
In yesterday’s Breakfast Brief, we looked at some of the forecasts for grain prices from Societe Generale in the last three months of the 2018 calendar year. They were, for the most part, pretty bearish.
FocusEconomics recently gathered all estimates of grain prices from all forecasters and shot callers. For corn prices, the average guesstimate of where things will be in 4Q2018 is $4.09 USD / bushel, which is pretty much in line with the current December 2018 contract of $4.10. For 4Q 2019 (this would be for the 2019/2020 crop), the average corn prices forecast is for $4.26. Currently, the December 2019 contract is showing around $4.18.
For soybean prices, the average guesstimate gathered by FocusEconomics is for $10.19 USD /bushel on the Chicago Board of Trade. This would be more than 20 cents below the current $10.42 level that the November 2018 soybeans contract is sitting at. For 4Q2019, soybean prices have an average forecast of $10.51, whereas the November 2019 contract is standing right now around $10.10.
For Chicago winter wheat prices, the average call from analysts collected by FocusEconomics is for a $5.08 handle in 4Q2018. Right now, the December 2018 SRW wheat contract in Chicago is sitting just under $5.40. The average forecast for 4Q2019 is for $5.53. Comparably, the December 2019 Chicago wheat price is currently sitting at $5.85 USD /bushel.
Potentially dragging on these prices is another few bumper harvests from Russia. SovEcon recently upgraded their estimate of the 2018/19 crop to 77.6 million tonnes.  While still far from the record 85.8 million tonnes of wheat combined by Russian farmers for the 2017/18 harvest, this 2018/19 estimate if realized, would be one of the biggest wheat crops ever.
Unlike Argentina soybeans, it seems like the grain markets never forget about Russian wheat production headlines.