Oilseeds are red but the rest of grain markets are in the green this morning following a bullish NOAA report. Canola prices have fallen like a baby giraffe out of the womb on some bad sentiment from China.
“Lower your expectations of earth. This isn’t heaven, so don’t expect it to be.” – Max Lucado (U.S. Christian author)
Mar. 22 – The NOAA Expects Major Flooding; Should You?
Grain prices are mostly in the green this morning following a bullish NOAA report, but canola exports being stopped by China has that oilseed’s prices dropping again like a baby giraffe out of the womb.
Yesterday, the NOAA released its updated three-month forecast, indicating extensive flowing through the Red River Valley down to Nebraska and Iowa.  Add in the expectations from the NOAA for above-average rainfall through June, one NOAA director literally said that “this is shaping up to be a potentially unprecedented flood season.
To say the damage caused to the Midwest already to date is significant would be an understatement.  The expected bill to fix the damage so far from this month’s weather activity in Nebraska alone is expected to top $1.5 Billion USD! I and many others are expecting this number to climb as the rest of this winter’s heavy snowpack melts off. 
U.S. Corn Exports Slowing?
From a grain markets standpoint, railroads crisscrossing the Midwest that are covered with water will severely impact grain supplies getting to export and domestic end-user positions.  On that note, yesterday’s exports report from the USDA showed that U.S. corn exports are slowing up a bit with 27.82 MMT shipped out through Week 28 of the 2018/19 crop year (or 1.095 billion bushels if converting metric tonnes into bushels).
U.S. wheat exports are picking up a little bit, with 17.37 MMT (or 638.2 million bushels), now shipped out through Week 41 of its crop year. Worth mentioning is that Brazil is opening up its doors to duty-free wheat imports of up to 750,000 MT (or about 27.6 million bushels).  However, this comes as this year’s wheat crop in Brazil is looking pretty good, not only from a crop development standpoint but also on the balance sheet.
For soybean exports, things are still relatively slow-moving as long as China isn’t at the table. It’s expected that the U.S. and China are pushing for a new round of trade talks with a goal to have a deal signed, sealed, and delivered by late April.  If that’s the case though, this would likely be on the late side of things for American farmers who have opted to plant wheat – namely in the Northern Plains – switch back over into soybeans. Of course, as I’ve mentioned many times over the past few weeks, the wet weather that we’re seeing could easily push back the start of Plant 2019.
EPA Overruled on Glyphosate
I spent over half this week in San Francisco at the World Agri-Tech Investment Summit. While the event brings together a who’s who of AgTech CEOs and executives and major decision makers from pretty much any company that touches agriculture, there was a bit of buzz about what else was happening in San Francisco at the same time: a court case between Bayer and a California man diagnosed with non-Hodgkin’s lymphoma. The former was found guilty as a jury determined that using Roundup caused the gentleman’s cancer.  This a bellwether judgment as there are 11,000 other lawsuits against Bayer from others who blame the company for their sickness.
Now, I’m not at all interested in taking anything away from an individual’s sickness – I sit on the board of the Mandi Schwartz Foundation and I know first-hand that cancer is terrible. However, what I am trying to pick at is how the decades of research and review of glyphosate and approval by governments and international organizations are suddenly superseded by five days of deliberations between jurors who are not scientists or experts on subject matters ranging from biomolecular chemistry to urology. For the record, I am also not the expert on these subject matters, but when I am not the expert in something, I defer immediately to those who are.
Sidenote: a senior Democrat from Connecticut has introduced a bill that would ban pre-harvest application of glyphosate on oats.  This is a result of a pretty good job by the Environmental Working Group who augmented the fact that traces of glyphosate were found in oat products.  Ironically, what the EWG reported on was levels that were still at least 100 times above the EPA’s exposure limit to be considered non-threatening for human consumption.  However, if you create an emotional headline about food safety, it’s hard for today’s news organizations to not jump quickly on the reporting of it. Never in the history of the world has fiction had a chance to be spread so quickly.
Worth the supplemental reading is by Saskatchewan farmer Jake Leguee who has written what I think to be the best take on the subject on the use of glyphosate. It’s worth you reading and sharing as well. 
China Suspends Canadian Canola Exports
While we know of at least one emergency meeting by the Canadian International Trade Committee, made up MPs from all sides of Parliament, it doesn’t seem like it’s done much good.  Late this week, we’ve found out that China is now refusing purchases of all Canadian canola exports, regardless if it’s from Richardson or any other player.  For perspective, China’s imports account for about 40% of all Canadian international shipments of canola seed, oil, and meal. This includes at least 20% of all Canadian production of canola seed.
As I understand it, the Canadian government is trying to have a technical conversation with the Chinese on the subject of canola exports but the latter has no interest in talking scientific facts. What else would there be to talk about? Politics. Thus, it’s another issue where emotions will rule the day, and not fact.
Ultimately, while today’s FarmLead Breakfast Brief might be a bit less specific to grain markets happenings like it normally is, the issues discussed above have more of a long-term/tailwind impact on the industry and it’s healthy to bring them up here and there. I inherently trust in the forecast from the NOAA and manage risk exposure in terms of what could happen to grain markets accordingly. Namely, I think the reporting from NOAA is supportive of grain prices in the short-term, and if the NOAA proves to be correct, likely in the long-term as well.
Intuitively I ask the question then: if society is willing to trust the NOAA, why don’t we trust other experts and/or other scientific facts?
Have a great weekend!
At 8:25 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3423 CAD, $1 CAD = $0.745 USD)
May Corn: +3.3¢ (+0.85%) to $3.795 USD or $5.094 CAD
May Soybeans: -2.8¢ (-0.3%) to $9.078 USD or $12.185 CAD
May Soybean Meal (per short ton): -$0.40 (-0.15%) to $310.50 USD or $414 CAD
May Soybean Oil (cents per lbs): -0.17¢ (-0.6%) to 28.93¢ USD or 38.83¢ CAD
May Oats: +1.3¢ (+0.45%) to $2.82 USD or $3.785 CAD
May Wheat (Chicago): +1.8¢ (+0.4%) to $4.683 USD or $6.285 CAD
May Wheat (Kansas City): +2.3¢ (+0.5%) to $4.493 USD or $6.03 CAD
May Wheat (Minneapolis): +1¢ (+0.2%) to $5.723 USD or $7.681 CAD
May Canola: -17¢ (-1.6%) to $10.449/bu / $460.70/MT CAD or $7.784/bu / $343.22/MT USD
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