Ahead of Thursday’s Prospective Plantings report from the USDA, grain markets are mixed, being also cognizant of the heightened geopolitical risk.
“Continuous effort – not strength or intelligence – is the key to unlocking our potential.” – Winston Churchill (former British Prime Minister)
Gearing Up for USDA’s Prospective Plantings
Grain markets this morning are mixed as trade steadies itself on heightened geopolitical risk and Thursday’s Prospective Plantings report from the USDA.
As Garrett mentioned in his daily afternoon trading recap, Grain Markets Today, grain prices were able to rebound on Friday. They were helped out by some decent export sales, but also a bit more of a toned down approach to trade wars from both the US and Chinese governments.
Reports over the weekend that trade representatives from both sides are “negotiating behind the scenes” to limit the damage between the two economies.  American negotiators want more access to China’s market, which is especially important for agricultural products, namely soybeans since China is forecasted to import 100 million tonnes of the oilseed in 2018/19.
With the focus on Thursday’s Prospective Plantings report and a China-America trade war, South American weather seems like a long-lost factor. Total December-March rainfall in Argentina is expected to come in at nine inches, below the 12 inches that were seen during the last major drought in 2008/2009. For our corn and soybean GrainCents subscribers in this weekend’s market update emails, we walked through a lot of the downgrades that the private trade is making to Argentina’s production prospects.
Will the USDA drop their production numbers for Argentina in the April WASDE report, out on Tuesday, April 10? And what might the impact on corn prices, soybean prices, and canola prices be?
Right now, the USDA is expecting an average soybean yield in Argentina that’s about 9% below trend but private estimates are anywhere between 20-40% lower. In early March, we took a historical look at soybean prices, relativized to the 2008/09 drought. We also did the same thing for canola prices here.
While the entire market is focused on Thursday’s Prospective Plantings report, we can’t ignore the other grain market movers.
State of European Crop Conditions
FranceAgriMer says that 79% of their winter wheat crop is in good-to-excellent (G/E) health. This is a four-year low and down from 91% at the same point a year ago. Durum G/E ratings in France dropped one point but as we noted for our GrainCents durum readers last week, the French (and Italian) durum wheat crop (and prices) are expected to be a bit of an asterisk in the 2018/19 crop year. For our GrainCents winter wheat readers, we dug into the most recent estimates from MARS, the EU crop monitoring agency.
In Russia, winter conditions have been fairly deluxe for fall-planted crops, as they experienced one of the warmest winters on record. While we had some choice words for Russia’s wheat numbers back in September, Garrett explored where Russia’s wheat industry is going as we near the 2018/19 crop year.
Last week, Adrian did a heck of a job looking into where we could see flax acreage heading in the Black Sea. While they can never be counted out, Russia has some sleepy flax acres that we’re monitoring going into 2018/19. Kazakhstan is the more interesting player in the flax markets though – can you guess how much lower their spot prices are from Canadian or American flax prices right now?
Staying in the Black Sea, we know that Ukraine has exported over 30 million tonnes of grain thus far in the 2017/18 crop year, down 8.5% year-over-year.  This includes 11.6 million tonnes of corn (-13% YoY), roughly 4 million tonnes of barley (-15% YoY), and 13.8 million tonnes of wheat (-4.5% YoY). More specifically, more than 7.7 million tonnes of said wheat Ukrainian wheat exports were milling quality (-14.5% YoY), while a little more than 6 million tonnes was feed quality (+9% YoY).
On the oilseeds front, Ukraine has shipped out 4.3 million tonnes of oilseeds, up 30% from the same point a year ago. Most notable is rapeseed exports of a little more than 2 million tonnes, more than double what it was a year ago. We started covering burgeoning Ukraine rapeseed exports back in January for our GrainCents canola readers – their increased exports are certainly displacing someone else!
Prospective Plantings Report Guesstimates
This week, on Thursday, March 29, we’ll get the USDA’s annual Prospective Plantings report. This report tends to set the goalposts for the next few months in terms of production potential, based on the area seeded.
Soybeans continue to hold more profitable sway for American farmers today, which is why most pundits agree that we’ll see the USDA update their February acreage number of 90 million. Conversely, corn acres are expected to come in around 89 million.
The most recent Farm Futures survey says that American farmers will plant 91.5 million acres of soybeans (a record) and 90 million acres of corn.  The drought-tolerate crop, sorghum/milo, is expected to see acres climb by more than 4% year-over-year to nearly 6 million. Spring wheat acres are expected to climb nearly 6% to 11.6 million acres, whereas durum acres are likely to fall 2% to 2.3 million.
On durum specifically, we’ve been looking into the subject more for our GrainCents readers. It’s certainly a big question mark and this could be a pivotal year for the direction of durum prices. Read up on our deeper analysis for US durum acres here and what we’re expecting for Canadian durum acres in 2018/19 here.
Overall, the market will be positioning itself all week until the Prospective Plantings report out at 12 eastern on Thursday. While the focus is on Washington, DC’s numbers, it’s important to not forget about the other factors influencing markets.
May Corn: +1.5¢ (+0.40%) to $3.788 USD or $4.884 CAD
May Soybeans: +6.3¢ (+0.61%) to $10.345 USD or $13.340 CAD
May Soybean Meal (per short ton): +$3.40 (+0.90%) to $381.30 USD or $491.689 CAD
May Soybean Oil (cents per lbs): +0.2¢ (+0.64%) at 31.6¢ USD or 40.8¢ CAD
May Oats: +4.3¢ (+1.88%) to $2.305 USD or $2.972 CAD
May Wheat (Chicago): -2.5¢ (-0.54%) to $4.578 USD or $5.903 CAD
May Wheat (Kansas City): -3.0¢ (-0.63%) to $4.763 USD or $6.141 CAD
May Wheat (Minneapolis): +2.3¢ (+0.37%) to $6.050 USD or $7.802 CAD
May Canola: -$0.70 (-0.13%) to $11.791/bu / $519.90/MT CAD or $9.144/bu / $403.177/MT USD