Grain markets are mostly lower despite some bullish factors starting to come into play, including potential changes to Plant 2019 and potentially deflating geopolitical risk.
“Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.” – Albert Einstein (German theoretical physicist)
Mar. 15 – Plant 2019 Questioned from Many Angles
Grain markets are mostly lower despite some bullish factors starting to come into play, including potential changes to Plant 2019 and potentially deflating geopolitical risk. Grain markets have been moved this week by trade deal takes between China and the U.S., year-round ethanol blending/sales, as well as concerns over the start of Plant 2019 as a result of the wet weather hitting the Midwest.
On the ethanol front, we saw the Trump administration pave the way for ethanol sales and blending to take place year-round.  Ironically, it was just announced that, in 2018, ethanol consumption fell for the first time in 20 years.  This was as the overall gasoline blend rate dropped from 10.13% ethanol in 2017 to 10.07% last year.
Announcements from the USDA for corn and soybean export sales were within expectations, but wheat faltered a bit. Through Week 27 of the 2018/19 crop year, actual exports of U.S. soybeans and corn are tracking 31% behind and 34% ahead of last year respectively.
While we talked a bit about pulses in Wednesday’s Breakfast Brief, the USDA’s attaché in China noted the demand for pulses in the People’s Republic continues to grow.  Imports of peas by China for the current crop year are expected to total 2.1 MMT, or a 10% bump from 2017/18, thanks to growth in feed demand. Also increasing the need for more imports is the fact that total 2018/19 production of pulses in China was down about 5% year-over-year due to a smaller harvested area. That’s not all that surprising though when you consider Chinese farmers get significant incentives to grow corn instead of pulses or soybeans.
Global Output Estimates Bump Up
AgriCensus notes that Ukraine’s major corporate farms are looking to hold off on selling anymore into the export market. So far this year, Ukraine has had some strong corn export volumes but with a mild winter and early spring, corn held in grain bags are starting to get emptied/sold. That increase in supply coming to market has pushed down domestic corn prices to less-than-ideal-sellable levels. Expectations though are that, after a big harvest last year, Ukraine’s corn farmers could produce another bumper crop.
Also, in Ukraine, the outlook for 2019/20 wheat harvest there was raised by 700,000 MT to 28.3 MMT. This would be a 3.3 MMT, or 13% jump from this past year’s 25 MMT haul. Nearby, in Germany, expectations are that this year’s wheat harvest will jump nearly 20% to 24.2 MMT.
Switching continents, Rosario Grains Exchange in Argentina revised their estimate of the country’s soybean harvest to 54 MMT, up 2 MMT from the previous estimate. Comparably, Buenos Aires Grains Exchange is still at 53 MMT. Rosario also increased their forecast for the corn harvest by 800,000 MT to 47.3 MMT. The increase is likely a result of the positive growing conditions, namely weather, that Argentina is experiencing right now. 
Soybean, Corn Prices Crawling Back
Coming back to North America, FocusEconomics came out with their latest consensus reports and only wheat prices are expected to go higher from where they’re at today.  Corn price estimates are a bit bearish, given the lower demand that the USDA pointed to in their March WASDE report. For soybean prices, the average analyst is expecting lower trade tensions, and/or a deal to be found. However, thanks to large global supplies, expectations are that gains could be limited. Finally, for Chicago SRW wheat prices, expectations are that the cereal can rebound from its recent sell-off.
SIdenote: I talked about said sell-off yesterday morning with Ben Lichtenstein on TD Ameritrade Network. We also discussed some of the bearish & bullish factors for wheat prices that I’ve been pointing to in the last few FarmLead Breakfast Briefs.
After the largest funds’ net short position since January 2019 helped test new contract lows last week, corn prices have picked up their socks a bit. Some strong export sales have helped the coarse grain but it doesn’t seem like any one wants to jump on the train to ride prices really higher. Put another way, those in a short position aren’t looking to cover their bets and help push the market higher until there’s something more definitively bullish for corn prices.
Weather Concerns for Plant 2019
One of those things could be the start of Plant 2019. This winter has surely been one of the more extreme ones for most of the American Midwest as the region continues to get regular dumps of precipitation. When all added up though, for a lot of North Dakota, Wisconsin, Iowa, and Illinois, this winter has been one of the wettest (read: combination of rain and snow) in nearly 130 years.
This includes this past week’s major storm that caused white-outs in the north and flooding through the Cornbelt. Of course, this has had a very detrimental impact on calving season.  The subsequent question is whether these acres will get dried up in time for optimal seeding dates for Plant 2019.
Trade War Implications for Plant 2019
On the trade war front, President Trump says that “probably one way or the other, we’re going to know over the next three or four weeks” if a deal will get done with China.  Whether or not that happens can have a pretty significant impact on what final acres will be for Plant 2019.
If you do see a deal made before Plant 2019 starts in the U.S. Northern Plains, it’s very possible that all those once-lost soybean acres that were supposed to get planted into wheat, may go back to getting seeded with the oilseed. For some American farmers though, they see soybeans still as the more profitable crop and will plant it with or without a deal to end the trade war. 
Put another way, there’s not a big soybean market in places like North Dakota and Minnesota if there’s no demand out of the West Coast. If that returns, so does the likelihood of 2019 soybean acres in these fringe states being closer to what was planted in 2018. In turn, that means less wheat. Thus, if you’re a soybean, wheat, or even canola grower for that matter, you’re hoping some sort of geopolitical risk comes off the table before the drills start rolling in the next 5-8 weeks for Plant 2019.
Specifically, on canola, the USDA is expected more acres to be seeded in Canada with the oilseed for Plant 2019. Through Week 32 of the 2018/19 crop year, Canada has shipped out 5.9 MMT, or about 8.5% less than this time a year ago. With about 20-25% of Canadian canola production headed to China, but currently dealing with political snafus, it might be a good time to review a diversification strategy for canola exports. 
Have a great weekend!
At 8:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3344 CAD, $1 CAD = $0.7494 USD)
May Corn: -0.3¢ (-0.07%) to $3.70 USD or $4.937 CAD
May Soybeans: +0.5¢ (+0.06%) to $8.99 USD or $11.996 CAD
May Soybean Meal (per short ton): +$0.20 (+0.07%) to $306.10 USD or $408.46 CAD
May Soybean Oil (cents per lbs): -0.04¢ (-0.15%) to 29.53¢ USD or 39.41¢ CAD
May Oats: +0.3¢ (+0.1%) to $2.738 USD or $3.653 CAD
May Wheat (Chicago): -2¢ (-0.45%) to $4.508 USD or $6.015 CAD
May Wheat (Kansas City): -2.5¢ (-0.55%) to $4.34 USD or $5.791 CAD
May Wheat (Minneapolis): -0.5¢ (-0.1%) to $5.52 USD or $7.366 CAD
May Canola: unchanged at $10.46/bu / $461.20/MT CAD or $7.839/bu / $345.62/MT USD
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