“We don’t know the probabilities of future events. Still, you have to take action, and so you do it on gut feeling. That’s the world we live in.” – Robert J. Shiller (American economist)
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Grain prices this morning are mostly mixed as concerns mount over Plant 2019 and the impact of trade war aid for U.S. farmers. After the Canadian Victoria Day long weekend, we have a lot to catch up on as the bullish politics and weather of last week are now diverging: politics are driving soybean prices lower while weather negatively impacting Plant 2019 helping prop up corn and wheat prices.
It was suggested yesterday that President Trump and company are considering offering a farm aid package in the magnitude of up to $20 billion to offset losses from the trade war with China.  It’s been rumoured that the U.S. federal government is considering hand-outs of $2 USD/bushel for soybeans, 63¢/bushel for wheat, and 4¢ for corn. More details of the program are expected to be announced tomorrow but this rumour was enough to drive soybean prices down as more farmers are expected to plant what gives them a guaranteed revenue.
With the new tariffs in place from both Washington and Beijing, the Chinese ambassador to the U.S. says that they are ready to resume trade war talks with the former.  In a bit of a contradiction though, Chinese President Xi Jinping has been making speeches this week that the country is “now embarking on a new Long March”, a reference to China’s civil war in the 1930s and basically saying they’re not going to cave in the trade war with the U.S. 
America’s Plant 2019 Bullish Lag
The aid for soybean prices has more analysts thinking that this will put more downside pressure on soybeans prices. Ag Economist Scott Irwin from the University of Illinois said that if the second payment program rolls out and further subsidizes the American soybean farmer, “it will be one of the stupidest ag policy moves ever made by the USDA.” 
The possibility of the extra $2/bushel comes at a time when many Midwestern farmers are facing the decision to plant corn without insurance (once it’s dry, that is), or put in more soybeans thanks to this additional $2 and a later crop insurance date.  Put simply, there’s way more guarantee in planting soybeans than there is corn today, and as such, soybean acres could easily balloon.
It’s not hard to fathom either, considering where the corn planting pace is at through this past Sunday: May 19th! 49% of this year’s American corn crop across the U.S. had been seeded through May 19th.  This well behind the seasonal average of 80% complete by this week and 78% a year ago. Further, it doesn’t look like much of Plant 2019 will accelerate this week in the Corn Belt, thanks to more precipitation in the 7-day forecast. (shown below). With the expected rain in mind, Scott Irwin also reminded us that there is 45 million acres of corn that hasn’t been planted.  Conversely, only 19% of the U.S. soybean crop has been planted, also well behind the 5-year average of 47% for this time of year. 
Kluis Advisors shared that, “in the northern Corn Belt, corn planted after Memorial Day only has 77% of normal yield potential.  They are estimating that over 32 million acres of corn will get planted after the upcoming U.S. long weekend! This is what has helped corn prices drive higher for the seven straight sessions (that is, before taking a breather this morning).
Expectations for Canadian Grain Prices
Conversely, the Western Canadian Plant 2019 campaign has been going relatively smoothly, albeit, as I mentioned in my weekly grain markets recap on RealAgriculture.com, more farmers in Alberta and Saskatchewan are looking or rain. 
In last Friday’s FarmLead Breakfast Brief, we acknowledged that Canadian soybean exports to China were a bit in limbo, augmented by the fact that actual shipments in March 2019 were basically nil.  That said, China has bought nearly 1.5 times the soybeans from Canada so far this crop year than it did at the same time a year ago. In general, through March 2019, China has imported nearly 9.5 MMT of Canadian grain, oilseeds, and pulses in the 2018/19 crop year. This is 2.65 MMT or 39% more than what China had imported through March 2018 in the 2017/18 crop year. 
We know that China has bought a lot more Canadian soybeans (albeit, now slowing), but the People’s Republic has also bought significantly more Canadian canola (+11% year-over-year at 2.91 MMT) ad wheat (+116% at 1.413 MMT). Undoubtedly though, since China has revoked some import licenses, Canadian canola exports have started to sink: just 7.37 MMT have been shipped out through week 41, down more than 10% year-over-year.
Conversely, Canadian wheat exports continue to show strength: 14.25 MMT of non-durum and 3.51 MMT of durum have been shipped out through week 41 of their 2018/19 crop year. This is good for 14% and 9% better, respectively, than this time a year ago, and with less than 3 months to go in the marketing year. Thanks to the bump in demand, some analysts are starting to get more optimistic on durum prices improving. Also worth mentioning in the recovery of durum prices is smaller global acres and drier conditions in major-growing regions in Europe and even Western Canada.  We do have a long ways to go though to see previous levels realized.
However, the interesting headline read this week came from the Land Down Undaa as, since Eastern Australian is entering its third year of drought, the country will import wheat for the first time in a dozen years, and the supply is coming from Canada.  This seems logical since the main options to replace the high-protein wheat that Eastern Australia usually produces are Canada, the United States, and possibly Argentina. If you recall, I timestamped back at the end of February that the dry weather in Australia could be the most bullish dynamic for wheat prices in 2019/20.
Due to some early morning meetings, futures grain prices are not included in this morning’s FarmLead Breakfast Brief but you can view them here.
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