Grain prices this morning are mixed as the complex – especially soybean prices – look for a new direction following last Thursday’s mostly bearish November WASDE report.
“If everybody is doing it one way, there’s a good chance you can find your niche by going exactly in the opposite direction.”
– Sam Walton (Founder of Wal-Mart)
Where do Soybean Prices Go Now?
Grain prices this morning are mixed as the complex – especially soybean prices – look for a new direction following last Thursday’s mostly bearish November WASDE report. A couple of areas that may provide a fresh course include weather in South America, U.S. export activity, and currency effects.
Later today at 4 PM EST, the USDA will release one of its final crop progress reports of the calendar year as Harvest 2018 nears the finish line. Expectations ahead of the crop progress report are that we’ll see the U.S. soybean harvest at 90% complete and the corn harvest at 88%, up 7 points and 12 points respectively week-over-week. These numbers, if realized, are both close to their five-year averages.
While Harvest 2018 is ending, the U.S. winter wheat Plant 2019 is also nearing its end: today’s crop progress report is expected to show 90% of the crop is in the ground, up 7 points week-over-week but 3 points behind the 5-year average.
On the political front, the U.S., Canada, and Mexico will sign the new USMCA trade deal on November 30.  In an interesting twist, it’ll be done in Argentina while the leaders of all three nations will be in Buenos Aires for this year’s G20 Summit. However, the spotlight of that get together will likely be on China and the United States, as they try to work towards a trade deal.
Canola, Soybean Prices Look for Direction
After seeing ending stocks of 955 million bushels in last Thursday’s November WASDE report, soybean prices pulled back some, losing about 1.5% on the week for front-month contracts. However, new crop 2019/20 soybean prices were able to gain ground. This is although the net short position held in soybean futures were improved by nearly 37% to now sit at a little under 45,100 short contracts.
While canola prices also saw the November 2019 gain while all other contracts lost ground last week (including a 15-month low), the net short position in canola was more than tripled.
South American Crop Update
Brazil’s soybean seeding campaign continues to track well with 69% of the crop estimated to be in the ground through last week, as per Safras & Mercado. That’s nearly 15 points ahead of the 5-year average.
The trickle-down effect of this is that the first fields to be harvested in major Brazilian growing regions would be in the second half of December, roughly two weeks ahead of schedule. Granted, while the volumes at the very beginning of January won’t be huge, things will accelerate quickly, and this will likely have an impact on the market.
Very explicitly, the market’s job is to price in perceived information about supply and demand. This means that if everyone starts posting combine photos in Mato Grosso (Brazil’s largest soybean-growing state) on December 15, one shouldn’t necessarily expect a Santa Claus rally in the soybean markets.
With an early soybean harvest, it also intuitively means that the second crop/safrinha crop could start getting planted earlier.
Thinking more short-term, the weather is expected to be a little wetter in Brazil through the middle of November. A similar weather pattern is expected in Argentina, where there’s much optimism that both corn and soybean production will rebound in 2019 and their drought-riddled harvest last year.
As a side note, Argentina is working on a currency swap with China to help stabilize the former’s economy, despite just receiving a $56 USD Billion loan package from the IMF.  This is an indication that China is trying to diversify its final interests in South America away from just the major soybean player, Brazil.