Nov 5 – Corn Futures Feeling Pressure of 2019 Acres?

Good Morning!

Grain markets this morning all slightly in the red with soybean and corn futures continuing their pullback from Friday’s morning highs ahead of tomorrow’s U.S. mid-term election.

“I don’t feel pressure in a negative way. I like the pressure. I feel excitement and calm at the same time. No pressure, no diamonds. I want pressure: pressure creates drama, creates emotion.

– Conor McGregor (Irish MMA Fighter)

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 Corn Futures Feeling Pressure of 2019 Acres? 

Grain markets this morning all slightly in the red with soybean and corn futures continuing their pullback from Friday’s morning highs ahead of tomorrow’s U.S. mid-term elections. 

Also putting some pressure on grain markets are the USDA’s baseline projections for the next decade, announced on Friday. [1] In it, the USDA said that U.S. farmers will reduce soybean acres but increase corn and wheat acres in 2019. Very specifically, the agency expects corn acres climb 3.3% or 2.9 million acres year-over-year to 92 million while soybeans will drop 6.6 million acres (or 7.4%) to 82.5 million. For wheat, the USDA suggested that total 2019/20 wheat area will increase by 3.2 million acres, or 6.7% year-over-year to 51 million acres.  

The USDA will provide more details on these numbers at their annual outlook forum on February 21-22, 2019. In the meantime, it’s worthwhile to recognize that these numbers reflect America’s current trade environment, including the tariff tit-for-tat with China.  

That being said, grain markets are losing some love with the idea from U.S. President Trump that there has been some good progress on trade talks with China. This in mind, on Friday, the White House leaked that Trump had asked key cabinet members to put together a draft proposal to put a halt to the current trade war. [2] Of course, patience is required, says U.S. Secretary of Ag Sonny Perdue at a recent lecture at Kansas State University, but reminded us that volatility in grain markets is actually quite the norm. [3] 

Corn Futures Only Watching Soybeans 

In Friday morning’s FarmLead Breakfast Briefsoybean prices had made double-digit gains at the time of writing, and, for the week, ended up gaining around 30 cents USD / bushel on most contracts. With soybean prices back near $9 USD/bushel in Chicago on the front-month contracts, and November 2019 above $9.30, why wouldn’t these be sellable levels? Keep in mind where we’ve been the last few months!  

Conversely, corn prices watched soybeans from afar as they only gained a little more than 3 cents last week in Chicago. That being said, managed money’s net short in soybeans increased by nearly 27,000 contracts through October 30, whereas fund managers still were holding a slight advantage.

Corn futures fund position reduce net long

For the month of October, front-month corn futures actually lost about 1.4% but were up 4.2% year-over-year. Over the last 5 years, the last 2 months of the calendar year haven’t necessarily been a friend to corn prices, as they’ve traded more sideways than anything over this timeframe.  

The good news for corn futures is on the demand front, as through Week 8 of the 2018/19 crop year, U.S. corn exports are tracking more than 76% above last year with 9.25 MMT shipped out.  

Week 8 2018/19 Weekly U.S. Corn Exports

Comparably, U.S. soybean exports are tracking nearly 40% lower year-over-year with just under 7.5 MMT shipped out through Week 8. Further, total U.S. wheat exports are down 18% through Week 21 of its 2018/19 crop year, with a little less than 8.3 MMT actually shipped out of the country.  

Canadian Grain Exports Picking Up (Mostly) 

While U.S. wheat exports remain low relative to last year, Canadian wheat exports continue to perform well, tracking 23% higher than 2017/18’s pace with 4.7 MMT shipped out through Week 13 of the 2018/19 crop year. And prices did find some strength last week but its low protein/CPS wheat prices in Western Canada that impress the most, tracking nearly 30% better than this time a year ago.  

November 2018 Canada Spot CPS Wheat prices

Unfortunately, durum prices have gone the opposite way, with durum exports still a mystical question, now tracking nearly 22% lower year-over-year. Canadian barley exports are now up 10% year-over-year and while international barley demand looks strong, domestic interest might be waning. 

Canola prices lost a lot of ground in October, but as mentioned in Friday’s FarmLead Breakfast Brief, exports are starting to pick up. Canadian flax prices remain relatively strong but exports have started to slow down, now 6.3% behind last year’s pace through Week 13 with just under 50,000 MT shipped out.  

Trade policy remains the main factor impacting pulse markets, as lentil import tariffs were raised by India yet again, but just for U.S. origination. The same was done for chickpeas import tariffs. 

All things considered, grain markets are fairly twitchy, looking at factors like geopolitical risk (read: trade war) and currency, instead of just the usual supply and demand fundamentals. As such, throughout November, we might see more volatility in grain markets. As with volatility, opportunities will be made available. Are you ready and do you know when you act on them?  

To growth, 

Brennan Turner

TF: 1-855-332-7653
@FarmLead or @GrainCents on Twitter

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