Wheat prices are leading the grain complex lower this morning, albeit quietly as volume starts to die down today (and will likely stay soft) ahead of the U.S. Thanksgiving holiday.
“You’ve got to think about big things while you’re doing small things so that all the small things go in the right direction.”
– Alvin Toffler (American Futurist)
Wheat Prices Looking for New Direction
Wheat prices are leading the grain complex lower this morning, albeit quietly as volume starts to die down today (and will likely stay soft) ahead of the U.S. Thanksgiving holiday. Futures markets will be closed tomorrow and only re-open for about 4 hours on Friday. With the smaller volume though, there’s more susceptibility for stronger volatility.
Soybean prices gained 7 cents in Chicago yesterday creating a lot of conversation on whether or not we should be selling on the small rally.  After all, there are nearly 1 billion bushels of U.S. soybeans expected to carry over into the 2019/20 crop year as it stands today.
Following soybeans, canola prices gained some ground yesterday as the futures market rallied off some short-covering and a slightly weaker Canadian Dollar after hitting new lows on Monday.
Wheat Prices Looking for Something, Anything
In one of the last crop progress reports of the year, the USDA said that 90% of the U.S. corn crop has now been cut, which is 3 points behind the 5-year average but right in line with where we were at this time a year ago.
For soybeans, 91% of American fields have been combined, 5 points back of both last year’s pace and the 5-year average. Some of the delays are due to inclement weather.
Finally, 93% of the U.S. winter wheat crop has been seeded, slightly behind the 97% average over the past five autumn planting campaigns. 56% of the crop has already been rated good-to-excellent (G/E), slightly behind the 5-year average of 57%.
We know that because of the current trade war with China, and soybean prices artificially depressed due to tariffs, more American farmers are planting winter wheat this fall. They’ll also likely plant more spring winter when the weather turns in six months. We’ve been hearing from producers in Minnesota, North Dakota, and Montana that spring wheat acres in the area could be up 10-15% as farmers in these states move away from planting soybeans and durum. For the latter, it’s pretty easy to do the math on durum ROI.
This narrative holds in Western Canada as well: Spring wheat prices are doing very well relative to durum prices, and so more HRS wheat is getting penciled in for Plant 2019.
If a trade deal between China and the U.S. is figured out before the drills hit the fields in spring 2019, this could certainly impact spring wheat prices and basis. A winter rally due to export issues or Asian demand could also factor in. We’re watching for opportunities accordingly.
China Blinking First in Trade War?
There is some research that posits China is starting to feel the effects of the trade war with America.  Ahead of the G20 Summit next week in Argentina, EconPol Europe says that China’s exports of affected goods by the tariffs the U.S. are expected to fall by 17%, mainly because the White House went after products with high “price elasticity.” This translates to those goods that have a high possibility for substitutes, be it other similar goods or products from other countries.
While is relatively good for the average U.S. consumer, it’s clear that American agricultural products have been negatively impacted (just check the futures board). Further, any crop that’s been negatively impacted by weather, namely those in the Southwest hit with Hurricane rains, is being left to rot or getting plowed under; nobody has room to buy and then store damaged grain.  Further, the National Corn Growers Association is asking the USDA to increase the tariff aid for American corn farmers in the second round of payments, after the first round provided only a penny a bushel on 50% of 2018 production. 
One of the issues that might be helping bring China back to the negotiating table is that their economy wasn’t performing so well before the trade war.  On the flipside though, US
While U.S. President Trump has declared that “China wants to make a deal very badly” and will impose another $250 Billion worth of new tariffs on China if something isn’t done at the G20 Summit. 
Happy Thanksgiving to our American readers!