Nov 19 – Are Grain Prices Finally on the Lows?

Good Morning!

Grain prices this morning are mixed with soybeans and wheat values in the red, but oats futures are making double-digit gains after a positive finish last Friday.

“The trick is to be grateful when your mood is high and graceful when it is low.”

– Richard Carlson (American Author)

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Are Grain Prices Finally on the Lows? 

Grain prices this morning are mixed with soybeans and wheat values in the red, but oats futures are making double-digit gains after a positive finish last Friday. Technicals are suggesting some sideways activity is expected for the rest of the month while fundamentals are only looking to demand price direction. 

Soybean prices are showing double-digit losses, whereas canola prices are down just a dime. This comes after seeing the largest weekly export number so far in 2018/19 crop year for Week 15. Total Canadian canola exports are still tracking 5% behind last year’s pace.

2018/19 Canadian total canola exports through Week 15

We’ve seen U.S. soymeal sales flying high though as crush volumes in Argentina – the world’s largest exporter of the feedstuff – have slowed considerably thanks to poor crush margins. Instead of Argentine soybeans going into the crush market, the international demand is helping exporters pay a premium. Further, taxes on exports of soybeans and soybean byproducts (i.e., soymeal) are now the same, so there’s no tax advantage to crush versus exporting.  

Pulses Update: India’s Winter Rabi Crop 

Prices for pulses have been in the dumps for the past year since the complex was dealt with India’s import tariffs. The size of the 2018 kharif summer harvest of pulses seems to be smaller year-over-year, which now puts our attention on the winter rabi crop. 

Through this past Friday’s report from India’s Ag Ministry, total pulses seeded thus far has totaled just under 17.3 million acres, which is down 18% year-over-year. [1] Specific to lentils (or masoor/masur as it’s called in India), just 16.83 million acres have been seeded; This is down more than 20% year-over-year.   

For field peas specifically, just over 1 million acres have been seeded in the rabi winter campaign through Friday, which is down 12.2% year-over-year.  

As we’ve mentioned many times in past analysis, yellow peas are often substituted for chickpeas (or gram/chana as it’s called in India), and as it relates to rabi seeding, just 12.41 million acres of chickpeas have been seeded through reporting this past Friday. This is down more than 21.5% year-over-year.  

We know that India’s yellow pea prices have crept up to chickpea levels and have stayed relatively elevated, which might reflect these drier conditions. If the situation gets bad enough, we might see more yellow peas be imported by India, but this is a very big “might.” [2] 

India yellow pea prices - Nov 14, 2018

Western Canada spot yellow pea prices - Nov 16, 2018

Is There a Trick to Ending a Trade War? 

However, this would require India to likely ease up on the import tariffs. This isn’t likely to happen until after the federal elections in India in April 2019.  

Much like in India, geopolitical risk has become the only real major fundamental since supply and demand of most major production regions are set. This, combined with these protectionist trade policies, price equilibriums are drifting lower. 

While we have discussed how we’re optimistic that diplomatic relations can help solve trade war issues, it might actually take a production shock to get cooler heads to re-appear.  

In the meantime, the rising tide of interest rates is something ag bankers are starting to sound the alarm on. [3] While it’s certainly not like the late 70s/early 80s in terms if sky-high interest rates, talking operation loans doesn’t look like it’s going to be an easy thing for many. [4] Thus, I implore you to get over-acquainted with your farm’s balance sheet.  

To growth,

Brennan Turner

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

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