Nov 16 – The Effects of Weather, Trade War Ending

Good Morning!

Grain markets this morning are very quiet, despite more buzz about the trade war potentially ending, a new record for U.S. soybeans crush, and an update on the weather.

“While it may seem small, the ripple effects of small things is extraordinary.”

– Matt Bevin (Current Governor of Kentucky)

Post Your Specialty and Feed Grain Today

The Effects of Weather, Trade War Ending

Grain markets this morning are very quiet, despite more buzz about the trade war potentially ending, a new record for U.S. soybeans crush, and an update on the weather.

Before we dig into trade war hopes, the NOAA came out with a fresh 3-month weather forecast, but, not much has changed from the previous outlook. [1] Expectations are for above-average temperatures in the Western Corn Belt and Northern Plains, while the southern half of America should see above-average precipitation.

NOAA Says warmer 2018 winter for U.S. Western & Northern states

In Canada, Drew Lerner says that average to above-average precipitation could be seen in parts of Western Canada to start the winter, but things could warm up for most areas across the Prairies through January and February. [2]

Yesterday, the NOPA crush report showed us that 172.35 million bushels of soybeans had been used by U.S. processors in August. As mentioned in Wednesday’s FarmLead Breakfast Brief, expectations going into the report from grain markets was for just over 170 million bushels, so this is a bit bullish in that sense.

It’s also bullish because it’s a new monthly record, eclipsing the previous record set back in March, which saw 171.9 million bushels of soybeans used. Very clearly, there’s a domestic demand function that is cruising right now.

We are seeing more headlines that suggest China and America are figuring out how to fix their respective trade issues with one another ahead of the G20 Summit in Argentina at the end of the month. Most recently, China wrote out specific demands for wide-ranging trade reforms and sent them to the White House, but it’s unclear if this should be viewed as positive or negative. [3]

Should that be the case, what are the likely ramifications?

Brazil Watches China & U.S. Trade War Closely

Let’s start in Brazil, a country that’s been able to take advantage of the situation tremendously with a record amount of exports. Customs data shows that Brazilian soybean exports for 2017/18 are up 17% year-over-year at 74.6 MMT (local analysts are suggesting a full crop-year total of 80 MMT!), while corn exports are tracking 27% lower at 15.9 MMT.

Quite simply, corn exports from Brazil have slowed as soybean exports have taken over. With the focus on soybean shipments out of Brazil, many port positions are a bit on edge about maintaining their bet. For, if Beijing and Washington can figure things out, there’ll be a slowdown in Brazilian soybean exports and likely more interest in shipping out corn.

Later this morning we’ll get the USDA’s update on exports, a day late because of the Monday Veterans Day holiday. What we do know is that through last week, Week 9 of the 2018/19 crop year, U.S. corn exports were tracking 85% higher year-over-year. Conversely, soybean exports were pacing more than 41% below total shipments at this time a year ago.

Should the trade war end, the shipments of wheat and corn out of the Pacific Northwest ports will likely be completely replaced with soybeans as U.S. exporters try to recapture the Chinese market. After all, it’s estimated by AgriCensus that China still needs to buy up to 5 MMT for December and January, but Brazil can only supply about 2 MMT before they have to wait for new crop supplies.

Trade War Stoppage Effects on Others

More than just Brazil, China, and the U.S. are being impacted by this trade war.

For example, Canadian barley exports started slow, but through Week 15 of their 2018/19 crop year, they’re now tracking more than 11% higher than the pace a year ago. Cumulatively, nearly 529,000 MT of Canadian barley has been shipped out.

Week 15 2018/19 Canadian barley exports weekly

This in mind, we know that China is very interested in Canadian barley. If we’re honest though, Chinese importers are interested in any feedstuff that’s not soybeans coming directly from America.

The EU and Argentina are going to have re-route some trade flows as these countries have been counting on more soybeans from the U.S., with Brazil only having focused on shipments to China these last few months.

On that note, 10% of Argentina’s soybean crop and 36% of their corn crop has been seeded thus far, but central areas of the country see some heavy rains. [4]

Overall, grain markets are watching this South American weather but are continually looking for direction on what will happen with the U.S.-Chinese trade war.

Have a great weekend!

To growth,

Brennan Turner

CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

 

At 7:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3184 
CAD, $1 CAD = $0.7585 USD)

Dec Corn: -0.3¢ (-0.08%) to $3.683 USD or $4.856 CAD
Jan Soybeans: -1.8¢ (-0.20%) to $8.870 USD or $11.695 CAD
Dec Soybean Meal (per short ton): $1.40 (0.46%) to $306.80 USD or $404.50 CAD
Dec Soybean Oil (cents per lbs): -0.24¢ (-0.87%) at 27.45¢ USD or 36.19¢ CAD  
Dec Oats: -2.0¢ (-0.86%) to $2.903 USD or $3.827 CAD
Dec Wheat (Chicago): -2.8¢ (-0.55%) to $5.028 USD or $6.629 CAD
Dec Wheat (Kansas City): -1.0¢ (-0.23%) to $4.790 USD or $6.315 CAD
Dec Wheat (Minneapolis): unchanged to $5.748 USD or $7.578 CAD
Jan Canola: -$1.30 (-0.27%) to $10.816/bu / $476.90/MT CAD or $8.204/bu / $361.71/MT USD

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

Most Recent Posts
Dec. 7 - Will Canola Prices Rally on ABARES, StatsCan Reports?
December 07, 2018 Brennan Turner
Grain prices are mostly all in the green this morning, led by canola prices, which are finding some strength recently thanks to a slightly bullish StatsCan report and a weaker Canadian Loonie.
October 4: Corn Prices Edge Higher With October WASDE in Focus
October 04, 2018 Garrett Baldwin
Corn prices ticked higher Thursday as traders and analysts began to speculate on next week’s release of the October WASDE report.