Nov 2 – Soybean Prices Rally into November

Good Morning!

Soybean prices are leading grain markets higher this morning, following yesterday’s gains on news that the trade war may end soon.

“Patience, persistence and perspiration make an unbeatable combination for success.”

– Napoleon Hill (American Author)

Test your grain today!

Soybean Prices Rally into November

Soybean prices are leading grain markets higher this morning, following yesterday’s gains on news that the trade war may end soon.

While the demand buzz is undoubtedly positive, there is still quite a bit of grain in the U.S. that needs to be worked through. [1] A fresh Farm Journal survey of nearly 700 farmers suggests that nearly 2/3s of this year’s harvest in the U.S. will be stored on the farm, with only 20% of the crop priced/already contracted.

One of the demand factors for corn that’s been well-received by corn farmers has been the law pushed out from the White House that allows E-15 gasoline to be sold year-round (previously it was just eight months). However, with the lack of infrastructure to support this, S&P Global Platts says that it could take as much as 15 years to see E-15 be sold nationwide! [2] That being said, corn prices for October lost 1.4%, but are up a little more than 4% year-over-year.

October 2018 corn prices performance

Soybean Prices Find Fresh Legs

After posting a new monthly low, soybean prices jumped about 4% in a few minutes after a tweet from U.S. President Donald Trump saying trade talks are going “nicely.” [3]

The G-20 in Buenos Aires is going to be held at the end of November, and the lead up to the event has been hotly anticipated as it’s widely expected that a lot of sideline activity will happen.

The news also comes right before the U.S. mid-term elections, held next week on Tuesday, November 6. With most of China’s tariffs directed at red, farming states, even the suspicion of some diplomacy starting back up is welcome news not just for grain markets, but also its participants.

After all, U.S. soybean exports to China were down 80% year-over-year at just 132,000 MT. [4] Comparably, Brazilian soybean exports to China jumped 28% to nearly 7.6 MMT! Overall, Chinese soybean imports in September were the smallest in two years, and CNOIC says that total 4Q2018 bean imports will likely come in at 20 MMT, down 17% year-over-year.

On that note, in October, soybean prices on the Chicago Board of Trade closed nearly 1% higher than September’s finish, but they were still tracking about 14% below prices at this time a year ago. As you can tell from the chart below, soybean prices the last two years have been pricing larger global soybean inventories, not just the recent trade war.

October 2018 soybean prices performance

King Oilseed: Canola Prices or Soybean Prices?

Canola prices are the most expensive vegetable oil right now on the market, and a lot of the market is noticing the possibility to the downside. The problem is, this argument has been made for roughly the last year. And that in mind, canola contracts hit new yearly lows this past Wednesday! [5]

The elephant in the room for canola prices has consistently been the U.S.-China trade war, but with that possibly ending (as suggested above), might canola prices rise significantly?

Should said trade war between Washington and Beijing (and its constituents) end, it’s likely that canola prices won’t likely rally as much as soybean prices will. This is mainly because the market has already applied a 25% discount to U.S. soybean prices.

Following this line of thinking, if the trade war ends, and the 25% tariff is revoked, then you’ll likely see soybean prices recover most of this discount. I have been quoted previously, saying that we might see beans climb $1.25 – $1.50 USD per bushel in Chicago should a resolution be found. However, canola prices are unlikely to push higher by a proportional amount.

That being said, canola prices have been resilient on the recent increase in export demand, something we’ve been calling out for our canola GrainCents readers. Through Week 13 of the Canadian canola 2018/19 crop year, exports are now sitting at 2.33 MMT, just 2.3% behind last year after a few strong weeks of shipments. Three weeks ago, canola exports were tracking nearly 16% behind 2017/18’s pace.

2018/19 Week 13 Weekly Canadian Canola Exports

Overall, canola prices have been pressured by farmer selling and following soybean prices lower, but we know November tends to a positive month for grain prices. Keep this mind going forward (but don’t wait until the end of the month to act on it!).

Start the month’s grain marketing plan by posting a few blocks of your harvest on the FarmLead Marketplace!

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 = $1.3067 
CAD, $1 CAD = $0.7653 USD)

Dec Corn: 1.8¢ (0.55%) to $3.685 USD or $4.828 CAD
Jan Soybeans: 12.5¢ (1.42%) to $8.945 USD or $11.689 CAD
Dec Soybean Meal (per short ton): $0.80 (0.26%) to $314.20 USD or $410.57 CAD

Dec Soybean Oil (cents per lbs): 0.18¢ (0.64%) at 28.50¢ USD or 37.24¢ CAD  
Dec Oats: 5.5¢ (1.96%) to $2.868 USD or $3.748 CAD
Dec Wheat (Chicago): 1.0¢ (0.20%) to $5.090 USD or $6.651 CAD
Dec Wheat (Kansas City): 2.8¢ (0.56%) to $5.035 USD or $6.586 CAD

Dec Wheat (Minneapolis): 2.0¢ (0.35%) to $5.820 USD or $7.563 CAD
Jan Canola: $1.60 (0.33%) to $11.140/bu / $491.20/MT CAD or $8.525/bu / $375.90/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.

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