Oct. 21 – Record Oats Exports & Bulls Running of the Soybeans

Grain markets are all green as speculative buying & continued demand is helping, especially for oats exports, which are currently on a record pace.

“All people should strive to learn before they die, what they are running from, and to, and why.” – James Thurber (American cartoonist)

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Record Oats Exports & Bulls Running of the Soybeans

Grain markets are all green as speculative buying & continued demand is helping, especially for oats exports, which are currently on a record pace.

In outside markets, it looks like another Canadian federal election is around the corner as Prime Minister Justin Trudeau has called for a confidence vote today. [1] Given the $200 Billion transferred to businesses and individual persons in COVID-19 aid programs, the Conservatives are probing where the money has been spent, and that’s why they’re trying to set up a corruption committee, largely related to the third ethics scandal that Prime Minister Trudeau has been involved in related to the now-dead WE Charity government program. [2]

Ultimately, the data doesn’t lie: relative to GDP, Canada has spend the most in pandemic aid in the G20, but unemployment is also the highest out of all G7 countries. [3] Basically, the worst outcome for the highest cost, but perhaps the Liberals are hoping that all those who got some form of COVID-19 pandemic unemployment payments will vote for them. Unfortunately, my concern is that if a Canadian election is held, it will be all about who’s willing to give the most handouts, which could be a very steep path to ultra-socialist policies (and very expensive for taxpayers).

Canada's COVID-19 spending and unemployment, relative to the G20 and G7

Meanwhile, in the U.S., top Democrats and Republicans trying to finalize another COVID-19 relief package are losing time and support. As reported by the Washington Post yesterday, Senate Majority Leader Mitch McConnell (R-Kentucky), “revealed that he has warned the White House not to strike an agreement with House Speaker Nancy Pelosi (D-California) before the November 3rd, election.” [4] On that note, tomorrow night we’ll get the second U.S. Presidential debate, where producers will try to avoid a second episode of the gongshow that was the first debate. To do so, President Trump and former Vice-President Biden will be muted during initial responses to prevent interruptions but it’ll still be open-season once those initial responses are done. [5]

What’s the Ceiling for Soybeans and Canola?

In the futures-related crops, export sales reports from the USDA continue to show consistent buying from abroad (thanks to the weak U.S. Dollar), and, coupled with limited farmer sales, grain markets continue to push higher. Helping the bulls is the slow soybean planting pace in Brazil, as well as the high prices for the likes of corn and soybeans in China, which continue to support more buying from cheaper origins like America. [6]

Brazil might even buy some American corn and soybeans, but the UDSA attaché down there said that “current price spreads and several regulatory and logistical challenges” could prevent any statistically significant volumes from being shipped south. [7] Further aiding the bears is the current pace of the U.S. corn and soybean harvests! Through this past Sunday, the U.S. corn harvest was 60% complete, well above the 43% five-year average, while soybean fields combined has totaled 75%, again, well above the five-year average of 58%. [8]

Overall, until the music stops in terms of Chinese buying American soybeans, it’s unlikely that the strength seen in the oilseed complex will fade. That’s not to say that the upside is unlimited for soybean prices, or even canola prices for that matter, but it’s hard not to recognize that, current planting pace aside, China will surely switch origins to Brazil as soon as their soybean harvest starts up in early January.

As I said in last Friday’s Breakfast Brief, both U.S. soybean and Canadian canola exports are running at record levels and that’s what a lot of bullish speculators are holding onto. Also worth considering is that, despite the Canadian Loonie’s push back up above 76 cents USD, canola futures continue to push higher alongside the oilseed complex (namely, soyoil and palm oil).

Canadian Oats Exports on Record Pace

Speaking of record exports, while we’ll get an updated report for Week 11 tomorrow from the CGC, Canadian oats exports are tracking about one-third higher year-over-year with nearly 450,000 MT shipped out through Week 10. While we know that oats exports for this time of year are usually strong as U.S. millers try to rebuild their inventories, this year there’s a little bit extra required after all the COVID-19 pandemic buying of simple foodstuffs, like oatmeal.

2020/21 Canadian weekly oats exports through Week 10

Accordingly, with some expectation that the Canadian oats harvest is going to revised lower in StatsCan’s next estimate in December, oats prices have pushed higher by a little bit lately, creating some good selling opportunities, and it seems farmers are taking advantage with both Listings and contracted Deals on the Combyne agricultural trading network picking up these last few weeks. With over 80 different oats buyers on Combyne today, I’d encourage you to post your oats Listing on Combyne, and let the market come to you! P.S. hit the Connect button with any buyer that engages with you as you’ll then have their contact info and can just discuss the deal over the phone.

There is downside risk though: echoing Chuck Penner of Left Field Commodity Research, I, too, do not think this current record pace of oats exports can be maintained. [9] At a certain point though, supply will catch up to demand and there’s definitively enough supply out there is seems. This hold true especially when you consider that with the USDA’s Grain Stocks and Small Grains Summary reports from a few weeks ago, American oats stocks, as of September 1st, 2020, were 11% higher than a year ago AND that the U.S. oats harvest this year was 23% bigger year-over-year with 65.4M bushels combined (or a little over 1 MMT if converting bushels into metric tonnes).

One of the reasons is that you’ve got an Australian oats harvest that is just getting going and expectations are that the combines in the Land Down Undaa will take of 1.66 MMT, as per ABARES September 2020 estimate. If realized, that would be almost double what Aussie producers harvested off their paddocks last year. Despite the ongoing political riff between Australia and China, Aussie oats exports tend to own the market in the People’s Republic. However, with that big of a crop, you can expect Australian oats exports to try and find its way into other markets, hence the expectation that the current record pace of Canadian oats exports will slow down.

The 2020 Australia oats exports is expected to be quite large

To growth,

Brennan Turner
CEO | FarmLead
TF: 1-855-332-7653

At 8:05 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3122 CAD, $1 CAD = $0.7621 USD)

Dec Corn: +3.8¢ (+0.7%) to $4.125 USD or $5.413 CAD
Jan Soybeans: +10¢ (+0.95%) to $10.738 USD or $14.089 CAD
Dec Soybean Meal (per short ton): +$7 (+1.9%) to $378.90 USD or $497.18 CAD
Dec Soybean Oil (cents per lbs): +0.12¢ (+0.35%) to 33.43¢ USD or 43.87¢ CAD
Dec Oats: +1¢ (+0.35%) to $3.01 USD or $3.95 CAD
Dec Wheat (Chicago): +1.8¢ (+0.3%) to $6.338 USD or $8.316 CAD
Dec Wheat (Kansas City): +4.5¢ (+0.8%) to $5.755 USD or $7.552 CAD
Dec Wheat (Minneapolis): +2.8¢ (+0.5%) to $5.805 USD or $7.617 CAD
Jan Canola: +6.1¢ (+0.5%) to $12.347/bu / $544.40/MT CAD or $9.409/bu / $414.89/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.

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