Grain markets are red today as we look into barley and oats prices while the futures complex continues its pause/pullback from the past few weeks’ rally.
“Those who are blessed with the most talent don’t necessarily outperform everyone else. It’s the people with follow-through who excel.” – Mary Kay Ash (American entrepreneur)
Oats Prices to Outperform Barley in 2020/21?
Grain markets are red today as we look into barley and oats prices while the futures complex continues its pause/pullback from the past few weeks’ rally. While exports sales to China for corn and soybeans continued yesterday, harvest 2020 is progressing across the U.S. with 8% of corn and 6% of soybeans harvested as of Sunday.
With some dry weather on the horizon for the Midwest, it should allow harvest activity to accelerate, which intuitively means more supply coming to market. Conversely, these dry conditions do present some potential concerns of soil moisture profiles for the Plant 2021 campaign, but that’s still a long way off.  Looking south of the equator, Argentina and Brazil have some much-needed rains in the forecast and that’s also weighing on grain markets this week, but we’ll see if the beer clouds materialize or not!
Western Canada is likely to get some dry weather as Harvest 2020 finishes up, according to Weatherlogics, and given the current pace so far, things could be pretty close to wrapped up by the end of September.  On the flipside, over the weekend, some freezing temperatures were seen across Ontario, likely impacting corn and soybean yield potential, which, as we all know, is incredibly frustrating, given how close the crop is to being taken off! 
Internationally, Russian wheat prices continue to increase as export demand remains high, but farmers there are holding onto their harvest.  Worth noting is that China is looking to import more wheat this year, but Russian supplies are having a tough time cracking into the Chinese market.  In 2019/20, China’s top 5 sourcing options (in order of largest to smallest) were France, Canada, Australia, Kazakhstan, and U.S., but, based on exports reports to date, it looks like the U.S. is getting a stronger look in 2020/21.
Barley Prices Inching Back Up on Demand
Barley prices in Ukraine have jumped about 20% since July as demand from China has supported greater exports, and thus better barley prices for country’s growers.  More specifically, Ukraine’s barley exports to China in the first 2 months of their 2020/21 crop year is nearly double what it was over the same time frame a year ago, with 1.3 MMT sailed. Historically, a lot of Ukraine’s barley exports go to Saudi Arabia, but the Saudis might be buying more Australian since a large crop is expected from growers in the Land Down Undaa. Further, China’s 80.5% import tariff on Australian barley exports to the People’s Republic has basically priced them out of the market.
However, the Ukrainian 2020 barley harvest is estimated to be 18% smaller than last year with 7.3 MMT combined, according to the country’s Economy Ministry. Similarly, barley exports are expected to slide by about a third to 3.34 MMT as more product is kept at home (likely for food security reasons, similar to the wheat exports restrictions that we saw being discussed by Ukrainian officials just a few months ago).
That said, we know China is buying more Canadian barley exports as they try to replace their long-standing dance partner in Australia. In that vein, through the first six weeks of the 2020/21 crop year, Canadian barley exports are nearly quadruple what they were a year ago, with 227,000 MT sailed thus far. This strong pace of international demand isn’t exactly being matched on the domestic side, however, feed barley prices continue to inch higher (up about 4% week-over-week) as harvest is onto the back half of being complete. 
Oats Prices to Improve More than Barley?
For domestic oats prices, so far we’ve seen levels stay relatively strong, compared to seasonal lows during previous harvest times.  Supporting the current floor for oats prices is the reality that, in many places, yields aren’t really living up to the expectations that were had a month ago, albeit quality is still good. In last Monday’s Breakfast Brief, I discussed the updated production estimate from Statistics Canada, which included 4.5 MMT of oats and 10.25 MMT of barley. For the former, this was unchanged from the first estimate StatsCan put out on August 31st, while the barley harvest was about 291,000 MT smaller. Year-over-year, the Canadian oats harvest is expected to be about 7% larger, whereas barley output is just 1% below last year’s haul.
Oats prices are also being supported by a strong start to the 2020/21 marketing campaign, as nearly 210,000 MT have sailed in the first 6 weeks, up about 40% year-over-year. From local demand, Canadian domestic disappearance of oats is up 54%, while producer deliveries are tracking one-third higher year-over-year with nearly 432,000 MT trucked in to CGC licensed facilities.
While we’ll get an updated estimate from Agriculture Canada this week, right now, 2020/21 oats ending stocks are pegged at 1 MMT. I think that number could come down by maybe 100,000 or 200,000 MT, but we’ll need to continue to see a strong pace of exports into the winter months. Potentially impacting Canadian oats exports, however, is a larger U.S. harvest, pegged at 942,000 MT, or a 22% bump over last year’s 771,000 MT output.
Overall, I’m not expecting oats prices to hit last year’s levels, but I do think we could inch up from where we’re currently at, as it’s something that’s historically seen over the winter months. That said, here are some decent pricing options for deferred delivery and locking in oats prices at a profit should never be considered a bad thing! The main takeaway here, however, is that oats demand is likely to be stronger than barley in 2020/21, as it’s a food staple (i.e. oatmeal) and the COVID-19-related drop in commercial demand isn’t a stark as that for malt barley demand, something I wrote about back in June. However, I do think that feed barley prices will remain relatively strong, but like oats prices, not as strong as last year.
Harvest Done? Time to Build Your Trading Network
As you prepare to hit the fall/winter grain marketing season, it’s important to put together your list of buyers for your various crops. In that vein, we’ve got plenty of credit-verified oats buyers on the Combyne platform who buy from basically everywhere. Accordingly, if you grow oats, below are a few of names that I’d strongly recommend you click on, and hit the Connect button to add them to your personal Combyne trading network for oats.
- Scott Shiels – Grain Millers Canada (MB & Sask)
- Lorne Boundy – Paterson Grain (all of Western Canada)
- Maurice Indenbosch – Green Prairie International (all of Western Canada)
- Jarrod Firlotte – Emerson Milling (MB & Sask)
- Ryan McKnight – Linear Grain (MB & Sask)
- Grant Fehr – Buffalo Creek Mills (MB & Sask)
- Neil Schuller – The Andersons (all of Western Canada
- Mark Hantelmann – AGT Foods (Alberta & Sask)
- Alesha Slasynski – Providence Grain (Alberta & Sask)
- Matthew Toews – Sweet Grass Contracting (Alberta & Sask)
While not all of them have a Bid up at this second, by being Connected with them on Combyne, you can be notified of all future deals from them, and conversely, they’ll be notified when you List something for sale. Ultimately, we’ve got over 60 oats buyers on Combyne, but the reality is, I don’t know who all of your trading partners are.
That said, you can make your grain marketing efforts a lot easier this fall/winter by either (1) sharing your deals with them with your current trading network, via the Share Listing feature, or invite them directly to Combyne, via the Connections section of the app or website, to join you on Combyne. In doing so, you can share the deals terms (i.e. quantity, price, quality, movement, etc.) once with ALL your trading partners in a single Listing, versus having the same conversation over and over again with every one of them.
At 8:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3328CAD, $1 CAD = $0.7503 USD)
Dec Corn: -2.5¢ (-0.7%) to $3.668 USD or $4.888 CAD
Nov Soybeans: -5¢ (-0.5%) to $10.148 USD or $13.525 CAD
Dec Soybean Meal (per short ton): +$3 (+0.9%) to $344 USD or $458.48 CAD
Dec Soybean Oil (cents per lbs): -0.74¢ (-2.2%) to 32.86¢ USD or 43.80¢ CAD
Dec Oats: -3.3¢ (-1.15%) to $2.85 USD or $3.798 CAD
Dec Wheat (Chicago): -2.3¢ (-0.4%) to $5.635 USD or $7.51CAD
Dec Wheat (Kansas City): unchanged at $4.918 USD or $6.554 CAD
Dec Wheat (Minneapolis): -1.3¢ (-0.25%) to $5.385 USD or $7.177 CAD
Nov Canola: -6.8¢ (-0.6%) at $11.753/bu / $518.20/MT CAD or $8.818/bu / $38888/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.