Oct 19 – Canola Prices on the Edge of Glory?

Good Morning!

Grain markets this morning are mixed with soybean and canola prices up, corn and wheat prices ever so slightly in the red.

“Whatever course you have chosen for yourself, it will not be a chore but an adventure if you bring to it a sense of the glory of striving.”

– David Sarnoff (American Businessman)

 

Test your grain today!

 

Canola Prices on the Edge of Glory?

Grain markets this morning are mixed with soybean and canola prices up, corn and wheat prices ever so slightly in the red.

Harvest 2018 has started to pick back up in most places across North America, which is putting pressure on grain markets again.

The long-range forecast from the NOAA suggests most of the United States will see normal temperatures this winter, but average to below-average precipitation. The only anomaly is in the South, which should get more rain (and possibly snow) than usual this winter.

We talked mostly about crop progress in Wednesday’s FarmLead Breakfast Brief, but we also noted a few cargoes of soybeans headed to China. Worth noting is the International Grains Council is expecting China’s full 2017/18 crop year soybean imports to come in at 93.5 MMT. This would be down 3% year-over-year and slightly below the current official forecast of 94 MMT.

Soybean crush margins have been positive since August, and available stocks at the port are sitting around 8.57 MMT, down slightly from last week’s record of 9 MMT. [1]

While the IGC notes that U.S. soybean shipments to China have dropped considerably, larger soybean exporting campaigns from Brazil, Uruguay, and even Russia have offset the fall. Last September, we noted the rise of soybean production in Russia, amidst their wheat production prowess.

Long Live the Wheat King?

Last week for our GrainCents Spring Wheat readers, we discussed and answered some of the questions about this year’s spring wheat quality.

This is also a question for Russian wheat production.

We’ll be answering this question a bit more for subscribers this Sunday in the GrainCents weekly digest, sent out every Sunday at 9 AM. Sign up for your free trial here!

While protein in Russian wheat is up ever so slightly, yields are certainly down, which is easily attributed to the drier growing conditions this past year in many areas across Russia. Across the entire country, wheat yields are pegged 12% lower year-over-year at a hair under 43 bushels per acre.

The worst decline year-over-year was seen in Volga Valley, down 29%. Central and Southern federal districts saw wheat yield drops of 14% and 13% year-over-year, respectively. Siberia’s average wheat yields are seen up 7.5% from 2017, which is a bit ironic given the latest harvest conditions, but they did have better growing conditions than that seen in the Western Russia regions.

While the USDA’s official forecast is for 70 MMT of total wheat production, the USDA’s attaché in Moscow is currently forecasting 68.5 MMT. Similarly, the attaché in Russia is estimating total wheat exports in 2018/19 from Russia at 33.4 MMT, below the most recent official forecast from the USDA of 35 MMT.

Keep in mind that last year, Russia exported more than 41 MMT of wheat.

The drop in wheat exports is not only reflective of the smaller crop, but also the aim of the Russian government to alleviate fears over food price inflation. The government intervention is something that we’ll be watching closely going forward as; we noted a few weeks ago just the rumors of some slowing of exports by the government helped rally spring wheat prices a bit.

While they’re 2018/19 wheat crop has certainly been smaller, all signs are pointing to Russian wheat growers increasing their acreage, with winter wheat seeding already underway.

Where Do Canola Prices Go Now?

Worth noting as well is the bigger oilseed crops in the Black Sea, which can certainly have an impact on canola prices. [2]

I’ve been getting a lot of questions about where canola prices are going.

There are some out there who think that the rally of canola prices seen earlier in October was an opportunity missed, mainly because of the large U.S. soybean carryout and there’s still a lot of canola left to harvest.

 It can be suggested that the market has priced in the size of both crops already, as it usually does by this time. However, also worth noting is the historical tendency of canola prices to rally in November.

 

It could also be suggested that canola prices have been subdued thanks to the weaker performance of Canadian exports. They’re tracking nearly 16% behind last year’s pace with just 1.73 MMT shipped out through Week 11 of the 2018/19 crop.

Canola prices remain pressured with slower exports

Participate in, comment on, and share our Twitter poll here as to where you think canola prices could top out before Christmas.

Have a great weekend!

To growth,

Brennan Turner

President | 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 = $1.3036 
CAD, $1 CAD = $0.7671 USD)

Dec Corn: -0.3¢ (-0.08%) to $3.705 USD or $4.830 CAD
Nov Soybeans: 2.0¢ (0.23%) to $8.655 USD or $11.283 CAD
Dec Soybean Meal (per short ton): $0.90 (0.28%) to $317.20 USD or $413.51 CAD

Dec Soybean Oil (cents per lbs): 0.13¢ (0.20%) at 29.15¢ USD or 38.00¢ CAD  
Dec Oats: 1.3¢ (0.45%) to $2.988 USD or $3.895 CAD
Dec Wheat (Chicago): -1.3¢ (-0.25%) to $5.118 USD or $6.752 CAD
Dec Wheat (Kansas City): -1.5¢ (-0.29%) to $5.133 USD or $6.691 CAD

Dec Wheat (Minneapolis): 0.3¢ (0.05%) to $5.853 USD or $7.7630 CAD
Nov Canola: $2.40 (0.49%) to $11.181/bu / $493.00/MT CAD or $8.577/bu / $378.18/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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