Oct 24 – Who’s Winning the Grain Exports Game?

Good Morning!

Grain markets this morning are all in the red as the complex is factoring in some slower grain exports, notably in U.S. soybeans and wheat exports, and in Canadian durum and canola. 

A champion is afraid of losing. Everyone else is afraid of winning.”

– Billie Jean King (U.S. Tennis Player)


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Who’s Winning the Grain Exports Game?

Grain markets this morning are all in the red as the complex is factoring in some slower grain exports, notably in U.S. soybeans and wheat exports, and in Canadian durum and canola.  

Before we dig into all things grain exports, the broader stock market took some hits yesterday after news surfaced that Caterpillar is starting to feel the effects of the trade war with China. [1] There are some ideas that the outflow of capital from equity markets could make their way into grain markets. By no means is this a guarantee though as investors are just as much aware of the impact of the trade war on U.S. grain, namely grain exports.  

On the weather front, it looks there are a few spots that might get rain over the weekend or into next week, which would intuitively slow Harvest 2018 again. Thinking more long-term, the NOAA has now raised their expectations for an El Nino this winter to 70%. [2] This usually means a wetter winter for the southern U.S. but above-average temperatures and below-average precipitation for northern areas in the country.  

Staying Power of Brazil’s Grain Exports 

In the Monday FarmLead Breakfast Brief, we namely discussed corn prices, exports, & Harvest 2018, the speed of Plant 2018 for the Brazilian soybean crop continues to impress. 34% of the crop has been planted so far across the country, versus the 20% seen by this time a year ago and the 5-year average of 18%. [3] 

While the 2018/19 crop is going in, the 2017/18 crop is still being shipped out: Nearly 4 MMT of soybeans have been exported by Brazil so far in October. Last week, port facilities loaded an average of 4 boats a day, and that pace is expected to continue over the next few weeks. All data points suggest these vessels are headed to China where 4 MMT would represent about two weeks-worth of soybean crush capacity.  

As a reminder, China is looking at all alternative protein options instead of sourcing from the U.S., especially with the 2018/19 Brazilian soybean harvest starting in mid-January. Karen Braun of Reuters points out that, historically, “76% of U.S. soybean shipments in October are to China.” [4] This year though, all export inspections to date about 40% year-over-year. Through Week 6 of the 2018/19 U.S. soybean crop year, the USDA reports that actual exports are down more 37% with just 5.08 MMT shipped out from American ports. 

2018/19 Week 6 U.S. Soybean Exports - Weekly

With more than three months left to go in their 2017/18 crop marketing year, it’s very likely that Brazil will surpass the 76 MMT export target set by the Brazilian government and the 76.2 MMT forecast by the USDA. Some local analysts and soybean traders speculate that Brazil might end up shipping out more than 80 MMT of soybeans. While farmers have limited stocks left to sell, crush margins have been negative since mid-September so why wouldn’t they try to sell their supply at a profit to China? [5] 

One last factor to add into the equation: this Sunday’s general election. Farmers are waiting to see how it might impact the Brazilian Real (the country’s currency) before forward contracting more beans. Conversely, there are more than a few analysts who are expecting soybean prices to be rangebound over the next few months. [6] Will the world between $8 and $9.50 USD/bushel on the Chicago futures board be the new norm. Rabobank thinks so.  

North American Grain Exports Mixed 

Speaking of grain exports, we’ve got some healthy datapoints on Canadian grain shipments this year, but there is some speculation that the music might be slowing. The CEO of CP Rail says that crude oil railroad shipments in Canada may match or possibly even exceed its record 2014 pace. [7] 

For our GrainCents readers, we look at grain exports out of both the U.S. and Canada on a weekly basis.  

Why does it matter?  

The fact is, a whole heck of a lot of the demand function for North American grain prices is based on grain exports.  

Overall, here’s how Canadian grain exports have been tracking so far in the 2018/19 crop year, through Thursday’s CGC datapoints:  

Weekly Canadian pea exports Week 11 2018/19

  • Canadian oats exports: 449,700 MT, +16% year-over-year; 
  • Canadian barley exports: 295,600 MT, +13% year-over-year; 
  • Canadian lentils exports: 121,500 MT, +40.5% year-over-year; and 
  • Canadian flax exports: 47,000 MT, +24.3% year-over-year. 

StatsCan just released Canadian grain exports data by destination for August 2018, the first month of the 2018/19 crop year. Durum exports saw the worst performance, with canola’s monthly shipments down 38% year-over-year.  

Canadian Grain Exports in August 2018 Were Mostly Lower

Comparably, here is how grain exports out of American ports are tracking, through last Thursday’s USDA report:  

  • All U.S. wheat exports: 7.49 MMT, -22.8% year-over-year; 
  • U.S. hard red spring wheat exports: 2.29 MMT, -14% year-over-year; 
  • U.S. durum exports: 190,815 MT, +27.4% year-over-year; 
  • U.S. corn exports: 7.28 MMT, +80.3% year-over-year; and 
  • U.S. soybean exports (as mentioned): 5.06 MMT, -37.4% year-over-year

To growth,

Brennan Turner

President | CEO
TF: 1-855-332-7653
@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 = $1.3091 
CAD, $1 CAD = $0.7639 USD)

Dec Corn: -1.8¢ (-0.49%) to $3.685 USD or $4.824 CAD
Jan Soybeans: -3.3¢ (-0.38%) to $8.687 USD or $11.372 CAD
Dec Soybean Meal (per short ton): -$1.90 (-0.61%) to $308.80 USD or $404.25 CAD

Dec Soybean Oil (cents per lbs): 0.2¢ (0.07%) at 28.78¢ USD or 37.68¢ CAD  
Dec Oats: -3.3¢ (-1.11%) to $2.938 USD or $3.846 CAD
Dec Wheat (Chicago): -5.3¢ (-1.04%) to $5.038 USD or $6.595 CAD
Dec Wheat (Kansas City): -4.5¢ (-0.89%) to $5.030 USD or $6.585 CAD

Dec Wheat (Minneapolis): -0.8¢ (-0.14%) to $5.843 USD or $7.649 CAD
Jan Canola: -$0.10 (-0.02%) to $11.254/bu / $496.20/MT CAD or $8.597/bu / $379.04/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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