Ahead of tomorrow’s October WASDE report, grain markets this morning are mostly in the green thanks to trade talks optimism and a blizzard in the forecast.
“You can find peace amidst the storms that threaten you.” – Joseph B. Wirthlin (American religious leader)
Another WASDE Report Amidst Trade Talks & Blizzards
Ahead of tomorrow’s October WASDE report, grain markets this morning are mostly in the green thanks to trade talks optimism and a blizzard in the forecast. Before digging into the weather, it’s been suggested by the Financial Times that China has committed to buying 10 MMT more American soybeans than it’s currently buying (or about 20 MMT).  This follows some solid purchases by the Chinese last week or nearly 750,000 MT of soybeans alone that we know about. 
If the Chinese make good on their olive branch, it would bring total U.S. soybean exports to the People’s Republic back to pre-trade war levels, and that’s why soybean prices are in the green this morning. As a side note, a new hybrid soybean seed has been developed in China that produces nearly 4 times the average soybean yields in the People’s Republic.  Clearly, the Chinese are trying to minimize supply constraints (but who wouldn’t!?).
Harvest 2019 Resumes in Winter?
Most of the Northern Plains (MN, SD, ND, and MT) and southern parts of Manitoba are expected to get dumped on with snow for a couple of days, with forecasters calling for the system to turn into a blizzard.  This isn’t great timing as crops have already been dealing with wet and cooler weather over the last few weeks that have impeded the pace of Harvest 2019 progress. Snow also fell on most of Alberta yesterday as a cold front blew through the province (as well as any plans to trying to keep getting fields combined).
Quite literally, in Monday’s crop progress report, the USDA said that just 8% of North Dakota’s soybeans had been harvested and the corn harvest hadn’t even started yet. In South Dakota, 2% of corn fields had been cut and 5% of soybeans had been combined. In Manitoba, 14% of both soybean and corn fields have been harvested as of yesterday’s crop progress report, and overall, 71% of all crops for Harvest 2019 are in the bin, a bit behind the three-year average of 85%.  With some decent conditions this first half of the week, combines are pushing hard to get the crop off before what’s expected to be a foot of the white stuff fall, starting tomorrow.
Looking elsewhere, parts of Ontario saw a frost last weekend while it looks like the Corn Belt will get the freezing temperatures this weekend, but not the snow that’s expected in the north. Usually, the “F” word isn’t a big deal for this time of year, except this year, since a lot of the crop planted so late in America’s Heartland, the crop isn’t yet mature and so it is a big deal.  Further, in Monday’s progress report, the USDA said that 17% of American corn and 13% of soybeans had been harvested, both below pre-report expectations.  For perspective, the five-year average for the harvest completion rate of these two crops is 27% and 34%. Further, last year, 24% of the U.S. corn crop was cut by this time while 31% of soybeans were combined.
What’s Up with the Ethanol Policy?
Last Friday, the White House announced that they will maintain a 15-billion-gallon blending requirement for the Renewable Fuel Standard.  Then on Monday, President Trump said that the number would actually be 16 billion gallons and that “they should like me out in Iowa.” That parting comment comes as the biofuel policy has been a point of much contention for producer organizations and producers themselves as the Trump administration has given out many exemptions to refineries who won’t have to blend ethanol with their gasoline.
In addition to the assurances that the full legal limit of blending requirements will be met, the Trump administration also confirmed its pursuit of expanded access to E15 gasoline to consumers (versus the more common E10 blends). While margins remain slim amidst this market uncertainty for ethanol processors, we also know ethanol production is simmering in the U.S.  That said, 3 more ethanol plants in Iowa recently shut down. Unsurprisingly, this move doesn’t necessarily make Big Oil happy as the move says it will cost them millions of dollars to blend the ethanol. 
October WASDE Report Expectations
While grain markets are looking at coming winter weather as a main driver of direction for grain prices, tomorrow, at 11AM CST, we’re getting the USDA’s October WASDE report. Headed into the report, average analysts’ guesstimates are expecting slightly lower corn and soybean yields, which translates into lower production, and thus, smaller ending stocks. Harvested acreage will be the big question to get answered though as that sets the foundation for production numbers. Average pre-report guesstimates are that corn harvested acres will drop by about 300,000 from the NASS September estimate to 81.65M and soybeans will drop by about 150,000 to 75.71M.
With all this weather likely stopping the stalling the growth of crops still not yet mature, there’s obvious yield and production implications. Thus, many are already willing to question the numbers in tomorrow’s WASDE report, even before the USDA releases it, considering its forecast will be based on data from a few weeks ago. Progressive Ag Marketing thinks that this October WASDE report could be the most bullish of the year, as, combined with a few other external bullish factors (read: weather), grain markets are set up to push higher. 
Wheat in the October WASDE Report
On the wheat front, I’m expecting to see some changes to the Canadian balance sheet as the USDA accounts for some poor weather; if not in the October WASDE, then definitely in the November WASDE report. As I mentioned in this week’s Alberta Wheat Commission’s Wheat Market Insider, cash wheat prices in Western Canada are starting to earn a quality premium, especially durum prices. Click the link though to understand why I’m shooting down any ideas of $20/bushel durum and double digit HRS wheat prices.
The USDA’s attaché in Australia just updated its production estimates for the Land Down Undaa, noting even drier conditions for its western territory, the same region that was the saving grace for last year’s harvest.  “Inadequate rainfall” in September across the country-continent means Harvest 2019 isn’t going to be much bigger than last year’s drought-riddled crop. Specifically, the USDA’s attaché is estimating wheat production at 18 MMT, just 700,000 MT above Harvest 2018 and 1MMT below the official USDA estimate from the September WASDE report. In that report, the USDA forecasted 2019/20 Australian wheat exports at 10.5 MMT, but their Australian office says it might only come in at 9 MMT, which would be a decade-low. Also worth mentioning is that the USDA’s attaché is estimating the Aussie barley harvest at just 8.5 MMT, about 190,000 MT bigger than last year’s harvest. Barley exports from Australia in 2019/20 are estimated by the USDA’s Aussie bureau to come in at 4.5 MMT, about 500,000 MT more than last year.
Ultimately, the WASDE report tomorrow aside, today might be one of the last days in awhile to get into the field so good luck out there and keep safety first.
At 7:50 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3298 CAD, $1 CAD = $0.7520 USD)
Dec Corn: +1.3¢ (+0.3%) to $3.97 USD or $5.279 CAD
Nov Soybeans: +10.3¢ (+1.1%) to $9.308 USD or $12.377 CAD
Dec Soybean Meal (per short ton): +$4.30 (+1.4%) to $311.20 USD or $413.83 CAD
Dec Soybean Oil (cents per lbs): +0.18¢ (+0.6%) to 29.95¢ USD or 39.83¢ CAD
Dec Oats: +0.3¢ (+0.1%) to $2.848 USD or $3.787 CAD
Dec Wheat (Chicago): -0.5¢ (-0.5%) to $4.998 USD or $6.646 CAD
Dec Wheat (Kansas City): +2¢ (+0.5%) to $4.123 USD or $5.482 CAD
Dec Wheat (Minneapolis): +2.3¢ (+0.4%) to $5.458 USD or $7.257 CAD
Nov Canola: +6.8¢ (+0.65%) to $10.61/bu / $467.80/MT CAD or $7.978/bu / $351.79/MT USD
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