This morning we’re exploring pea exports amidst all grain prices on the futures board being in the red as friendly headlines are slowing.
“The future is always coming up with surprises for us, and the best way to insulate yourself from these surprises is to diversify.” – Robert Shiller (American economist and one of my professors at Yale!)
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Will Pea Exports Pick Up on Smaller India Pulses Harvest?
This morning we’re exploring pea exports amidst all grain prices on the futures board being in the red as friendly headlines are slowing. In the broader sense, the extremely fast spread of the coronavirus through China (and elsewhere, including the U.S.) is pushing investors to sidelines, be it in commodities or equities. 
With the Chinese government quarantining a couple cities and travel restrictions on more than 35 million people, there are concerns that Chinese shoppers won’t venture out during Lunar New Year celebrations (and thereafter).  Further, there’s rumours that China will cancel the New Year celebrations in Beijing and close Shanghai Disneyland to slow, if not stop the spread of the disease. Therefore, the economic impact of the coronavirus could be significant, not just in China, but globally.
Elsewhere, timely rains in Brazil and Argentina are helping the production potential in both countries.  However, because the Brazilian soybean crop was planted a bit late, it’s estimated that at least 30% of the crop needs more rain before combines take them off.  On the corn side of things, the planting of the safrinha/second-crop has started in areas where the soybean harvest is finished. Most analysts agree that Brazilian corn prices should stay strong due to combine domestic and export demand. 
Strong Pea Exports (For Now)
Fresh insights from India’s National Bulk Handling Corporation (NBHC) suggests that the summer kharif pulse crop harvest there will fall about 14% year-over-year to about 7.4 MMT.  As mentioned in my outlook for 2020 pea prices, this is well below some early estimates as high as 10 MMT! The main culprit behind the decline is the heavy monsoon season that went longer and wetter than usual, meaning some areas were completely flooded out. As a forward-looking note, this also meant a delay in the seeding of India’s rabi winter crop.
While it’s estimated that India will have to import 3 MMT of pulses this year, with these lower production numbers, that pulses import number might have to go higher. That said, China continues to be the largest buyer of Canadian pea exports, with Chuck Penner of Left Field Commodity Research pegging their purchases at 80-85% of all pea exports from the Great White North.  For context, from licensed exporters, Canadian pea exports are tracking 33% higher year-over-year with 1.33 MMT sailed through Week 24 of the 2019/20 crop year.
I also have to agree with Mr. Penner’s call for a diversification of destination of Canadian pulses, especially pea exports. Those countries suggested for increased Canadian pea exports to include Bangladesh, Nepal, and other countries nearby to India. Think of these destination countries for pea exports like a portfolio of assets: the less diversified it is, the more pronounced any shock to those assets can be to the bottom line.
However, Agriculture Canada published its first estimate of the 2020/21 balance sheet and they’re expecting pea exports to be marginally lower than the 3.4 MMT expected for the 2019/20 crop year. However, Agriculture Canada is forecasting that “the average (2020/21) price is expected to be unchanged from 2019/20, due to similar pea prices and ample world supply.”
It’s worth noting that the White House is currently exploring a trip for President Trump to India to work on a free trade deal.  Among the topics likely to be discussed would be steel, but pulses is the one category that should also be on the docket, given the tariffs in place against U.S. pulses. As we know from the trade deal signed last week with China, these negotiations talk time though so don’t expect something to get done overnight!
Combyne Cash Grain Marketplace Wins 1st Place
In Wednesday’s Breakfast Brief, I introduced you to our next generation cash grain marketplace, Combyne. The subsequent 48 hours have been very busy on a couple of fronts. First, Combyne was award 1st place at the Innovation Showcase in Brandon at the Manitoba Ag Days. This recognition is really for the entire team who have been working extremely hard over the past 9 months, taking feedback from our beta testers, iterating on it quickly, and continually driving towards the product that you see today (which by the way, is just the start as there are some exciting features we’re working on).
Second, we’ve seen 1,000s of our users set up their accounts and start building their grain trading networks. This second component is more important since Combyne is built to help manage both your current relationships, in addition to buildings some new ones! This in mind, you can easily update your normal trading partners of your next deal intentions by sharing your Listing(s) from the My Listing page (and as shown in the screenshot below). This lets them know, “Hey, I want to keep you informed of where I might be looking to do my next deal at”, helping set expectations so no one is wasting each other’s time on a random prospecting phonecall. Since there are no subscription or transaction fees, all your trading partners can easily join your Combyne network at no cost whatsoever.
Other than the early success/adoption of Combyne, there were also a few other takeaways from the Manitoba Ag Days show this week. First, not many farmers are looking to buy new equipment, let alone used gear. Some people I spoke to think that this downturn in the equipment market might last another two years, but that’ll be largely dependent on how the 2020 growing season performs! Speaking of, unsurprisingly, there’s very strong indications that we’ll see a lot more oats, durum, canola, and green peas planted in the Canadian Prairies in Plant 2020. It’s a good thing there’s at least plenty of oats seed out there! 
Intuitively, this means that prices for these commodities are likely to pull back below where we’re at right now, so if you’re thinking about planting some, seriously consider getting some forward contracted coverage sooner than later!
Have a great weekend!
At 8:30 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3141 CAD, $1 CAD = $0.761 USD)
Mar Corn: -3.3¢ (-0.85%) to $3.905 USD or $5.131 CAD
Mar Soybeans: -2.5¢ (-0.25%) to $9.07 USD or $11.919 CAD
Mar Soybean Meal (per short ton): +$1.10 (+0.35%) to $300 USD or $394.22 CAD
Mar Soybean Oil (cents per lbs): -0.42¢ (-1.3%) to 32.06¢ USD or 42.13¢ CAD
Mar Oats: -1¢ (-0.3%) to $3.153 USD or $4.146 CAD
Mar Wheat (Chicago): -6.3¢ (-1.1%) to $5.743 USD or $7.546 CAD
Mar Wheat (Kansas City): -2.8¢ (-0.55%) at $4.895 USD or $6.432 CAD
Mar Wheat (Minneapolis): -3¢ (-0.55%) to $5.528 USD or $7.263 CAD
Mar Canola: -7.7¢ (-0.7%) to $10.653/bu / $469.70/MT CAD or $8.107/bu / $357.44/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.