Grain markets this morning are mostly green, as, like yellow pea prices, it seems like nothing can stop the rally (but there’s always something to consider…).
“One of the guiding beliefs of our consuming age is that we are all free and independent individuals. That we can choose to do pretty much what we want, and if we can’t, then it’s bad. But at the same time, co-existing alongside this, there is a completely different, parallel universe where we all seem meekly to do what those in power tell us to do.” – Adam Curtis (British filmmaker)
Pea Prices Rally Alongside Corn, Wheat
Grain markets this morning are mostly green, as, like yellow pea prices, it seems like nothing can stop the rally (a contrarian indicator for me). Speculators Chicago wheat prices pushed higher to levels not seen in almost 6 years (December 2014) on the dryness headlines and continued strong export activity.
While I discussed soybean and canola exports in Friday’s Breakfast Brief, the most feedback I got from that post was the new feature we added that allows you to post to specific types of users on the Combyne trading network. In that vein, I encourage you to try out the new functionality yourself, and go through the 30 – 60 second process of posting on new Listing on Combyne, be it from your computer or mobile device.
Wheat Prices Jump on Dryness
As the table at the beginning of today’s Breakfast Brief shows, wheat prices were the clear winners last week to increase their long positions on the dryness concerns. While there are some moisture events in the forecast for the dry areas, the buying activity last week seems likely to slow, if not reverse as soon as we see ANY moisture event. That said, the U.S. drought monitor will continue to be watched closely by traders, notably in western areas of the U.S. winter wheat belt.  Notably, no rain has fallen in western Kansas or the Texas and Oklahoma panhandles in the past month, and not very many beer clouds are in the forecast.  Even the Dakotas and parts of Nebraska are turning to a significant state of drought. 
Looking across the pond, DTN reports that in southern Russia since the beginning of August, they’ve received the lowest amount of rainfall in 3 decades, but the region is expected to see wet weather for the rest of October!  Another potential price-pullback headline to watch for will be the start of the Australian wheat harvest, albeit, it’s worth noting that the Grains Industry of Western Australia just dropped its wheat harvest estimate of the region by 2 MMT to now sit at 12 MMT. The reason behind the downgrades is the extreme dryness that the growing season there finished off with. As a reminder though, Western Australia tends to produce more low protein wheat, whereas East Coast Aussie farmers take of more high protein quality.
Speaking of Australia, the dispute between them and China continues to escalate as Beijing has urged its cotton mills to stop using Aussie product.  Since about 30% of Australia’s cotton exports usually head to the People’s Republic, it’s a pretty significant market loss. That said, the move echoes the 80.5% import tariff that China put on Australian malt barley back in May, which coincided with China’s banning of meat imports from 4 of Australia’s largest meat processors.
While Chinese officials won’t admit it’s the reason behind their trade war acts, Australian officials have publicly criticized China’s handling of the coronavirus AND the annexation of Hong Kong as an independent city-state (about 30 years before it was supposed to happen). Worth noting is a new Pew Research Center survey, which shows that out of 14 democratic countries, Australia has the largest negative view of China and its leader, Xi Jinping.  One line worth sharing: “A majority in each of the surveyed countries has an unfavorable opinion of China (and) in the United States, Canada, Australia, Japan and several Western European nations, roughly half of the respondents said they had “no confidence at all” in Mr. Xi.”
Yellow Pea Prices Up 25% YoY
Nonetheless, the conundrum lies in the reality that China is the largest commodity consumer in the world, something that’s extremely difficult to ignore when you’re a net-exporting commodity-producer like Australia or even Canada for that matter. Accordingly, China continues to be a big buyer of peas, and that demand is helping pea prices creep higher.  More specifically, pea prices have now become competitive with that of soybeans or corn in China, and thus, a sufficient substitute for feed rations.
Accordingly, it’s expected that China could import anywhere between 2.5 – 3 MMT of Canadian peas in the 2020 calendar year, based on current volumes. In fact, through Week 10, Canadian pea exports from licensed CGC facilities are tracking about one-third higher than a year ago, with nearly 961,000 MT sailed! For perspective on how aggressive this pace of Canadian pea exports is, over the last 3 years, on average, to cross the 1 MMT threshold in shipments, it’s usually taken us to Week 21 of the marketing year to get there!
Something to keep in mind is that Russian farmer produced 2.6 MMT of yellow peas this year, which was a slight improvement over last year.  However, yellow pea prices in Russia aren’t very attractive right now and so, not only are farmers there being slow sellers of their production, but they’re also likely to plant less for the 2021/2022 crop year. Comparably, in Western Canada, yellow pea prices are rallying harder than green pea prices, with average yellow pea prices for spot movement now close to eclipsing the highs of the 2019/20 crop year.
This doesn’t mean that yellow pea prices can’t continue to climb, but I’m cognizant that this fast and hard of a rally is not sustainable. Therein, I again encourage you to post your Listing on Combyne trading network, and, as mentioned at the beginning of today’s Breakfast Brief, be 100% in control of who sees the next deal(s) you’re looking to do!
At 8:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3174 CAD, $1 CAD = $0.7591 USD)
Dec Corn: +2.8¢ (+0.7%) to $4.048 USD or $5.332 CAD
Jan Soybeans: +4.5¢ (+0.45%) to $10.548 USD or $13.896 CAD
Dec Soybean Meal (per short ton): +$6 (+1.65%) to $373.50 USD or $492.06 CAD
Dec Soybean Oil (cents per lbs): -0.36¢ (-1.1%) to 32.63¢ USD or 42.99¢ CAD
Dec Oats: +1.5¢ (+0.5%) to $2.96 USD or $3.90 CAD
Dec Wheat (Chicago): +9.3¢ (+1.5%) to $6.345 USD or $8.359 CAD
Dec Wheat (Kansas City): +7.3¢ (+1.3%) to $5.66 USD or $7.457 CAD
Dec Wheat (Minneapolis): +8.3¢ (+1.45%) to $5.68 USD or $7.483 CAD
Jan Canola: -1.1¢ (-0.1%) to $12.097/bu / $533.40/MT CAD or $9.182/bu / $404.88/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.