November 13 – A Silver Lining in Pulses, Grain Markets?

Today we look at soybean and canola prices, the various trade deals going on, and if there are any silver linings in the grain markets, namely pulses. 

“Every cloud has its silver lining but it is sometimes a little difficult to get it to the mint.”
– Don Marquis (American author)

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Selling it for a bigger profit.
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Grain prices this morning are mostly in the red. The market continues to weigh the bearish WASDE report from last Thursday.

Heading into the weekend, most of us turned to honoring military personnel with Remembrance Day in Canada and Veterans Day in America. (Thank you for service!)

However, most of the politicians seemed to focus on trade. This focus included:

• An escalating ethanol battle between Brazil and the U.S. [1],
• An agreement of “core elements” of a Trans-Pacific Partnership that does not include the U.S. [2], and
• the framework for the fourth round of NAFTA renegotiations this week.

We’ll discuss some points about NAFTA this week, but between the potential of losing NAFTA and not being a part of TPP, the outlook would not be great for the U.S. ag industry. [3]

A positive factor is that grain prices are holding up against supply levels and that suggests that we might be turning the corner. [4]

What’s certain is that managed money maintains an extremely short position in both corn and winter wheat markets. Is a short-covering rally in our future?

Maybe it’s too early; however, one could think that with U.S. Thanksgiving out of the way next week, a silver lining for the grain markets is the potential buzz about a Santa Claus rally.

Soybean Prices, Canola Prices Looking to Keep Uptrend

As our friends at AgChieve note, January soybean prices need to stay above $9.80 at the Chicago Board of Trade for an uptrend to stay intact.

The problem is, Brazil is starting to see forecasts for rains in previously dry areas.

Commodity Weather Group says that the major grain-producing states of Mato Grosso and Minas Gerais received more than 1 inch of rain over the weekend. [5]

We’re hovering around levels that could make or break soybean prices, and a lot of it will hinge on South America.

For canola prices, Canadian exports remain a positive factor. The Canadian Grain Commission said that a record 470,200 tonnes of canola were shipped out for the week ending November 5.

This puts total-crop-marketing year Canadian canola exports at 2.86 million tonnes. That is 25% ahead of the pace set last year. As a result, visible domestic inventories hit their lowest levels since September.

However, it is worth noting that Canadian farmers did deliver more than 401,000 tonnes of canola in this same week. Clearly, they’re taking advantage of some of the better canola prices we’ve seen.

But there are some pressures in the market. Specifically, Malaysian palm oil production in October topped 2 million tonnes. [6] That’s the first time the nation’s production level crossed this threshold in two years!

Given its price point after a slowdown in exports, traders suggest that palm oil may be more attractive versus soy oil or canola oil.

january-soybean-prices-trend
January soybeans need to say above $9.80 in Chicago or else we’ll dip lower.


India’s Peas Import Tax Effects on Pulses

If you’ve been living under a rock, India recently announced plans to tax pea imports at 50%.

This comes after they imported a near-record of 3.2 million metric tonnes in 2016/17. This included 2.02 million tonnes from Canada and more than 127,000 MT from the U.S.

In the first two months of this marketing year, Canada has exported nearly 196,000 tonnes of peas to India. The three-year average over the same time is more than 465,000 tonnes. These two months usually end up accounting for nearly 1/3 of total-crop-year Canadian peas exports to India.

From a different perspective, Canada produced a little more than 4.8 million tonnes of peas in 2016/17. To all destinations, Canada exported nearly 3.35 million tonnes of peas in 2016/17.

Thus, India received 60% of all Canadian pea exports.

Put another way, India got 42% of all Canadian peas produced in 2016/17.

Is this the right move for India?

As respected Indian pulse market analyst G. Chandrashekhar puts it, “yellow peas provide the most economical vegetable protein for the protein-starved people of this country.” [7]

The negative effect is the removal of peas bids (especially yellows) from many buyers’ text messages, emails, and website.

There’s also more rumors in India business journals that chickpeas and/or lentils import tax is next.

Our friend Chuck Penner of Left Field Commodity Research notes that record prices in the chickpeas market aren’t likely to stick around. [8] Between the southern hemisphere chickpeas crop from Australia and Argentina hitting the market in a few weeks and bigger acreage In India and Mexico, high prices are helping find more production.

Who doesn’t like record prices? Those who didn’t sell when they were at a record, that’s who. Post a block of your chickpeas on the FarmLead Marketplace today.

StatPub reports that bids for #2 small red lentils in Western Canada have dropped to $295 USD per metric tonne (or 13.4 cents USD and 21.5 cents CAD per pound). [9]  However, most bids we see are at or below 20 cents CAD per pound.

#2 large green lentils bids are sitting at $575 USD per metric tonne (or 26 cents USD and 33 cents CAD per pound when toggling between currencies on GrainUnitConverter.com).

China seems to be the next legit option for the peas market. DTN’s Cliff Jamieson notes that over the past three years, Canada has shipped an average of just under 170,000 tonnes to the People’s Republic in the first two months of the crop year. [10]

This year, 421,000 tonnes of Canadian peas have been sent to China in the first 2 months of the crop year.

To date, about a little more than 850,000 tonnes of Canadian peas have been exported versus the nearly 1.5 million tonnes shipped out by this time a year ago.

Any other silver linings out there in the pulses that someone knows about?

To growth,

pulses-canadian-peas-exports-india-import-tax
Canadian Peas Export Set to Revert From Heaven?


Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

At 7:45 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2703 CAD, $1 CAD = $0.7872 USD)

Mar Corn: -2¢ (-0.55%) to $3.548 USD or $4.506 CAD
Jan Soybeans: -2.8¢ (-0.3%) to $9.843 USD or $12.503 CAD
Jan Soybean Meal (per short ton): -0.60 (-0.2%) to $316 USD or $401.42 CAD
Jan Soybean Oil (cents per lbs): -0.20¢ (-0.55%) to 34.75¢ USD or 44.14¢ CAD  
Mar Oats: +1.5¢ (+0.55%) to $2.815 USD or $3.576 CAD
Mar Wheat (Chicago): -5¢ (-1.1%) at $4.44 USD or $5.64 CAD
Mar Wheat (Kansas City): -5.8¢ (-1.3%) at $4.443 USD or $5.643 CAD
Mar Wheat (Minneapolis): -7.3¢ (-1.1%) to $6.52 USD or $8.283 CAD
Jan Canola: -0.9¢/bu / -$0.40/MT (-0.1%) to $11.682/bu / $515.10/MT CAD or $9.196/bu / $405.49/MT USD or 

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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