Nov 27 – Corn, Soybean Harvest Maintain Market’s Attention

Grain markets this morning are green as the complex digests global corn and soybean harvest data, in addition to some optimism for a trade war deal.

“I pay no attention whatever to anybody’s praise or blame. I simply follow my own feelings.” – Wolfgang Amadeus Mozart (Austrian composer)

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Corn, Soybean Harvest Maintain Market’s Attention

Grain markets this morning are green as the complex digests global corn and soybean harvest data, in addition to some optimism for a trade war deal.

After 8 days of striking, the union representing 3,200 conductors and railyard operators reached a tentative agreement with their employer, CN Railway. [1] This is positive for Western Canadian farmers who saw cash bids drop as, without rail service, elevators were less inclined to buy grain since it had nowhere to go. In eastern Canada, the corn and soybean harvest can resume as; without propane to dry wet grain, elevators in Ontario and Quebec stopped taking deliveries off the combine so farmers sat idle, waiting.

The rail strike, combined with short covering and speculative selling has put pressure on canola prices, which have also followed soybean prices lower. Yesterday, soybean prices fell to their lowest in two months and their fifth straight day of losses as technical selling and focus on the South American soybean harvest starts to pick up. Usually, we see some South American weather premium during this time of year (compare it to the weather premiums seen in late May/early June in North America) but beneficial rains have helped the Plant 2019 campaign move along. Thus, traders are less concerned about prospects for the Brazilian and Argentine soybean harvest. While South American farmers are working on getting their crop in, U.S. farmers are still trying to finish their corn and soybean harvest.

In Monday’s crop progress report, the USDA said that the American soybean harvest is 94% complete, up 3 points on the week and matching last year’s pace. [2] While the soybean harvest is now in line with its historical pace, but the corn harvest continues to lag as 16% of the crop remains unharvested, making it the fourth-slowest U.S. corn harvest ever. [3] This would suggest that more than 2 billion bushels of corn have not been cut yet. This includes over 10M acres of corn in U.S. Northern states (ND, SD, MN, WI, and MI), including 70% of North Dakota’s corn that still hasn’t been cut. With two back-to-back winter storm systems set to hit the Midwest this week, not too many American farmers will be spending this year’s Thanksgiving on the combine. [4]

China Waiting for Big Brazil Soybean Harvest?

Brazilian farmers continue to plant their soybeans, thanks to some recent beneficial rains, but they’re still tracking behind last year’s seeding pace, as well as that of the seasonal average. Through last week, 79% of Brazil’s soybean acres were seeded, down from last year’s pace of 89% but in line with the historical average. [5]

That said, last week, Brazil’s central bank cut interest rates by 0.5% or 50 basis points, which devalued the Brazilian Real against the U.S. Dollar, making it cheaper for international buyers to purchase Brazilian soybeans. [6] This has spurred more forward contracting of this year’s Brazilian soybean harvest, as well as international buying, as China purchased at least 40 boats-worth of Brazilian beans booked last week. On the flipside, U.S. soybean exports are now tracking nearly 14% ahead of last year’s pace will nearly 12.4 MMT sailed through Week 11 (but this is still well behind the five-year average as you can see in the chart below).

As the U.S. soybean harvest nears completion, soybean exports have picked up

Coming back to Brazil, it’s widely expected that Brazil’s soybean harvest will be a new record. However, thanks to an earlier soybean harvest  and improving logistics, Brazil’s soybeans are coming to market faster than ever in January. This is making the window between the American and Brazilian soybean harvest much shorter (as well as more competitive on the soybean exports front). [7] I posited a few weeks ago that the inability to get a trade war deal done because the Chinese are just waiting on the South American soybean harvest and how the President Trump impeachment hearings play out.

While this has obvious implications for trade war negotiations between the U.S. and China, Europe is another interesting market. More specifically, there is a Brazilian producer group who wants to end the moratorium on buying beans that are produced on cleared areas of the Amazon rain forest. [8] Above, the country’s organization that represents soybean traders and crushers obviously knows that if the moratorium ends, Brazil may lose a $5 Billion/year market.

Speaking of exportability, one group, Anec, is expecting Brazilian corn exports to reach a new record of 41 MMT in 2019. [9] After a small harvest 2018, if these 41 MMT of shipments are realized, this would be an astounding jump of 80% year-over-year, in addition to soaring past the current record for Brazilian corn exports of 20.7 MMT, set in 2015. Of course, the crop has to get off first and the majority if Brazil’s corn is grown in the second/safrinha season, meaning it gets planted after the Brazilian soybean harvest is done. However, there are some doubts about the size of the Brazilian corn harvest harvest, as the delayed soybean planting start in some areas means a delayed soybean harvest, which then means a delayed (and less optimal) date for planting the second corn crop. [10]

Argentina’s 2019 Soybean Harvest Gets Bigger

Next door, the Buenos Aires Grains Exchange is estimating that Argentinian farmers will plant 43.7M acres of soybeans in their upcoming campaign, up 200,000 acres from the previous estimate. [11] Comparably, the Argentine Ministry of Agriculture is estimating the area seeded with soybeans this year at 42.2M acres, but that’s also up about 250,000 acres from the government’s previous estimate.

The increase in soybean acres is a result of less corn acres going as political uncertainty and reduced soil moisture reserves is making soybeans the more financially attractive crop. Through last week, 20% of Argentina’s soybeans and 45% of their corn acres had been planted. [12] There are some growing concerns though for weather as the long-term forecast for Argentina is trending drier and this will negatively impact the soybean harvest and final yields.

On the flipside, Argentine wheat harvest is now 20% complete through last week. That’s slightly behind last year’s pace but the bigger concern is that just 6% of the wheat crop is rated good-to-excellent (G/E), including just 1% rated “excellent”. Compare this to a year ago when 35% was rated G/E, including 6% categorized as excellent.

To growth,

Brennan Turner
TF: 1-855-332-7653
@FarmLead on Twitter

At 7:30 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.327 
CAD, $1 CAD = $0.7536 USD)

Mar Corn: +0.5¢ (+0.15%) to $3.788 USD or $5.026 CAD
Jan Soybeans: +1.8¢ (+0.2%) to $9.005 USD or $11.949 CAD
Jan Soybean Meal (per short ton): +$1.50 (+0.5%) to $298.60 USD or $396.23 CAD
Jan Soybean Oil (cents per lbs): +0.06¢ (+0.2%) to 30.46¢ USD or 40.42¢ CAD  
Mar Oats: -1.5¢ (-0.45%) to $3.208 USD or $4.256 CAD
Mar Wheat (Chicago): +1.3¢ (+0.25%) to $5.323 USD or $7.063 CAD
Mar Wheat (Kansas City): +1.8¢ (+0.4%) at $4.433 USD or $5.882 CAD 

Mar Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.125 USD or $6.801 CAD
Jan Canola: -0.5¢ (-0.05%) to $10.374/bu / $457.40/MT CAD or $7.818/bu / $344.70/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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