Grain markets are mostly in the red as corn, canola, wheat, & soybean prices all pull back from last week’s positive performance.
“At the end of a marathon, it’s going to hurt whether you’re speeding up or slowing down. You may as well push.” – Summer Sanders (U.S. Olympic champion)
Soybean Prices Finally Cooling Off?
Grain markets are mostly in the red as corn, canola, wheat, & soybean prices all pull back from last week’s positive performance. Limited rainfall and consistent reports of export sales have helped support the rally thus far, but as a few Tropical storms make landfall, some parts of the Midwest could get a shot of moisture. In the meantime, in today’s crop progress report from the USDA, grain markets are expecting to see the good-to-excellent conditions of corn and soybean stay at 60% and 63%, respectively.
While I mentioned a few weeks ago that lentil prices were trading sideways to lower, that might not be the case going forward. Late Friday, the Indian government announced that they were lowering their import tariff on Canadian lentil exports back down to 11% from the 33% it was sitting at as of September 1st. 
If you recall, back in June, to help ease the burden of the impact of COVID-19 on Indian consumers, the Indian government bought more pulses to distribute amongst the population, which meant lowering the tariff until September 1st. Over that timeframe, lentil exports exploded, and so it’s likely that the lowering of the tariff again is going to be positive for lentil prices. Bottom line, if you missed some good pricing this summer for your lentils, I’d recommend that you post your Listing on the Combyne Marketplace today and have the market come to you.
Soybean Prices Rally Slowing Down?
In Friday’s Breakfast Brief, I talked about some of the main factors driving the rally in grain markets, notably the cheap money from the U.S. Federal Reserve and strong demand headlines for the likes of corn, canola, and soybean exports. In fact, hedge funds are estimated to now be in their longest position ever for soybean prices and further, based on buying activity on Friday, managed money is also likely the longest they’ve been in corn and wheat since 2012 (if you recall, that was when the Midwest experienced a drought & corn prices hit $8 USD/bushel on the futures board). 
This in mind, we’ve now had 10 straight days now of the USDA announcing new soybean export sales to China.  This certainly plays well to the reality that soybean prices have climbed in 17 of the last 19 sessions, and have had sixth straight weeks of positive gains. While soybean prices are flower this morning, more export sale announcements would likely keep pushing things up, but analysts agree that we’re now in the late stages of this rally. 
And when you look at the performance of soybean prices the last 7 weeks, it’s hard not to agree with this sentiment that the rally is likely closer to the end than it is to the beginning. With soybean prices now firmly at a level not seen since basically the trade war between China and the U.S. began, it’s certainly a positive for many farmers to be able to lock in a profit.  I continue to mindful, however, of China potentially cancelling U.S. soybean exports if the Brazilian crop – which just started getting planted last week – shows any sort of promise. I’m also cognizant of the fact though, that there’s currently a 75% chance that La Nina shows up this winter, which isn’t great for South American production potential. 
Canola Prices Also Top-Heavy
For canola, the rally over the same timeframe has been half of what soybean prices have achieved, but it’s obviously impressive, especially in the cash market where we continue to see high $11s and even $12 CAD/bushel canola prices trade in parts of Western Canada on our open Combyne cash grain & hay platform. In that vein, canola exports continue to be strong with nearly 1.2 MMT sailed through Week 6 of the 2020/21 crop year. That’s good for nearly one-third more than what canola exports were a year ago.
Continuing to support canola prices is the smaller 2020/21 rapeseed harvest in Europe, which is now estimated at 16.6 MMT, the smallest haul for the bloc in nearly 15 years.  In Romania, the USDA’s attaché there says two years of dry conditions have led to a very small harvest, and thus, very low exports relative to year’s past.  In fact, Romania’s rapeseed exports to the EU were down 70% in 2019/20, helping pave the way for more Canadian canola exports to make it to the European Union.
Further, in France, the bloc’s largest rapeseed-producing country, this year’s harvest is expected to yield just 3.3 MMT, a third lower than the five-year average. This, again, means the EU will have to import more in the 2020/21 crop year. Looking into the crystal ball, the drought that much of central Europe has experienced the last few months are likely going to negatively impact fall seeding of the 2.5M – 2.7M acres planned for France’s 2021/2022 rapeseed crop. More specifically, in France, last week’s hot spell that served up record high temperatures likely put some negative strain on recently-planted rapeseed fields. 
Ultimately, there are a fair amount of bullish headlines that are supporting the vegetable oil complex, but this is where I am mindful of the fundamentals versus speculators’ influence in where things go next. However, once the bullish fundamental music heard by speculators slows down, grain markets may stutter for a day or two (which is where we might be right now. Historically, this sort of rally in grain markets is unwound in a matter of a week so selling into this current strength is not a bad thing. That said, there is still the demand fundamentals (for now) to fall back on and so the pull-back may not be as hard as usual (but it will still be a pullback!).
P.S. Have you looked at current canola and soybean prices for new crop 2021? Might want to.
At 8:10 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3356 CAD, $1 CAD = $0.7544 USD)
Dec Corn: -1.5¢ (-0.4%) to $3.77 USD or $4.998 CAD
Nov Soybeans: -4.3¢ (-0.4%) to $10.393 USD or $13.777 CAD
Dec Soybean Meal (per short ton): -$0.30 (-0.1%) to $342 USD or $453.37 CAD
Dec Soybean Oil (cents per lbs): -0.36¢ (-1%) to 34.78¢ USD or 46.11¢ CAD
Dec Oats: +0.5¢ (+0.2%) to $2.838 USD or $3.762 CAD
Dec Wheat (Chicago): -2¢ (-0.35%) to $5.73 USD or $7.596 CAD
Dec Wheat (Kansas City): -1.8¢ (-0.35%) to $5.025 USD or $6.661 CAD
Dec Wheat (Minneapolis): -1.8¢ (-0.3%) to $5.495 USD or $7.284 CAD
Nov Canola: -2.7¢ (-0.25%) at $12.022/bu / $530.10/MT CAD or $9.069/bu / $399.88/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.