Grain prices are all in the green this morning as the complex continues its rebound amidst optimism a new NAFTA will appear by tomorrow.
“Financial crises are like fireworks: they illuminate the sky even as they go pop.” – James Buchan (Scottish Author)
StatsCan Crop Production vs. Soybean Prices
Grain prices are all in the green this morning as the complex continues its rebound from the 3-week sell-off amidst optimism that a NAFTA deal that does include Canada will indeed get done by tomorrow.
Three key issues are separating the US and Canadian governments: Chapter 19 (a trade appeals process), cultural industry exemptions (i.e., film), and Canada’s dairy industry (read: supply management). 
Speaking of the Canadian government, StatsCan will put out its first estimate of the 2018 Canadian crop. Also, supporting canola prices and soybean prices is news that China is figuring out how to get American soybeans, by way of Argentina and other countries.
Before we get to StatsCan, soybean prices, and canola prices, let’s quickly review what exactly happened in wheat prices yesterday.
Wheat Prices Spike Thanks to Russia
“The big news today was a letter obtained by Reuters from Russia’s National Association of Exporters of Agricultural Products. Following a meeting on Tuesday with the nation’s agriculture ministry, the association said it is exploring a cap on grain exports at 30 MMT. That would likely put a curb on wheat exports right around 25 MMT.”
Cognizant of the current export pace, it’s likely Russia would hit said 25 MMT in wheat exports sometime in December. While purely speculative, it certainly got the attention of traders, and thus wheat prices.
For our spring and winter wheat GrainCents readers, this coming Sunday morning’s weekly Digest will review what happened to wheat prices the last time that Russia curbed exports (including charts of wheat prices). However, we’ll be relativizing that against the fact that global wheat stocks are still the second-largest ever.
A Bullish StatsCan Report?
Here’s a quick peek of what the market is expecting tomorrow, as well as last year’s and the 5-year average of Canadian crop production.
The key numbers most of the trade will be watching are the wheat and canola numbers. For the former, the USDA is currently forecasting a total wheat crop of 32.5 MMT. The IGC is currently forecasting a 31 MMT 2018 Canadian total wheat crop.
In yesterday’s FarmLead Breakfast Brief, aside from discussing wheat prices, we said that StatsCan tends to underestimate Canadian lentils production in their August report by a little more than 12% when compared to the final December output number. We’ll be digging into all of the changes in tomorrow’s exclusive recap of the StatsCan report for our GrainCents readers.
Ahead of StatsCan’s report tomorrow morning, we got some good news from India. It appears that the quantitative restrictions on how many peas they would import have been lifted.  To be clear, this does not mean that India’s import tax on peas has been lifted.
If you’re a peas grower and haven’t been looking at your FarmLead Watchlist lately, you need to check out these healthy yellow and green pea prices/bids posted on the FarmLead Marketplace yesterday. They won’t be around long simply because India has some quick demand needs likely to fill and their kharif (summer crop) harvest will be starting soon.
Quite a sidenote: With our focus tomorrow morning on analyzing StatsCan’s production of principal field crops estimates for our GrainCents readers, there will be no Breakfast Brief emailed out/published.
Shifting Soybean Flows
Back in May, Brazil’s transport sector was upended when a national minimum freight rate was implemented. This was done to quell, by then, the 11-day strike of truckers, which paralyzed the country’s flow of fuel and food supplies.
As is the case with most government intervention, there were unintended consequences.
More specifically, this raised the cost of transporting grain and oilseeds, including soybeans by $0.60 – $1.20 USD/bushel, depending on the area. With these sort of additional freight costs, Brazilian farmers are opting to store and hold onto their beans in hopes that the legislation will be redacted by the end of 2018 (or in the middle of Brazil’s 2018/19 soybean growing season).
Next door in Argentina, we know that their 2017/18 harvest was drastically lower, thanks to extremely dry growing conditions in January and February 2018. Thus, Argentina has been importing soybeans from the US to help make up for the lost domestic product that gets processed into soymeal and soyoil. As a reminder, Argentina is the #1 exporter of both these products, shipping out nearly 30 MMT and 5.1 MMT respectively in the 2018/19 crop year.
As reported by Bloomberg, Argentina plans to import almost 1 MMT of US soybeans this crop year and the next.  That’s the most in 2 decades.
Since China can’t buy enough soybeans that aren’t “Made in America” to feed their growing livestock industry, they must revert to buying a processed product, like soymeal, from the likes of Argentina. Another option is buying canola or canola meal from the likes of Canada, but it’s clear that the People’s Republic has an obvious preference for soy.
Going into this weekend’s Digest for our GrainCents readers, we’ll be exploring this dynamic of musical soybean chairs in more detail for both our soybean and canola subscribers (and the impact on soybean prices and canola prices.