Sept. 27 – Stocks Report Next on Grain Markets “To Do” List

Grain markets this morning are mixed with just the USDA quarterly stocks report and today and Monday’s trading left in the month and the calendar quarter.

“The game has its ups and downs, but you can never lose focus of your individual goals and you can’t let yourself be beat because of lack of effort.” – Michael Jordan (NBA Hall of Famer)

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Stocks Report Next on Grain Markets “To Do” List

Grain markets this morning are mixed with just the USDA quarterly stocks report and today and Monday’s trading left in the month and the calendar quarter.

U.S. and Japanese trade negotiators completed their first round of talks this week and it’s been suggested that, once the trade deal is in place, more than 90% of American food and agricultural products headed for Japan will enjoy either duty-free or preferential market access. This deal with Japan might be the biggest deal for U.S. pork and wheat producers. For the former, Japan is the #2 buyer after Mexico, purchasing 1.2 billion pounds of U.S. pork products shipped internationally, or 21% of total U.S. pork exports.

For U.S. wheat exports, this is significant as it gets back the roughly 3 MMT export market that they basically lost after the U.S. pulled out of the Trans-Pacific Partnership deal. Conversely, Canadian and Australian wheat exports are likely to take on some greater competition now that America is back in the market (and has some preferential treatment). Overall, most American farm groups agree that the trade deal with Japan is good for American agriculture. [1]

What the farm groups are not content with is the state of limbo that the ethanol industry is in. The White House has been meeting with ethanol and oil industry representatives but there hasn’t been any follow-up to the “giant package” that President Trump suggested a few weeks ago. Accordingly, anyone selling or buying corn for ethanol is getting frustrated that there hasn’t yet been anything announced. [2]

That said, some ethanol plants are trying to diversify and export more and/or produce higher value products.  [3] Conversely, the squeeze is just too much on some plants’ margins and just this week in Iowa, 3 more ethanol facilities shut down, which isn’t great timing given that harvest is right around the corner. [4]

Stocks Report to Show Big Disappearance?

On Monday, the USDA will release their quarterly stocks report for inventories as of September 1st. Heading into the stocks report, there’s a large expectation that corn and soybean stocks will grow, relative to September 1, 2018. [5] More specifically, the average analyst is expecting Monday’s stocks report to show soybean stocks at their largest level ever and corn inventories at their highest level since 1988. Comparably, the average pre-report guesstimate for what the stocks report will show for wheat is a slight drop of 3% from the same period a year ago.

Pre-report estimates for USDA stocks report as of September 1

As Karen Braun of Reuters notes, if these numbers are realized, this implies that soybean use for the last quarter of the 2018/19 crop year was a record 808M bushels. [6] That’s up 3% from last year’s Q4 use (which was the previous record) and 20% higher than the next largest level from 2016. Comparably, U.S. corn usage/demand/disappearance in Q4 of the 2018/19 crop year  would be down about 12% from last year’s record, should these pre-report numbers be realized. It is, however still the fourth-highest usage for Q4, tracking only last year, 2017 and 2016. To put it another way, demand is pacing pretty high as soybean and corn production also track at near-record levels every single year. [7]

Helping that demand (as of this week, at least) has been exports, notably that from China. Ahead of fresh trade talks, Beijing seems to be extending a pretty long olive branch by buying quite a few soybeans this past week. As Ted Seifried of Zaner notes, China has bought about 1.6 MMT in the last 10 days and has granted tariff exemption on 6 MMT of U.S. soybeans before the next round of trade talks in a few weeks. [8] From an actual movement standpoint, U.S. soybean exports through Week 3 of the 2019/20 crop year are sitting at 2.07 MMT, or about 13% behind this point a year ago.

U.S. weekly soybean exports through Week 3 of the 2019/20 crop year

Harvest 2019 Slows with Fall/Winter Weather

For Western Canada, winter is arriving this weekend, namely for Saskatchewan and Alberta with the snow expected to start falling today in the latter and continuing through Monday. Southern Alberta and southwestern Saskatchewan are expected to get the most amount of the white stuff, which isn’t great timing considering that there’s still quite a bit of Harvest 2019 to finish in these areas.

Harvest 2019 will stop with winter weather showing up the last weekend of September

More specifically, through Monday, September 23rd, the Saskatchewan government says SW Saskatchewan had about 65% of this year’s crop combined. [9] Further north where snow is also expected, in west central Saskatchewan, that number was just under 50%. While we can assume that combines were going pretty hard this week, I would estimate that there was probably 25% of Harvest 2019 left in SW Saskatchewan and 40% left in west central Saskatchewan, as of this morning. With a knot in my stomach, I don’t wish this scenario on anyone.

In the U.S., a frost has the potential to come about next week in some parts of the Northern Plains but nothing too substantial just yet. [10] Regardless, there’s quite a lot of crop that needs another week or two (at minimum) to get closer to be ready for a combine to run through it.

Due to some travel next week, there will be no FarmLead Breakfast Brief sent out on Monday.

Best of luck out there for Harvest 2019 this weekend.

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

Due to some early morning travel today, futures grain prices are not in this morning’s FarmLead Breakfast Brief but you can review them here.

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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