Grain markets to start May are mostly in the red as non-futures related crops like pea and lentil prices continue to perform well.
“We all face crossroads in our lives where we can retreat into ourselves, or we can hit the dance floor.” – Sebastien Lelio (Chiliean film director)
Strong Pea, Lentil Prices as Grain Markets Fall
Grain markets to start May are mostly in the red as non-futures related crops like pea and lentil prices continue to perform well. The big headlines yesterday continued to revolve around weather (something I highlighted in Wednesday’s Breakfast Brief) and U.S. and China trade. Yesterday, U.S. President Trump told the world that the Phase One trade deal with China has taken a back seat to holding China accountable for its role of not containing COVID-19 properly, in addition to keeping details about the virus quiet until it was too late. 
That said, China was a big buyer this past week of U.S. agricultural goods. Corn exports sales totaled 1.36 MMT (+87% week-over-week) while U.S. soybean exports sales totaled 1.08 MMT (more than 3x the previous week), including 618,100 MT by China. Also keep in mind, that it was announced that China bought an additional 300,000 MT for August and September movement, which will be reflected in next week’s report.  American sales of wheat exports also nearly doubled week-over-week to 467,700 MT, but the bigger factor that wheat traders are watching is the heat wave that’s expected to hit the Southern Plains, which could put the nail in the coffin on fields that barley survived freezing temperatures just a week ago! 
How do Soybean, Corn Prices Look in a Return to Normal?
The UN’s labour is estimating that as many as 300M full-time jobs around the world could be lost in the current second calendar quarter of 2020! That’s up from their previous estimate in March of 195M full-time jobs lost! This is a significant hit to not only developing markets, but also the western world! Even in India, unemployment has shot up to 23.5% in April, up from 14.8% in March (reminder, there are over 500M workers in India).  In the U.S., more than 30M American have filed for unemployment insurance in the past 6 weeks, including 3.9M last week.  And yes, while the cumulative number of workers on the unemployment line grows, the silver lining here is that the number of weekly jobless claims isn’t growing bigger than previous weeks.
Further good news is that the market is starting to figure out how to place these workers who have all become available suddenly. And they have to be creative these days! The Wall Street Journal reported earlier this week how meat plants and dairy processors are selling goods from their parking lots while food packagers are hiring laid off restaurant workers to help fill the additional boxes they’re packing every day for the grocery stores!  This is a positive for the general economy as those workers who have a paycheque again are able to increase their own discretionary spending.
Therein, there has been some indications that gasoline demand is starting to improve, but new record lows for ethanol production continue to be set on a weekly basis and we shouldn’t expect it to rebound quickly as economies open back up.  Just 537,000 barrels produced per day last week, which is a 48% decline year-over-year. Comparably, U.S. corn exports are down by about 1/3 compared to the same week last year, with 22.7 MMT sailed (or nearly 894M bushels if converting metric tonnes to bushels). That said, in addition to watching corn and soybean exports, later this afternoon we’ll get the USDA’s crush report for March, which has an average pre-report guesstimate of 191.5M bushels, which would top the previous record set in January of 188.8M bushels.
On that note, I have been doing some back-of-the-envelope calculations on what demand, and thus soybean and corn prices could look like in 2020/21. I will be sharing my estimates next Monday’s Breakfast Brief. In the meantime, given the strong start to the planting pace of the Plant 2020 campaign, corn prices lost a fair amount of ground in April, compared to where they finished March.
Yes or No: These Strong Pea and Lentil Prices Will Last
While futures-related crops continue to tumble, volatility in the non-futures crops continues to show opportunities to those paying attention. Flax prices, pea prices, and lentil prices have all seen some significant improvements in the past few months as demand for these types of foodstuffs has ticked higher. AGT Foods is already suggesting that the increase in lentil prices might lead to more small red lentil acres in Plant 2020.  While I’m not doubting that there could be some further upside for pea and lentil prices if Mother Nature doesn’t play nice, from where I’m sitting, there seems to be more risk to the downside. Similarly, pulses analyst G. Chandrashekhar in the Saskatchewan Pulse Growers monthly newsletter said the market for pulses in India is at a crossroads. 
The outlier here may be kabuli chickpea prices, which haven’t followed the rise in pea or lentil prices too much, despite fewer acres in both North America and India.  More specifically, India’s kabuli cchickpea harvest looks to be about 100,000 MT smaller than what we saw last year, while Mexico’s crop is going to be about half of what it was in 2019. Thus, kabuli chickpea prices are expected to peak later in 2020 or early 2021 as supplies carried over from the 2019/20 crop year are exhausted and international buyers start hunting for new product.
One COVID-19-related problem though is the actual movement of these pulses. One estimate from Transworld Group, a major transporter, says container ships have idled about 15% of their capacity and there’s been about a 20-25% drop in volume of goods moved via containers because of weaker consumer demand during COVID-19 (think clothes and other materialistic goods that aren’t deemed “essential”).  Specific to pulses, container shipments of the likes of chickpeas, peas, and lentils account for about 30% of all Canadian pulses exports. However, Ray-Mont, a transloader at the Port of Vancouver says that they’re running at about 50% the normal pace for containers headed for Asian markets.
Regardless, shipments of pulses continue to perform well. Canadian pea exports are tracking 1/3 higher year-over-year with nearly 2 MMT sailed through Week 38 of the 2019/20 crop year. Comparably, Canadian lentil exports are more than 1.6X what they were at this time a year ago, with nearly 700,000 MT sailed. It’s worth noting that around this time of year, we tend to see some big one-week shipments of pea and lentil exports here every second or third week. This does not necessarily translate into obvious, further improvements in pea or lentil prices, but in fact, it is likely the push that you’re seeing right now from grain buyers.
Growing Combyne Marketplace Demand
Despite Plant 2020 starting up, volatility continues to be a major factor in the grain markets. Accordingly, we’ve seen a lot more activity on the Combyne Marketplace these last few weeks. Activity on the marketplace has also increased since we’ve added the forage function, as well as completely revamping the Filters functionality, making it easier to sort through deals based on distance, price, volume, and even crop characteristics like spring harvested or certified organic. On that note, we’re seeing more new crop, 2020/21 bids and offers being Listed on Combyne – are you looking to get coverage on any new crop with the above in mind?
As a reminder, if you DO NOT hit the “Connect” button with somebody, you WILL NOT be notified of their deals posted on Combyne, and vice versa, they WILL NOT be in the know when you post a new Listing. Translation: Just hit the “Connect” button! Isn’t it better to have more grain trading partners, not less? Further, even if the price that you see today doesn’t make sense for you, you should obviously want to know when that price gets updated. Tapping the “Connect” button gives you that luxury.
This in mind, here’s a few bids from some credit-verified buyers for pea and lentil prices, as well as a few other crops.
- $12.50 green pea prices – south central Sask
- 27¢/lbs small green lentil prices – west central Sask
- 33¢/lbs large green lentil prices – south central Sask
- New crop small red lentil prices – South central Alberta
- $8 yellow pea prices – Saskatoon area
- $8 yellow pea prices – north central Alberta
- $6.80 fababean prices – central Alberta
Also, some other non-pulses bids worth highlighting
- Spring-harvested brown flax prices – anywhere
- Spring-harvested brown flax prices – eastern Sask/western Manitoba
- Spring-harvested canola prices – anywhere in Alberta
- $8.50 durum prices – central Sask
- $7.50 new crop durum prices – central Sask
- $4.10 milling oats prices – southern Manitoba
- $3.75 milling oats prices – eastern Sask/western Manitoba
- $3.80 milling oats prices – southern Alberta
- $4.55 feed barley prices – eastern Manitoba
- New crop malt barley prices – central Alberta
- $4 new crop feed barley prices – north central Alberta
- $5.75 new crop winter wheat – southern Alberta
Have a great weekend!
Futures data for the grain markets is not available in today’s Breakfast Brief, but you can review them here at your convenience.
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.