Today’s Breakfast Brief looks at wheat production declines in Australia, why soybean prices have a bull fighting a bear in South America, and how wheat trade is heating up.
“I have been up against tough competition all my life. I wouldn’t know how to get along without it.” – Walt Disney (American entrepreneur and animator)
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Grain markets this morning are trying to pick up on yesterday’s gains, albeit wheat prices are languishing and corn continues its sidestepping.
Soybeans and canola led the charge yesterday, but canola prices are lower this morning ahead of tomorrow’s StatsCan production estimates.
Also pressuring canola prices is a stronger Canadian Dollar and palm oil hitting a four-month low after the USDA’s Indonesia office increased their estimate of the palm oil crop there to a record 38.5 million tonnes.  That’s 2.5 million tonnes above the official USDA estimate.
In the Black Sea, UkrAgroConsult increased its estimate of Ukrainian rapeseed exports to 2 million tonnes, thanks to a huge harvest.  In 2016/17, total Ukraine rapeseed exports were roughly 1 million tonnes! Rapeseed production in the country jumped 85% year-over-year to 2.2 million tonnes, mainly because of acreage expanding 34% from 2016/17, although yields also improved, but just by 3% year-over-year.
Since most of Ukraine’s rapeseed gets exported into the European Union, this is more tough competition for Canadian canola exports.
Argentina Drives Soybean Prices
Soybeans had a decent day yesterday but gave up some of its gains from the morning, as we saw the January 2018 contract end up below $10 USD / bushel again on the Chicago Board of Trade. Hot, dry forecasts in Argentina was the main reason for the positive move in soybean prices though.
Also supporting the rise of soybean prices was the better-than-expected October crush report from last week, which showed 176 million bushels of soybeans used. The market was expecting 175.4 million bushels.
There’s some surprise that corn didn’t catch a little more air yesterday. Argentina’s dryness applies to the corn crop there as well. Nonetheless, it shows how jerky this market can be, mainly thanks to funds and algotraders who apparently will jump on any forecast. This creates opportunities to sell grain though as we, “sell the rumor and profit on the fact.”
The bear is South America though is Brazil. Average-to-above-average rains are expected in the major growing regions of Mato Grosso, Goias, and Minas Gerais. Compared to where soil moisture was at the beginning of the soybean growing season in September, vegetation maps show that crop potential is continuing to improve. As such, INTL FC Stone upped their estimate of the Brazilian soybean crop to 107.6 million tonnes, 1.5 million higher than their previous estimate.
Last week we saw that Brazilian soybean exports in November 2017 were just over 2 million tonnes, which was in line with expectations. It puts total exports year-to-date at nearly 65 million tonnes. The USDA’s current forecast for Brazilian forecast is for 65.6 million tonnes. This means that with two months left to go in the Brazilian soybean marketing year, there are about 1.6 million tonnes left to meet.
The current soybean vessel lineup for December shows 1.6 million tonnes should ship out, but AgResource is expecting that number to be larger.  Needless to say, it’s safe to assume that the USDA might have to update Brazilian soybean exports in either next week’s WASDE, or in the January one.
Aussie Grain Production Downgraded Again
Yesterday, ABARES dropped its forecast yet again for the Aussie wheat crop to 20.3 million tonnes.  That’s down 6% or more than 1.3 million tonnes lower than their September estimate of 21.64 million. Worth noting is that Aussie wheat acres are down over 3% from last year to 30.73 million. However, that number in the Land Down Undaa basically matches the five-year average at 30.7 million acres seeded to wheat for the 2017/18 campaign.
Sidenote: it’s completely statistically insignificant to compare this year’s drought-riddled crop to last year’s bumper crop. We went from one extreme to the other in two years. In the chart below, you do not see any year-over-year comparison, but just the 5-year average and the previous estimate.
However, it’ll likely be the headline you read everywhere so, here it is: “Australian wheat crop falls 42% from last year’s record 35 million tonnes.”
On the flipside, the Aussie canola crop was increased by 4% from its September estimate to 2.85 million tonnes. That is a 23% decline though from the 5-year average of Australian canola production.
Rounding things out, pulse crops are noticeably smaller year-over-year but mostly larger in the grand scheme of things.
Aussie peas production is the only one that is below its five-year average, but that’s because acreage in 2017/18 was down nearly 4% year-over-year and almost 10% from the five-year average.
Conversely, Aussie chickpeas acreage in 2017/18 compared to the 5-year average is 76% higher at 2.83 million acres. Australian soil seeded with lentils is up 65% from the 5-year average to 859,000 acres.
There is a possibility that La Nina-caused rains will continue in Australia. 
Ultra-Competitive International Wheat Trade
Thanks to the lows of the last few weeks, we’ve seen some more international buying lately.  More specifically,
• Ethiopia is looking for 400,000 tonnes;
• Saudi Arabia bought another 495,000 tonnes at a delivered price of USD 230.50 /metric tonne (or USD 6.25 and CAD 7.95 per bushel) ;
• Egypt bought 120,000 tonnes of Russian wheat a delivered price off about USD 206.50 / metric tonne (or USD 5.60 and CAD 7.15 per bushel);
• Algeria bought 570,000 tonnes of French and Argentinean wheat; and,
• Iraq purchased 100,000 tonnes, split equally between Australia and the US.
As mentioned in yesterday’s FarmLead Breakfast Brief, conditions for the Southern Hemisphere wheat crop aren’t the greatest. Thus, we reiterate the call that finding some better prices for high protein wheat is possible in the coming months.
As we pointed out in this past weekend’s November Grain Prices and Markets Recap, Canadian wheat exports are tracking a bit ahead of last year, but total US wheat exports are 7% below 2016/17’s pace through the end of November with just 11.6 million tonnes shipped out.
Breaking it down further though, this includes:
• 4.67 million tonnes of hard red winter wheat (-16% year-over-year);
• 1.08 million tonnes of soft red winter wheat (+5% YoY);
• 3 million tonnes of hard red spring wheat (-19% YoY);
• 2.58 million tonnes of white wheat (+30% YoY); and,
• 201,000 tonnes of durum wheat (+15% YoY…P.S. the US isn’t a huge exporter of durum)
What’s obvious notable here is white wheat exports. Farmers in the Pacific Northwest corridor (North Dakota, Montana, Washington, Oregon, and Idaho) are reaping most of the benefits. This is because they’re close to the port where HRS wheat and white wheat get exported into Asia. 
However, there’s real competition in US wheat trade from Canada, the Black Sea, Australia, and suddenly Argentina, as they no longer have any export taxes.
At 7:15 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2794 CAD, $1 CAD = $0.7816 USD)
Mar Corn: +0.5¢ (+0.15%) to $3.54 USD or $4.473 CAD
Jan Soybeans: +4.3¢ (+0.45%) to $10.028 USD or $12.669 CAD
Jan Soybean Meal (per short ton): +$1.40 (+0.4%) to $338.90 USD or $429.17 CAD
Jan Soybean Oil (cents per lbs): -0.10¢ (-0.3%) to 33.34¢ USD or 42.12¢ CAD
Mar Oats: +0.8¢ (+0.2%) to $2.575 USD or $3.253 CAD
Mar Wheat (Chicago): -0.8¢ (-0.15%) to $4.345 USD or $5.49 CAD
Mar Wheat (Kansas City): -0.3¢ (-0.05%) to $4.338 USD or $5.48 CAD
Mar Wheat (Minneapolis): -0.8¢ (-0.1%) to $6.283 USD or $7.937 CAD
Jan Canola: -2.7¢/bu / -$1.20/MT (-0.25%) to $11.48/bu / $506.20/MT CAD or $9.087/bu / $400.66/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.