June 5 – Volatility in U.S. Dollar, Loonie Mixing up Trade Flows

Grain markets this morning are almost all green as U.S. grain prices are seeing the benefit from a weaker U.S. Dollar, but that’s also pushing other currencies higher, including the Canadian Loonie and Brazilian Real.

“No matter what looms ahead, if you can eat today, enjoy today, mix good cheer with friends today enjoy it and bless God for it.” – Henry Ward Beecher (American minister)

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Volatility in U.S. Dollar, Loonie Mixing up Trade Flows

Grain markets this morning are almost all green as U.S. grain prices are seeing the benefit from a weaker U.S. Dollar, but that’s also pushing other currencies higher, including the Canadian Loonie and Brazilian Real. Also supporting grain markets are some drying conditions that is forecasted for the Corn Belt and while the initial heat will help stress the crop and get it going, if it persists too long, weather premiums will continue to expand. [1]
The tit-for-tat game of trade and travel restrictions continues to between the U.S. and China, with the most recent move coming from the White House of placing additional restrictions for Chinese state media organizations that have America-based operations. [2] This includes the #1 and #2 state-owned media groups, China Central Television (CCTV) and China News Service and would added to the five other Chinese media outlets who had restrictions placed on them back in February when China expelled a few U.S. journalists from Beijing.
On a similar note, Japan and the U.S. are already subsidizing companies who looking to repatriate manufacturing back home, or at least diversify it out of China and into other Asian regions. The impact could be substantial and probably best summarized by a National Interest piece, which quoted the Nikkei’s Katsuji Nakazawa, “If the U.S. and Japan, the world’s biggest and third-biggest economies respectively, move away from China, it will have a huge impact on the world’s second-biggest economy.” [3]
Speaking of trade flows, India has temporarily decreased its tariff on lentil exports from Canada from 33% to 11%. [4] As the tariff on U.S. lentil exports has remained at 33%, it obviously opens the door for more lentil exports from Canada to India. However, the tariff decrease is said to be temporary and I remain cognizant of the downside risk in lentil prices, given expanded acreage in Western Canada and good monsoon rains forecasted for India. Accordingly, I’m making more incremental, 10% sales today for both old and new crop lentils.
As mentioned in Wednesday’s Breakfast Brief which discussed the downside risk in lentil and flax prices in detail, there’s nearly 40 credit-verified lentil buyers on our free Combyne Marketplace, looking for both old and new crop. With Combyne, you are actually promoting the sale you’re looking to make by Listing it; this is much more efficient & effective compared to making phonecall after phonecall. Instead of the latter, Listing your deal on Combyne can help inform all your current trading partners (and potentially some new ones), about the deals you’re looking to potentially make.
The Combyne cash grain marketplace allows you to post publicly for everyone to see, or privately to just your network of trading partners

U.S. Dollar Helps Soybean Prices (Sort Of)

Currencies are getting a little more volatility as the U.S. Dollar continues to see a sell-off amongst investors, with yesterday being its 7th straight day of losses against other major currencies. [5] This has helped the Brazilian Real appreciate, which is the main reason behind Chinese grain buyers snapping up more American soybean exports at a time when their Beijing bosses are telling them not to do so. [6]
Worth mentioning though is that China still bought about 10 boats of Brazilian soybean exports this month. With one calendar quarter (13 weeks) left to go in the U.S. soybeans’ 2019/20 crop year, total shipments are tracking 3% higher than last year, with 35.92 MMT sailed (or 1.32 billion bushels if converting metric tonnes into bushels). Obviously though, as you can tell from the chart below, actual shipments of U.S. soybean exports have slowed down significantly over these last few weeks.
U.S. cumulative soybean exports through Week 39
Nonetheless, the weaker U.S. Dollar and buying buzz has helped catalyze a nice rally for soybean prices, which have gained 35 cents since Sunday night’s open on the futures board in Chicago, and are now sitting at levels not seen since late March/early April. That said, one People’s Republic think tank, the CNGOIC, said that China’s soybean imports for their 2019/20 crop year (which ends in September) is seen now at 91 MMT. This is a 1 MMT improvement from their previous forecast, and a healthy bump from the 82.5 MMT imported in the 20181/19 crop year.
Private consultancy, Shanghai JC Intelligence Co., says that Chinese soybean imports could continue to grow, depending on how quickly the Chinese hog herd recovers. Put simply, with sky-high pork prices in China, more players are either entering the market, or ramping up their production. [7]

The Resiliency of the Canadian Loonie

Similar to the Brazilian Real, the U.S. Dollar’s slide has helped the Canadian Loonie appreciate back above 74 cents for the first time since early March. [8] This is an impressive improvement from the low of 68.2¢ U.S. Dollar that the Loonie hit back in mid-March (it fell by nearly 10% in 2 weeks), but with oil prices improving again, this has helped the Canadian currency make up some this lost ground. Obviously, this is detrimental to the international purchasing power of buyers of Canadian agricultural exports, and this is why we’ve seen canola prices pull back over the last few weeks.
Canadian cumulative canola exports through Week 43
With investors starting to look past the COVID-19 fears and think about a V-shaped recovery, U.S. stock markets have also performed very well. This is, however, is largely because the U.S. stock market has healthy weighting towards health care and technology, two of the industries that are doing okay in this recession. Conversely, since the Canadian stock market is more closely tied to commodities (i.e. oil), it’s been slow to seen gains, until this week that is. Of course, since the Loonie is looked at as a petro-currency, stronger oil prices will inherently help the Canadian currency. [9]
The U.S. Dollar has fallen as oil prices have appreciated
With stronger oil prices, the Canadian Loonie has regained its COVID-19 losses

A Personal Reflection from this Week

Given the frustrating/saddening recent events that have engulfed our news and social media feeds, I wanted to share some personal reflections I’ve had over the last few days. I’ve also shared these comments this week with the FarmLead team, as well as our investors. Maybe you don’t care, but I think it’s better to say something, than to stay silent.
A few weeks ago, “The Small Work in the Great Work”, by Victoria Safford, was shared with me and from it, this line caught my attention, “Every day offers every one of us little invitations for resistance… and we make our own responses.” The events unfolding over these past few months – and especially the last few days – are a true test of leadership, of our society, and our humanity. Each of our lives are uniquely complex and flawed, but in each day, lies the possibility of redemption and progress.
My co-founder Alain and I are proud of our diversity and this is why, in our the FarmLead Employee Handbook, we’ve have been explicitly clear in our expectations of inclusiveness and how we expect all of our team members to conduct themselves. More specifically, in our Code of Conduct section, it states that “all workers are treated with respect and dignity (and) workplace harassment and discrimination will not be tolerated.”
Further, at FarmLead, we are an equal opportunity employer. We hire the best possible candidate we can, regardless of their skin colour, religion, gender, etc.. We have employed and/or are currently employing people from many countries, including, but not limited to, Israel and Iran, China and India, Italy and Brazil, Kuwait & the UAE, Uzbekistan and Ukraine, Romania and Russia; and we’ve worked alongside people who identify as atheists, Christians, Hebrews, Muslims, Hindus, and other faiths.
All of our lives are different, and yet, they’re the same as we come together to create and develop, both at a personal and professional level. We all have struggles; but the strength of a team and even that of a society is defined by its ability to build each other up, especially when it feels difficult to do so. As my friend, Ken Lin, the CEO of Credit Karma, recently wrote in a note to his employees (but made public), “Apathy is dangerous and the enemies of democracies.”
Ultimately, we hope that the person-first attitude of our company carries over into the daily lives of our employees, but I’m sharing my reflections as a means to catalyze some of your own thinking. Keep in mind, this is an ongoing journey which has many ups and downs, but, as the essay by Ms. Safford reiterates, every day offers us a choice. I hope that you consider standing with me in being on the right side of inclusivity and diversity.
Have a great weekend!
To growth,
Brennan Turner
TF: 1-855-332-7653
@Combyne or @FarmLead on Twitter
At 7:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3447 CAD, $1 CAD = $0.7437 USD)
July Corn: +0.8¢ (+0.25%) at $3.296 USD or $4.432 CAD
July Soybeans: +3¢ (+0.35%) at $8.708 USD or $11.709 CAD
July Soybean Meal (per short ton): +50¢ (+0.15%) to $290.30 USD or $390.37 CAD
July Soybean Oil (cents per lbs): +0.23¢ (+0.85%) to 28.05¢ USD or 37.72¢ CAD
July Oats: -2.3¢ (-0.65%) at $3.433 USD or $4.616 CAD
July Wheat (Chicago): +2.3¢ (+0.45%) to $5.26 USD or $7.073 CAD
July Wheat (Kansas City): +2.8¢ (+0.6%) at $4.75 USD or $6.387 CAD
July Wheat (Minneapolis): +1.8¢ (+0.35%) to $5.28 USD or $7.10 CAD
July Canola: +2.7¢ (+0.25%) to $10.541/bu / $464.80/MT CAD or $7.839/bu / $345.65/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.

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