Grain markets this morning are mixed as the complex settles down after the USDA gave us some bullish data in their November WASDE report on Tuesday.
“If a conversation is hard, it’s probably the one worth having.” – Unknown
Another Bullish USDA Report & the Last Breakfast Brief
Grain markets this morning are mixed as the complex settles down after the USDA gave us some bullish data in their November WASDE report on Tuesday. Soybean and canola prices continue reach new multi-year highs as export demand remains strong, stocks continue to tighten, and weather concerns remain for the South American crop. All of these factors were things that I mentioned in Monday’s Breakfast Brief heading into the WASDE report, but the reduction of U.S. and global ending stocks was much more than markets were expecting, hence the significant gains by soybean and canola prices this week.
In outside markets, everyone and their mother had a few deep sighs of relief earlier this week on the positive news about COVID-19 vaccine developments from Pfizer.  That optimism has faded, however, as the pubic and investors alike have started to realize that the distribution of the vaccine isn’t going to happen tomorrow. In the meantime, COVID-19 cases continue to rise in many countries, prompting fresh lockdowns and obvious negative economic implications. 
USDA November WASDE Keeps Bullish Tone
Back on Tuesday, November 10th, the USDA released their November WASDE report, surprising most of the market with some bullish numbers.  Going into the report, most market participants were expecting to see some sort of updates to demand and maybe some yield adjustments, but the adjustments were pretty significant. For production, average U.S. corn yields were lowered by 2.6 bushels to 175.8 bushels per acre (bpa), which was nearly 2 bushels below the average pre-report guesstimate from analysts. Similarly, American soybean yields were lowered to 50.7 bpa, a drop of 0.8 bushels from the October WASDE and, again, a healthy deviation from what the market was expecting to see.
This had some serious implications to the balance sheet, as the lower production numbers clearly has to have an impact on carryout, but this downgrade in the crop was significant. Combined with the USDA raising their estimate of corn exports by 14%, U.S. corn ending stocks were dropped 21%, or 465M bushels from the October WASDE (or 11.8 MMT if converting bushels into metric tonnes). Karen Braun of Reuters noted that, in the past 25 years, only in 2010 did the USDA drop their estimate of U.S. corn production by more than 5% from the August to November WASDE reports!  With a print of just over 1.7B bushels, this is a 7-year low and 300M bushels below what the market was expecting, thus helpful for corn prices.
Similarly, soybean ending stocks saw a major adjustment lower, dropping by 100M bushels down to 190M bushels, the smallest number since the 2013/14 crop year when U.S. soybean ending stocks were just 92M bushels. Worth noting is that in that crop year, the U.S. soybean stocks-to-use ration was 2.6% and this year’s it’s projected by the USDA to be 4.2%.  Adding to the bullish fever for soybean prices is the NOPA crush report for October set to be released on Monday, and the market is expecting to see 177.123M bushels used. If that estimate is realized, it would be the second-largest volume of soybeans crushed ever by NOPA members and nearly 10% above the September number.
For the wheat market, we saw the USDA raise ending stocks for both American HRS wheat and durum inventories, but the bullish buzz we’re hearing is that Russia may start to limit their wheat exports starting in February.  I mentioned this week in my Wheat Market Insider column for the Alberta Wheat Commission that fresh supply from the southern hemisphere is coming to market, namely Australia and Argentina.
For the latter, I’ve said for the last few weeks that the size of the wheat harvest there seems to be getting smaller, not bigger, and fresh estimates continue to validate my call. While the USDA dropped their wheat harvest estimate down to 18 MMT, the Rosario Grains Exchange said yesterday that they’re not expecting a 16.7 MMT crop.  This is a drop of 300,000 MT from their previous estimate and 100,000 MT lower than the 16.8 MMT estimated by the Buenos Aires Grain Exchange earlier this week.
Staying in South America, we’re getting into the thick of the Brazilian first-crop growing season and while dryness concerns continue to be discussed, production estimates continue to climb. While the USDA kept their estimate of the Brazilian soybean harvest at 133 MMT, CONAB (the USDA equivalent in Brazil) raised their forecast slightly to 133.7 MMT. Clearly something has to give, and my guess is that it’s going to be that these weather concerns are going to start fading a bit. That said, if production estimates out of Brazil start to fall a bit, this will obviously continue to tighten world ending stocks.
Thus, all this bullish sentiment isn’t going to go away immediately, and especially because demand continues to be strong as long as COVID-19 supply chain concerns remain high. This in mind, the USDA did not update their estimate of U.S. soybean exports. The UDSA, did, however, raise their expectations of China’s corn imports to 13 MMT, but it’s not the 22 MMT that their attaché in Beijing said was more likely.  It’s worth mentioning that many analysts continue to interpret President-Elect Biden’s win as bullish for the likes of corn and soybean prices because he is friendly with China (albeit some would argue, maybe too friendly…). 
The Last Breakfast Brief
I started writing the FarmLead Breakfast Brief nearly 7 years ago as a way to translate how I interpret grain markets for friends and family. What started as a personal email, sent out to a few people, quickly evolved into a readership base consisting of tens of thousands! Frankly, this exponential growth in readership exceeded my expectations. I’ve received some very positive feedback on the Breakfast Brief, but the best acknowledgments come in the form of when people tell me they made some great money off my insights.
That said, today’s FarmLead Breakfast Brief will be the last installment for the foreseeable future and, instead, I will be focusing more of my time on helping our agricultural trading network, Combyne, grow faster. Over the past few years, I’ve spent about 15% – 20% of my week on reading, writing, and putting together charts for the Breakfast Brief (special shout out to our Business Analyst, Victor Han, for all the help on the charts!) Instead, I’ll be investing those 15 – 20 hours helping farmers and buyers on Combyne build their trading network and maximize the many great features like posting Listings to specific types of users, making phone calls directly from the Combyne mobile app, and contract capture and export (where do you save all your grain contracts or who do you share them with?).
If I’m being honest with you, I’ve spent many years, beers, and even tears, thinking about how to make cash grain trading easier. We asked, received, and iterated on a lot of feedback from our users and based on what you’ve told us, we re-built the anonymous FarmLead Marketplace into today’s trust-based and transparent Combyne platform. In doing so, we’re helping farmers and grain buyers take their relationships to a more efficient, more purposeful level. The positive results we’re seeing through Combyne in helping strengthen these relationships and making cash grain trade easier is fueling my passion more than ever to make agriculture more connected.
Over the past several months, I’ve been speaking with Combyne users one-on-one on the phone, via text, and through email. In these conversations, it’s clear that Combyne Agricultural Trading Network (a free tool!) continues to be an effective tool to buyers and sellers alike. That said, I’m fully committed to helping our Combyne users, including even potentially providing them with the unbiased grain markets insight that you have enjoyed in the Breakfast Brief.
If you’re interested in making it easier on yourself to sell or buy grain, be it (1) soliciting intentions to buy or sell, (2) setting targets, (3) negotiate simultaneously with multiple trading partners, and/or (4) adding a few new trading partners, then Combyne is the right tool for you! I’m looking forward to dedicating more of my time to having fruitful conversations with grain and/or hay producers, livestock operators, line company merchandisers, brokers, exporters, processors, etc. who use our platform.
From time to time, you might hear from me for grain markets webinars I may be hosting, but the first seats will be available for Combyne users. Of course though, I’d still like to know if you want to hear about what I’m thinking for specific crops, so please fill out this 4-question survey to help me understand what sort of crops you want to know about. And if you are already using Combyne, don’t be a stranger in asking me for help! I’m here to support the heck out of you and would be more than happy to chat. Conversely, if you don’t participate in the cash grain markets (i.e. you’re a journalist or academic) but still have questions about what’s going on, feel free to reach out to me any time!
Have a great weekend!
Due to the delay in getting today’s final Breakfast Brief out, there is no North American grain markets futures data available 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.