Grain markets are mixed today with oilseeds up but corn and cereals lower, despite some continuing strength of wheat exports, especially in the United States.
“People who fly into a rage always make a bad landing.” – Will Rogers (American actor)
Politics Rage as Wheat Exports, Feed Prices Improve
Grain markets are mixed today with oilseeds up but corn and cereals lower, despite some continuing strength of wheat exports, especially in the United States. Canola prices have found some legs on a weaker Loonie and strong, continued domestic demand, with crush volumes running about 28% ahead of what it was this time a year ago. There have been no concrete moves on the trade war front since last week, but President Trump continues to reiterate that he will raise tariffs even higher if a deal isn’t done soon.  On the flipside, the new version of NAFTA, the USMCA trade deal, is potentially close to being ratified in the U.S., but politics are embroiling its passage, namely, the impeachment hearings. 
Monday’s crop progress report from the USDA noted that some solid progress was made in a few major corn and soybean states, but, overall, things are behind, and way behind in the Northern States.  For soybeans, just 9% of U.S. acres still have to be cut, up just 6 points on the week, and also behind the five-year average of 5% left by this week.
The aggregate U.S. corn harvest moved to 76%, up 10 points on the week, but still behind the five-year average of 92%. Of note, North Dakota’s corn harvest is at just 23% complete (85% average), Michigan farmers are 39% done (75%), Wisconsin is at 44% (77%), and South Dakota is now over half done with 53% of corn fields in the bin (91% average). Minnesota and Iowa have 77% of corn fields harvested, but that’s also behind their seasonal averages of 94% and 93%, respectively.
Going forward, it’s expected that Michigan and Wisconsin are going to get rain and snow within the next week, with about an inch this week, and possibly more next.  Depending on the temperatures, this could turn into snow. Regardless, it’ll likely create some soggy conditions for the corn that still needs to get cut, intuitively pushing some fields to the brink and likely a middle-of-winter or springtime corn harvest.  For the corn and soybeans that are coming off now, avoiding spoilage and quality deductions are paramount. 
Wheat Exports Taking Off?
American and HRS wheat exports continue to perform well, up 61% and 13%, respectively year-over-year to nearly 400,000 for durum and 3 MMT for HRS shipped out through week 23. As a reminder, two weeks ago, in the November WASDE, the USDA lowered U.S. hard red spring wheat production by 1 MMT to 14.2 MMT (down 11% from 2018/19) and durum output by 110,000 MT to 1.47 MMT (31% below 2018/19). With wheat exports running at this pace, it’s likely that the USDA will have to raise their estimate, which would, in turn, lower the 2019/20 carryout.
Across the border, through week 14 of the 2019/20 crop year, Canadian durum wheat exports are also performing well with 1.3 MMT sailed, good for a 57% improvement year-over-year. That said, durum prices in the Canadian Prairies have started to stagnate a bit, holding a regional average of about $7.50 CAD/bushel for the last few weeks now. Conversely, non-durum wheat exports are tracking nearly 10% behind last year, with just 4.57 MMT sailed so far.
For many Western Canadian wheat farmers, falling numbers continue to be heavily scrutinized by major companies, with reports that anything closer to 300 seconds is not meeting contract specs and being rejected. This is obviously a major point of contention with producers as falling number is not an official grading requirement from the Canadian Grain Commission. 
That said, this reinforces my #2 rule of grain marketing: know your grain’s quality. Go out and get it independently tested. If you’re balking at the cost of getting your grain tested by an unbiased player, then factor that test cost into your aggregate cost of production, and you’ll realize it’s likely about 50¢ – $1.50 per acre. Not that heavy of a burden, when you’re potentially leaving $1,000s on the table not knowing what you have.
Rising Barley Prices & Rail Strikes
Some of these tests will be also a good indicator if you should try and sell into the milling market, despite the discounts, or just move it in the feed market, and get some cash in your pocket before Christmas. Feed wheat and barley prices in the Canadian Prairies have strengthened a bit lately, but mostly because of freight costs going up.  Also, the slow pace of harvest has put some pressure on feed grain prices as limited selling amidst unknown quality has supported higher bids to bring grain to the market.
That said, it’s likely that harvest is finished in almost every area of the three Prairie provinces, notably in Alberta.  Further, while I did see some combines rolling on some corn and soybeans last week as I drove around Manitoba and North Dakota, it’s hard to expect anything more than Harvest 2019 inching forward from here. 
Looking at the prices down into Lethbridge, feed barley prices are tracking about $15 CAD/MT better than what they were doing a month ago. Comparably, feed wheat prices are about $10 CAD/MT higher than this time in October. To get a sense of how things are performing elsewhere, take the southern Alberta price and back it off about $20 CAD/MT for the Saskatoon, SK area and about $10 for the southern Manitoba areas.
The next problem to solve though is how to move this grain to market, especially if that market requires a railroad that’s on a CN line. As of yesterday, about 3,200 conductors and railyard coordinators from Canadian National Railway went on strike, severely impacting bulk freight traffic on their rail lines, especially grain in Western Canada.  With the Canadian Parliament not yet back in session following the October 21 election, many Canadian producer groups are banding together to call on Ottawa and Prime Minister Trudeau to intervene on the railroad issue.  However, if not solved quickly, this will likely put some pressure on the prices of commodities that have been flowing well, namely pulses, something I mentioned in Monday’s FarmLead Breakfast Brief.
Ultimately, the lack of rail movement is a significant hit to farmers in a year that’s already been one of the most challenging ever. While there is at least some grain in the bin this year, it was/is a “harvest from hell”. Add in a carbon tax ballooning grain drying costs and now this lack of market access via CN lines, the stress is real. While it doesn’t feel like there’s a lot of support from the political arena, there is lots of other support out there. If you’re not feeling 100%, there are some helpful resources available on the Do More Ag website. As always though, I’m happy to chat with you.
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 = $1.3301 CAD, $1 CAD = $0.7519 USD)
Mar Corn: -1.5¢ (-0.4%) to $3.793 USD or $5.044 CAD
Jan Soybeans: +3.3¢ (+0.35%) to $9.148 USD or $12.167 CAD
Jan Soybean Meal (per short ton): +$0.50 (+0.15%) to $304.70 USD or $405.27 CAD
Jan Soybean Oil (cents per lbs): +0.32¢ (+1.05%) to 31.48¢ USD or 41.87¢ CAD
Mar Oats: -1.8¢ (-0.55%) to $3.06 USD or $4.07 CAD
Mar Wheat (Chicago): -1.8¢ (-0.35%) to $5.135 USD or $6.83 CAD
Mar Wheat (Kansas City): -0.3¢ (-0.05%) at $4.315 USD or $5.739 CAD
Mar Wheat (Minneapolis): -0.8¢ (-0.15%) to $5.175 USD or $6.883 CAD
Jan Canola: +4.3¢ (+0.4%) to $10.796/bu / $476/MT CAD or $8.117/bu / $357.88/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.