Grain markets this morning are higher, rebounding from yesterday’s down day, despite some strong corn and wheat exports sales data.
“Time is a sort of river of passing events, and strong is its current; no sooner is a thing brought to sight than it is swept by and another takes its place.” – Marcus Aurelius (ancient Roman emperor and philosopher)
Corn, Wheat Exports Bonanza to Start 2020/21
Grain markets this morning are higher, rebounding from yesterday’s down day, despite some strong corn and wheat exports sales data. Cooler temperatures in the forecast for much of North America is starting to add some weather premiums into the market again, as some parts of Illinois and Missouri saw a drop in temperature by more than 20 degrees Fahrenheit yesterday! 
In Monday’s Breakfast Brief, I discussed the big production numbers from StatsCan for cereals and pulses, but the smaller harvest expectations for oilseeds. While I touched on lentil prices a bit in Wednesday’s Breakfast Brief (including a few buyers that you should add to your Combyne Connections trading network), I’ve gotten some questions from farmers this week on pea prices. Statistics Canada suggested a record pea harvest of 5 MMT, which is also 25% or 1 MMT more than the 5-year average!  While we know there’s strong demand from China and other Asian markets, it’s likely that last year’s pea prices won’t be coming back, at least not for the next 6-9 months.
Strong Wheat Exports On Smaller Wheat Harvest
Good rains in Argentina are helping alleviate some dry conditions, but the Buenos Aires Grains Exchange said this week that there is a lot of damage that the crop won’t be recoverable from.  On a related note, an updated estimate from German Ag Ministry suggests that their wheat harvest will total a little under 22 MMT, or about a 5% drop from last year’s haul.  For other crops, it’s estimated that the rapeseed harvest will rebound by 24% to 3.51 MMT, winter barley (mostly goes into the feed category) will fall over 9% to 8.84 MMT, spring barley (mostly used for beer production) will climb nearly 12% to 2.04 MMT, and the corn harvest should bump up by nearly 6% to 3.84 MMT.
Despite the smaller German wheat harvest, British millers are buying more from Germany since the UK’s own wheat harvest is expected to fall 35% year-over-year to just 10.5 MMT.  This is largely due to the fact that wheat acres planted last fall turned out to be the smallest in nearly 50 years, mainly thanks to the wet fall of 2019. UK millers have also bought more Canadian wheat, as they seek higher-protein levels to blend off with lower protein wheat coming in from the domestic UK wheat harvest. That said, it’s very likely that UK wheat imports will quickly surpass the 1.05 MMT brought in during their 2019/20 crop (which runs from July to June).
Speaking of Canadian wheat exports, we’re 4 weeks into the 2020/21 shipping campaign and non-durum wheat exports are already cruising with nearly 1.8 MMT sailed. That is nearly 150% better than the first 4 weeks of the 2019/20 Canadian wheat exports campaign! Comparably, U.S. wheat exports of all times are tracking a little higher than last year, with 6.53 MMT sailed through Week 13.
The strong start is largely attributed to the aforementioned smaller wheat harvest in Europe, but also the small haul in Ukraine, who’s own wheat exports are tracking slightly behind last year with just 5 MMT sailed in 2 months so far.  That said, wheat prices have been climbing globally for the past few weeks alongside the rally seen here in North America, and as the saying goes, high prices cure high prices, Asian wheat millers’ demand has slowed at these elevated levels. 
Corn Prices, Exports Looking at China & Brazil
In Brazil, corn prices continue to sit at record high levels and they’re going to drop any time soon says a couple analysts.  With the second crop, safrhina corn harvest finishing up in Brazil, there’s a fresh wave of supplies hitting the market, but the large majority of this production was forward contracted and so those are being filled for mainly the corn exports market. The main reason that corn prices continue to rise is the slow farming selling on the spot market to ethanol and livestock players, since they tend to buy a bit more hand-to-mouth.
That said, with corn prices climbing in Brazil, it’s making it tougher for the livestock industry to afford said feed supplies. Industry experts in Brazil believe that corn exports out of Brazil won’t slow down either, since exporters usually pass on the additional cost to their international buyer. In this vein, that’s why Brazil will see more than 41 MMT of corn in the 2019/20 crop year, and somewhere between 31.5 – 34.5 MMT of corn exports in 2020/21 (Note: the Brazilian corn crop year runs from February to January). That said, if Brazilian farmers repeat the same sales process in 2020/21 that they did in 2019/20, a lot of bushels will be forward contracted again and that should weigh on global corn prices a bit.
One thing to consider for Brazil, however, is that weather agencies around the world have increased their expectations of La Nina event happening this fall and continuing through the winter.  As this would fall in the heart of the South American growing season, it’s important to use history as a benchmark and the last time a La Nina event happened in 2011/12, soybean and corn production in Argentina and Brazil both saw significant challenges. Further, the La Nina event carried through to 2012, and brought drought conditions to the U.S. (and $8 corn prices on the Chicago futures board!)
That said, estimates for the 2020/21 soybean harvest in Brazil continue to grow, with Celeres increasing its estimate by 600,000 MT to now sit at 131.4 MMT. Conversely, they left the first crop 2020/21 Brazilian corn harvest at 30 MMT. Back here in North America, Allendale’s nationwide farmer survey pegged corn and soybean yields at 178.3 and 51.9 bpa respectively.  This would add up to just under 15 billion bushels of corn and a little more than 4.3 billion bushels of soybeans (or 380.8 MMT and 117.3 MMT, respectively, if converting bushels into metric tonnes).
While these new yield and total production numbers are below what the USDA suggested in their August WASDE, we’ll likely see someth9ing similar in the September WASDE, out next Friday. The numbers that traders will be watching more though will be soybean and corn exports. Last week, China bought over 1.2 MMT of U.S. corn exports last week, bringing the total since the middle of February to 10.58 MMT (as well as another nearly 2.5 MMT that the USDA has categorized as “Unknown” but it’s likely going to China).
Ultimately, those in the bullish corn exports camp are expecting China to buy somewhere between 15 and 20 MMT of U.S. corn exports in 2020/21.  This is largely because of the corn shortage their facing and so this demand is starting to be priced into the market, as is the expected drop in average U.S. corn yields. Thus, while we saw a sell-off yesterday, the supply and demand fundamentals are potentially setting grain markets up for a healthy 4Q2020 in terms of higher values. 
Have a great long weekend! (Reminder: due to the long weekend, there’ll be no Breakfast Brief sent out on Monday as grain markets are closed.)
At 8 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3092 CAD, $1 CAD = $0.7638 USD)
Dec Corn: +5¢ (+1.4%) to $3.588 USD or $4.697 CAD
Nov Soybeans: +2.3¢ (+0.25%) to $9.683 USD or $12.677 CAD
Oct Soybean Meal (per short ton): +$1.80 (+0.6%) to $309.40 USD or $405.08 CAD
Oct Soybean Oil (cents per lbs): -0.06¢ (-0.2%) to 33.08¢ USD or 43.31¢ CAD
Dec Oats: +2.5¢ (+0.9%) to $2.75 USD or $3.60 CAD
Dec Wheat (Chicago): +0.8¢ (+0.15%) to $5.54 USD or $7.253 CAD
Dec Wheat (Kansas City): +2¢ (+0.4%) to $4.778 USD or $6.255 CAD
Dec Wheat (Minneapolis): -1¢ (-0.2%) to $5.463 USD or $7.152 CAD
Nov Canola: +4.1¢ (+0.35%) at $11.465/bu / 505.50/MT CAD or $8.757/bu / $386.10/MT USD
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