Grain markets are in the green this morning, led by soybean, oats, and wheat prices, but for the third straight Monday, equity and oil markets are all lower.
“In tennis, you strike a ball just after the rebound for the fastest return. It’s the same with investment.” – Masayoshi Son (Korean-Japanese billionaire and founder of Softbank)
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Wheat Prices Leading Grains’ Rebuttal to COVID-19
Grain markets are in the green this morning, led by soybean, oats, and wheat prices, but for the third straight Monday, equity and oil markets are all lower. Grain prices are finding some gains as investors flee to more less volatile asset classes and recognize the increased demand for food staples (especially wheat by-products like flour, bread, crackers, and pasta).
This confirms my timestamped call from last week that wheat and durum prices may be the leading indicator for the rebound in grain prices overall. That said, average Western Canadian durum prices for spot movement are currently sitting at their best values since August 2017. Plenty of credit-verified durum buyers are looking for supply so post your Listing on the Combyne grain marketplace (Note: If you’re looking for something really high like $9 CAD/bushel right now, no buyer will touch it…there’s too much supply still in the pipeline at this point). At worst, by listing your deal publicly, new buyers can engage with you and you’ll build up your network of Combyne Connections so you have more options at your disposal for later sales.
To end last week, grain markets were mixed with oilseeds and wheat finding strong gains near its end while corn and oats couldn’t recover deep losses earlier in the week. In the broader markets, U.S. stocks had their worst week since 2008, with the Dow losing an incredible 17.3%, the S&P 500 dropping 15%, and the Nasdaq falling 12.6%. With the significant fall in oil prices, coal, which is usually the cheapest energy option, has now ironically become the most expensive. 
The broader markets are down again this morning as economic worries abound and global COVID-19 cases topped 340,000 (as of this morning and nearly 15,000 deaths), which would be double that of a week ago.  In an interesting turn, doctors and researchers are now looking to add loss of taste and smell to their list of COVID-19 symptoms 
Wheat Prices Following Food Staples Demand
Wheat prices were the start of last week and continue to find some buying strength this morning as investors start prioritizing what food products will be in demand during a lockdown. That said, just like there was an overreaction to the downside, I am cautious of the rally in wheat prices going too far and so you should be thinking about selling into strength in 10% increments here. Besides wheat prices potentially overcorrecting, the world is still plugged with a lot of wheat and expectations are that we’ll see record global output for the 2020/21 crop year.
However, coming back to the present, wheat prices continue to clearly be attractive, especially in the cash markets as millers scramble to secure supplies. This isn’t just the case in North America, but also abroad; several EU supply chain risk managers have been reaching out to me in the past few days as they think about shifting priorities and logistical resources. For example, in France, the government has designated the food industry as a strategic priority but firms are still struggling to find trucks to bring product from port positions to factories or warehouses. 
That said, wheat prices there are already performing fairly strong there as the country was on track to potentially set a new record for the amount of wheat exports. There’s also the general fear that products coming from the likes of Italy are somehow tainted or carrying the COVID-19 virus, so people are looking for alternatives (especially tomatoes and pasta). To be clear, I think this is unfounded, but in times of hysteria and fear, the rational thinking of many tends to go out the window. Accordingly, economists from the UN’s FAO are fully expecting food inflation to pop going forward as people “panic buy” and are asked to remain at home. 
Speaking of home, cash wheat prices in North America have followed the trend of the futures markets, in reclaiming all losses over the past few weeks and pushing higher. More specifically, CPS wheat prices in Western Canada jumped nearly 12% in one week while HRS wheat prices were up 6.3%. As a reminder, wheat prices are usually in a seasonal downturn at this time of year. That said, wheat prices will likely get fairly choppy in the coming weeks as the bulk buying demand might influence Plant 2020 wheat acres to the upside. One last factor to keep in mind: a Canadian Loonie trading below 70 cents USD will continue to support Canadian cash wheat prices.
What Else are Grain Markets Watching?
Corn mitigated its losses from earlier in the week thanks to a positive export sales report, namely the 756,000 MT sold to China. This is the largest single purchase of U.S. corn by the Chinese since July 2013, so needless to say, in a sea of woeful demand news, it was welcome. That said, those negative undertones are likely to keep corn prices in check and could further by pressured by a big 2020 U.S. corn crop. Also, don’t forget about the second/safrina corn crop in Brazil that’s in the middle of being planted.  There are some drought concerns in southern Brazilian states though, which is also going to reduce the size of the Brazilian soybean harvest.
Last week, we got Agriculture Canada’s supply and demand update. Most notable was the downgrade of their forecast for 2019/20 non-durum exports and 2020/21 pea exports, both of which were lowered by 200,000 MT to 18.2 MMT and 3.3 MMT, respectively. In the current crop year, 2019/20, Canadian pea exports are noticeably slowing down, albeit total 2019/20 exports through Week 31 are tracking 40% higher year-over-year.
The slowdown isn’t all that surprising though if you understand that a lot of Canadian pulses and specialty crops are exports via container, but said container transloading yards are full and preventing the receival of any more rail cars.  This is mainly a ripple effect of Asian ports (namely China) shutting down their ports for a few months.  Nonetheless, there’s speculation this could be “a boom time for the bean industry” (and pulses in general). 
Overall, the current situation just sucks. I sat down on Friday night and reflected on the situation, which led me to ask what I think is now the most important question to ask in today’s COVID-19 chaos. All politics aside, we can’t go back and change what’s happened; we can only move forward. Given the economic downturn that is happening, those of us who are still in the workforce have a much greater responsibility to get things going again. The greatest error to be made right now for you, for your family, for your community, and our economy, is to be paralyzed by fear and not move yourself forward. Yes, our humanity is being tested but this has been seen before. Past generations have, as one, rose to the occasion; have collectively struggled and emerged victorious. It’s our time in history to do the same.
This in mind, make it a great week!
At 8:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.4289 CAD, $1 CAD = $0.6999 USD)
May Corn: +0.5¢ (+0.15%) at $3.443 USD or $4.945 CAD
May Soybeans: +13.5¢ (+1.55%) to $8.76 USD or $12.583 CAD
May Soybean Meal (per short ton): +$7.40 (+2.3%) to $332.60 USD or $477.74 CAD
May Soybean Oil (cents per lbs): +0.27¢ (+1.05%) to 25.91¢ USD or 37.22¢ CAD
May Oats: +6.8¢ (+2.6%) to $2.688 USD or $3.86 CAD
May Wheat (Chicago): +16.3¢ (+3%) to $5.555 USD or $7.979 CAD
May Wheat (Kansas City): +15.5¢ (+3.3%) at $4.845 USD or $6.959 CAD
May Wheat (Minneapolis): +10.8¢ (+2.05%) to $5.318 USD or $7.638 CAD
May Canola: +2.5¢ (+0.25%) to $10.501/bu / $463/MT CAD or $7.311/bu / $322.34/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.