The first full week of 2019 came and went without much data from the USDA but wheat prices and canola prices found some strength on Friday.
“If you don’t have a competitive advantage, don’t compete.” – Jack Welch (former General Electric CEO)
The first full week of 2019 came and went without much data from the USDA but wheat prices and canola prices found some strength on Friday, which was a positive. This morning though, the Friday strength faded and wheat prices and canola prices are all lower with the rest of the complex.
Soybean prices continue to fall on the lack of fundamental data to trade off, including the news that China’s soybean imports in December dropped 40% year-over-year to just 5.72 million metric tonnes (MMT).  For the full 2018 calendar year, Chinese soybean imports fell for the first time since 2011, to 88 MMT (down nearly 8% year-over-year).
The1 drop is obviously stark for U.S. soybean exporters and growers. The challenge is, as well-articulated by Scott Irwin from the University of Illinois, “once you are branded with a scarlet letter of being an unreliable supplier, it is hard to completely regain those lost sales.’’ 
In the longer-term outlook though, there has been some positive news lately as China recently approved a few soybean and canola varieties for import.  This includes Corteva’s E3 Enlist soybeans and Bayer’s TruFlex canola.  Also a bit supportive of soybean prices is drier conditions in Brazil, where the crop size was recently downgraded to 116.9 MMT by CONAB. 
Canola prices found some strength on Friday, thanks to some short-covering, but the oilseed is still sitting in winter hibernation, not really moving anywhere.  Better meal prices have helped crush margins, but canola exports have been lackluster: Through Week 23 of the 2018/19 Canadian crop year, total canola exports have been only 4.41 MMT, down 8.1% year-over-year.
Conversely, Agriculture Canada is expecting 2018/19 Canadian canola exports to hit 11 MMT, which would be a 2.6%, or 277,000 MT jump year-over-year and 9.3% better than the five-year average of a little more than 10 MMT.
Feature Friday: Wheat Prices
Wheat prices found some strength on Friday as the market was factoring in the potential of a smaller U.S. winter wheat crop and less Russian wheat exports.  The USDA was supposed to release estimates for U.S. winter wheat acres on Friday, but because of the U.S. government shut down, no new information is coming out of the USDA.
That being said, the Kansas Wheat Commission says that U.S. growers likely seeded 32.5 million acres of winter wheat this past fall, down about 200,000 acres year-over-year.  In our outlook for 2019 grain markets sent out last week, we mentioned that Informa was estimating 2019/20 U.S. winter wheat acres of 31.5 million. Kansas Wheat says that the decline was mainly attributed to the state of Kansas receiving about 3 times the normal amount of rainfall in October, the main month to plant.
Kansas Wheat specifically says that the Southern Plains’ states of Kansas, Oklahoma, and Texas will see hard red winter wheat acres down 10% year-over-year. For perspective, these 3 states account for about half of total U.S. winter wheat acres.
In Russia, domestic wheat prices have been steadily climbing over the past few months, but since global values haven’t matched the move, the thinking is that Russia is running out of exportable supplies.  There is some buzz that the Russian government will subsidize transportation costs to pull wheat from parts of the country further from deep-water ports, but that’s entirely speculation at this time.
U.S. Wheat Prices Poised to Improve on Exports?
The U.S. Wheat Associates are expecting U.S. wheat exports to pick up in the coming months, thanks to the slower export pace out of Russia and limited supplies also in Australia after their drought-stricken harvest.  Given the current pace of U.S. wheat exports though, the second half of the 2018/19 crop year will have to see a fairly robust campaign, and one where U.S. wheat prices are competitive against the likes of Canadian wheat prices.
More generally though, U.S. wheat prices have been tracking relatively sideways.  Conversely, Canadian wheat prices (namely basis) continues to perform very well compared to the same point a year ago.
One specific destination for wheat exports that the U.S. is looking like it could lose is Japan.  With the Trans-Pacific Partnership now open for business, the U.S., as of April 1st, 2019, will be at a disadvantage of $14 USD / MT, or 38¢ USD and 51¢ CAD per bushel if converting metric tonnes to bushels.
Right now, Canadian (non-durum) wheat exports are tracking well, up 21.6% year-over-year at 8.19 MMT.
The bigger question though is if this pace can continue to me the AAFC’s current full crop-year target of a record of 18.5 MMT of Canadian wheat exports. With Japan giving preference to Australian and Canadian wheat over U.S.-origin, and Australia having a bit less wheat to export, this export target is certainly within reach.
At 7:55 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3278 CAD, $1 CAD = $0.7531 USD)
Mar Corn: unchanged at $3.785 USD or $5.026 CAD
Mar Soybeans: -2¢ (-0.2%) to $9.048 USD or $12.014 CAD
Mar Soybean Meal (per short ton): -$1.80 (-0.55%) to $312.80 USD or $415.35 CAD
Mar Soybean Oil (cents per lbs): -0.27¢ (-0.95%) at 28.21¢ USD or 37.46¢ CAD
Mar Oats: -2.3¢ (-0.75%) to $2.925 USD or $3.884 CAD
Mar Wheat (Chicago): -4¢ (-0.75%) to $5.16 USD or $6.853 CAD
Mar Wheat (Kansas City): -3.3¢ (-0.65%) to $5.013 USD or $6.656 CAD
Mar Wheat (Minneapolis): -3.5¢ (-0.6%) to $5.67 USD or $7.529 CAD
Mar Canola: -3.2¢/bu (-0.3%) to $10.929/bu / $481.90/MT CAD or $8.231/bu / $362.92/MT USD
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