Grain prices were under pressure in August as ongoing trade concerns continued to rattle confidence in the commodity markets. U.S. crop export prices hit their lowest levels in more than six years, as uncertainty from the trade war with China mounts.
A bearish August WASDE report also indicated that U.S. soybean stocks were on the rise, and record U.S. production is on tap. The ProFarmer Crop Tour also indicated that U.S. corn yields are potentially set to hit new records, while confirming a lot of suspicions about the size of the American soybean crop.
The biggest news in August was the decision by the Trump administration to compensate farmers for their lost income from the trade war with China and other nations. There is roughly $6.2 billion planned for dispersal among farmers. Roughly $3.6 billion has been earmarked for soybean farmers.
Here is the breakdown of payments to farmers.
• Wheat: 14 cents per bushel on 50% of 2018 production
• Sorghum: 86¢/bu on 50% of 2018 production
• Soybeans: $1.65/bu on 50% of 2018 production
• Corn: 1¢/bu on 50% of 2018 production
• Cotton: 6¢/lbs on 50% of 2018 production
• Dairy: 12¢/CWT on 50% of MPP production
• Pork: $8 per head on Aug. 1 for 50% of the herd
Keep in mind that the USDA might not be done with payments. The Trump administration has said that these cash payments could double. However, this decision will depend on whether the U.S. makes progress on trade through the end of the year.
That being said, soybean prices are down by about 11% from this time last year. Review all of the changes to grain prices in August 2018 for the 12 different crops that we cover for our GrainCents readers here:
Canadian Wheat, Canola Production Declines
Wheat prices in August were impacted by falling Canadian production, lower global stocks, and increasing pressure on European and Russian output and exports.
But we really want to hone in on Canadian production changes thanks to dry weather and shifting farmer expectations.
Statistics Canada said that spring wheat production would decline about 3% year-over-year, despite acreage increasing 9% from 2017’s area.
The agency said that Canadian canola production will come in at 19.2 MMT, down 10% from the 21.4 MMT we saw last year. Although falling canola production is a bullish factor for the crop, the price of canola was under pressure all month due to proximity to the struggling U.S. soybean market.
StatsCan’s production numbers also came in below expectations for peas, lentils, oats, and durum as well.
Specifically, the agency said that lentils production will fall by 15% year-over-year.
NAFTA Pressures Grain Prices
During the final week of August, the United States and Mexico reached a bilateral deal on trade. Mexico made a series of concessions in the automotive sector to get a deal in place. U.S. farmers are hoping that the deal will help bolster corn exports. However, as we’ve noted in the past, Mexico had already begun diversifying its supply of corn from Brazil over the last year.
The question moving forward is whether Canada will join the new pact to save NAFTA or if the Trump administration will shut out its long-time trade partner. Last week, a leak from the White House indicated that Trump was not willing to make any concessions on a deal between the countries. Trump has effectively said that Canada can “take it or leave it.”
Failure to get a deal done will likely put on canola, spring wheat, oats, and other crops in the Canadian Prairies.
What’s Happening at FarmLead?
FarmLead provides a wealth of cutting-edge tools to help farmers maximize their grain marketing and get more money for their grain.
• Check out Grain Marketing University to discover how to connect your farm’s production to your profits.
• GrainTests.com is a simple tool to proactively order, pay, and receive quality assessments done on your grain from hundreds of independent labs across North America.
• We also encourage you to explore all your options for cash grain trade on the FarmLead Marketplace: Post your own offer – be it negotiable, a firm target price, or a no-price offer – and let our network of more than 10,000 farmers and credit-verified buyers come to you!
• Finally, to be more on top of the what’s affecting grain prices, join us for your free trial at GrainCents.