Contributed Content: Who’s Winning the Grain Exports Game?

Brennan Turner, CEO & President, Farmlead - In the October 22 FarmLead Breakfast Brief, we namely discussed corn prices, exports, & Harvest 2018, the speed of Plant 2018 for the Brazilian soybean crop continues to impress. 34 percent of the crop has been planted so far across the country, versus the 20 percent seen by this time a year ago and the five-year average of 18 percent. [3]

While the 2018/19 crop is going in, the 2017/18 crop is still being shipped out: Nearly four million tons of soybeans have been exported by Brazil so far in October. Last week, port facilities loaded an average of four boats a day, and that pace is expected to continue over the next few weeks. All data points suggest these vessels are headed to China where four million would represent about two weeks-worth of soybean crush capacity.

As a reminder, China is looking at all alternative protein options instead of sourcing from the U.S., especially with the 2018/19 Brazilian soybean harvest starting in mid-January. Karen Braun of Reuters points out that, historically, “76 percent of U.S. soybean shipments in October are to China.” [4] This year though, all export inspections to all destinations are down about 40 percent year-over-year. Through Week 6 of the 2018/19 U.S. soybean crop year, the USDA reports that actual exports are down more 37 percent with just 5.08 million tons shipped out from American ports.

With more than three months left to go in their 2017/18 crop marketing year, it’s very likely that Brazil will surpass the 76 million tons export target set by the Brazilian government and the 76.2 million tons forecast by the USDA. Some local analysts and soybean traders speculate that Brazil might end up shipping out more than 80 million tons of soybeans. While farmers have limited stocks left to sell, crush margins have been negative since mid-September so why wouldn’t they try to sell their supply at a profit to China? [5]

One last factor to add into the equation: this Sunday’s general election. Farmers are waiting to see how it might impact the Brazilian Real (the country’s currency) before forward contracting more beans. Conversely, there are more than a few analysts who are expecting soybean prices to be rangebound over the next few months. [6] Will the world between $8 and $9.50 USD/bushel on the Chicago futures board be the new norm? Rabobank thinks so.

North American Grain Exports Mixed

Speaking of grain exports, we’ve got some healthy datapoints on Canadian grain shipments this year, but there is some speculation that the music might be slowing. The CEO of CP Rail says that crude oil railroad shipments in Canada may match or possibly even exceed its record 2014 pace. [7]

For our GrainCents readers, we look at grain exports out of both the U.S. and Canada on a weekly basis.

Why does it matter?

The fact is, a whole heck of a lot of the demand function for North American grain prices is based on grain exports.

Overall, here’s how Canadian grain exports have been tracking so far in the 2018/19 crop year, through Thursday’s CGC data points:

• Canadian non-durum wheat exports: 4.04 MMT, +28.8 percent year-over-year;

• Canadian canola exports: 1.73 MMT, -15.7 percent year-over-year;

• Canadian durum exports: 620,500 MT, -17.1 percent year-over-year;

• Canadian peas exports: 473,700 MT, -42.3 percent year-over-year;

• Canadian oats exports: 449,700 MT, +16 percent year-over-year;

• Canadian barley exports: 295,600 MT, +13 percent year-over-year;

• Canadian lentils exports: 121,500 MT, +40.5 percent year-over-year; and

• Canadian flax exports: 47,000 MT, +24.3 percent year-over-year.

StatsCan just released Canadian grain exports data by destination for August 2018, the first month of the 2018/19 crop year. Durum exports saw the worst performance, with canola’s monthly shipments down 38 percent year-over-year.

Comparably, here is how grain exports out of American ports are tracking, through last Thursday’s USDA report:

• All U.S. wheat exports: 7.49 MMT, -22.8 percent year-over-year;

• U.S. hard red spring wheat exports: 2.29 MMT, -14 percent year-over-year;

• U.S. durum exports: 190,815 MT, +27.4 percent year-over-year;

• U.S. corn exports: 7.28 MMT, +80.3 percent year-over-year; and

• U.S. soybean exports (as mentioned): 5.06 MMT, -37.4 percent year-over-year