Grain

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GRAIN DIVISION

Gary Friesen Grain Merchandizer

In 1939 Winston Churchill famously described Russia as “a riddle, wrapped in a mystery, inside an enigma”. Eighty years later Churchill’s quote could be used to describe the uncertainty that was encountered in the grain market this past growing season. The grain market continues its mysterious way even as we get the final production numbers for this year’s fall crop.

The wheat market began a move higher on December 10, 2019 with the Kansas City March 2020 Wheat contract trading from a low of $4.23 ½ to its recent high of $5.04 ¾ on Jan. 22, 2020. Strong export sales as well as continued concerns about dry conditions in Australia and Argentina supported the wheat market. Lower planted acres in the U. S. and concerns about dry conditions through the wheat belt as well as concerns of winter kill in the northern plains also supported the wheat market. The Kansas City July 20 Wheat contract closed above $5.00 on December 31, 2019, dipped down to $4.90 ¼ shortly after the first of the year but is currently trading above $5.00. March corn has been supported by better export sales numbers as the calendar year came to a close but futures continue to trade in a narrow range between $3.80 and $3.90. Domestic demand for corn for both feed use and alcohol continues to be strong. The new crop December 2020 Chicago Corn contract moved from its lows on Dec. 12, 2019 to a high of $4.04 ¾ on Jan. 15, 2020. The corn market continues to lack direction due to an ongoing uncertain production picture and a lack of Chinese demand.

Soybeans rallied from a low of $8.82 ½ on December 2, 2019 to a high of $9.61 on January 2, 2020 before sliding to a recent low of $9.04. New Crop November 2020 Soybeans have traversed the same path closing most recently at $9.47 ¼. Harvest prospects for soybeans appear good in South American and depending on yields could pressure nearby soybeans.

In January the grain markets got the highly anticipated USDA World supply and Demand Report as well as the important news that Phase 1 of the Trade Deal with China would be signed. Neither of these events provided significant support for the grain markets and in fact continued to leave lingering doubts that added to uncertainty in the grain markets. The trade deal was signed on Jan. 15 th by both President Trump and Chinese Vice Premier Liu but the grain markets shrugged off the news with soybeans ending the trading session down 13 cents, wheat unchanged and milo and corn down 1 cent. It seemed to be a classic case of traders

“buying the rumor and selling the fact”. After looking at the details of the Phase 1 agreement, there seemed to be little to really hang a hat on. The agreement was set to kick in 30 days from the sign up day and contained language that China would purchase and import on average at least $40 billion annually of U.S. food, agricultural and seafood products for a total of $80 billion over the next two years. Strangely, the agreement also recognized that Chinese purchases are to be made at market prices based on commercial considerations and that market conditions may dictate the time of year that agricultural purchases are made within any given year. I’m not sure just what that means but leaves me with doubts that these commitments can or will be met. The agreement certainly addressed a wide range of trade issues but so far the grain markets continue to wait to see what the outcomes will be. There are lingering concerns about Phase 2 of the agreement including when it will be completed and what Phase 2 will contain.

Date Wheat Corn Milo Soybean 10/7/19 3.47 3.77 3.22 7.90 11/6/19 3.78 3.69 3.14 8.03 11/21/19 3.76 3.59 3.54 7.76 12/18/19 4.12 3.72 3.22 8.14 Last Year –Feb. 2019 AVG. 4.31 3.64 3.14 7.75

3 USDA’s Jan. 16, 2020 WASDE report moved the grain markets lower, with wheat losing 11 ¾ cents, corn losing 12 cents and soybeans losing 4 ¾ cents at the close of that day’s trading session. Because this report is the final report on corn production for the year, many traders expected USDA to