Indonesia top importer as wheat sales remain brisk

It was a record breaking October for grain movement and export. October exports of all grains hit 4.737 million tonnes, up 14 percent over the same month in 2017.  |  File photo

It is always tricky to write a column with a deadline just as major news-making events are evolving.

American President Donald Trump and Chinese President Xi Jinping reportedly agreed on the weekend to temporarily cool down their trade war for 90 days to allow for new negotiations.

And a White House statement said the Chinese agreed to buy a “substantial” amount of American agricultural, energy, industrial and other products. The agricultural product buying is supposed to start immediately.

You would think that would mean the Chinese would come back to the U.S. soybean market after being almost totally absent since the spring.

But markets initially were cautious. In overnight trade Dec. 2, Chicago January soybeans were trading up only about 1.75 percent.

It might take several days this week for the market to figure out what is really going to happen and also it will have to digest what Statistics Canada says in its Dec. 6 Production of Principal Field Crops report.

So given that there are several unknowns in the market I should focus on things that we do know about the market. And what is clear is that the trade spat has caused shifts in export markets.

Back in early October, I reported that Canadian grain exports in the crop year were running a little behind but offered the opinion that with better harvest weather and more ships arriving on the West Coast things were about to improve.

In fact, it was a record-breaking October for grain movement and export. October exports of all grains hit 4.737 million tonnes, up 14 percent over the same month in 2017, according to Canadian Grain Commission figures.

November so far also looks very good, pushing the total movement for the crop ahead of last year.

For the first 17 weeks of the crop year to Nov. 25, the total exported is 15.327 million tonnes, 9.6 percent ahead of last year at the same point.

I noted a couple of weeks ago that wheat exports in particular were booming, thanks in part to surprising demand from China. At that time I had country of destination data for only August and September.

We now have data for October and it shows that while China’s imports of Canadian wheat are still running at double the pace of last year in the same period, at almost 400,000 tonnes, Indonesia has jumped into the lead position.

In the first three months of the crop year, it has taken 614,100 tonnes, up from 457,000 tonnes at the same point last year. Indonesia is often among the top buyers of Canadian wheat.

Peru is also a big buyer so far this year, standing in third place with 472,300 tonnes.

Canola exports are also improving but are still a little behind last year’s pace. Movement of the oilseed to China is up slightly but so far there has been no huge windfall on seed sales from the lack of American soybeans going to China.

However, oil and meal exports appear to be improving thanks to Asian demand.

In first nine months of calendar year 2018, canola meal exports to China total 1.08 million tonnes, up from 725,000 tonnes in the same period in 2017. Canola oil exports to China in the same three quarters total 813,500 tonnes, up from 493,000 tonnes in the same period in 2017.

Increased Chinese demand is also a major factor behind booming Canadian soybean exports. In the crop year to Nov. 25, total soybean exports stand at 2.2 million tonnes, up 25 percent over last year at the same point.

Meanwhile, America had almost completely lost China’s soybean market. Canada might be selling a few additional ship loads to China but the real lotto winner is Brazil, which supplied 95 percent of the soybeans China imported in October, or 6.53 million tonnes. That is the equivalent of about 109 shiploads.

China’s customs data showed that in the month it imported 6.9 million tonnes of soybeans from all sellers. That is even more than the same month last year when the U.S. was still a major supplier.

This year the U.S. supplied only 66,900 tonnes of soybeans to China in October, or about one boatload.

In November last year, China imported more than eight million tonnes of soybeans from all sources. The U.S. Department of Agriculture’s weekly sales report to Nov. 22 showed the U.S. did not sell soybeans this month to China.

In December last year, China imported more than nine million tonnes of soybeans. Will the easier relationship between Trump and Xi mean the U.S. will finally get a piece of the action?

Brazil must be getting close to the last bit of its old crop supply, but new crop soybeans start to be harvested in late January.

U.S. soybean exports for the current crop year stand at only 11.9 million tonnes, down from 21 million last year at the same point.

This helps to explain why the Chicago January soybean futures contract was at the lowest level since early 2016.

The weak soybean level was helping to keep Canadian canola similarly weak, with January trading around $480 a tonne.

But while prices here have been weak, soybean and soy meal prices in China were ticking up, raising costs for its pork industry, the world’s largest.

China’s hog farmers are already under a lot of pressure as they try to contain the deadly African swine fever, so maybe Xi decided it was best to be more conciliatory toward Trump on agricultural trade, at least for a few months.

China can buy American soybeans in December and January and then if it wants to it can go back to Brazil once its new crop starts to be harvested.

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