Canada Markets

A look at Beans Across the Border

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart highlights cash soybean prices reported by ProphetX for one particular location in southern Manitoba (blue line) along with single point in North Dakota (red line), in U.S. dollars. The Manitoba location moved higher as of July 11, while the USD spread grew to $1.60/bushel or $58.79/mt on Tuesday (green line, lower study). (DTN ProphetX chart)

DTN Contributing Analyst Elaine Kub's piece titled Color Coding the Pain points to the ongoing challenge faced in the northern states because of ongoing trade war between the U.S. and China.

North Dakota may be facing the brunt of the pain, being on the fringe relative to the Midwest crops, while the Pacific Northwest, the normal outlet for exports from the northern states, has not shown a bid for some time. The advanced pace of the U.S. harvest is perhaps adding fuel to the fire, with harvest in North and South Dakota and Minnesota at a pace that is likely double the five-year average pace overall according to the most recent Sept. 23 data.

As indicated in the piece, the year-over-year negative change in North Dakota's basis is $.64/bushel, given Sept. 17, 2017 and Sept. 18, 2018 data, by far the largest negative impact of the 18 states analyzed.

DTN's basis maps on Wednesday shows points in North Dakota and Minnesota along the Canadian border ranging from $1.70 to $1.87 under the November contract. While not the weakest basis levels on the map, noting a $2.02 under reported in South Dakota, they are among the weakest levels shown in the northern states. While extensive data is not provided for Manitoba, directly across the border, the bids shown range from $.15 to $.20 under the November. Given today's close, this would suggest an elevator bid ranging from $6.63 to $6.80/bushel on the U.S. side as compared to $8.30 to $8.35/bu. in southern Manitoba, all in U.S. dollars for comparison purposes.

As seen on the attached chart, price data accessed on ProphetX is compared for two locations, one in southern Manitoba and one in North Dakota between Nov. 30, 2016 and June 15, 2018. The spread in bids (green line, lower study) has ranged from as narrow as $.07/bu. USD (North Dakota over Manitoba) to as wide as $1.14/bu. in N.D's favor, while averaging $.57/bu. The selected North Dakota bid remained continuously above the chosen Manitoba point over the entire period.

Since June 15, this spread given these two locations has moved from minus $.50/bu. to plus $1.60/bu. (Manitoba over North Dakota) as of Sept. 25, with gains realized in Manitoba continuing to outstrip gains at the North Dakota location.

In past months, Soy Canada has stated that this situation is not entirely clear-cut for Canada's industry given that: 1) the U.S. is an important export market for Canadian production; 2) Canada will face the threat of U.S. imports; and 3) Canada will have to protect sales potential in close to 70 other markets it sells into. It is difficult to know how this will affect the market overall, but we can only watch how this price relationship evolves. On Oct. 5, Statistics Canada will release merchandise trade data for August that might provide insight into the country's exports as well as imports.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @Cliff Jamieson

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