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Mar. 18 – Grain Prices Getting Record Bearish Attention

Grain prices this morning are relatively quiet but mixed as the complex tries to decide what headlines are more important to focus on this week, weather or trade war talks.

“The difference between something good and something great is attention to detail.” – Chuck Swindoll (US evangelical pastor).

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Grain Prices Factoring in Negative Weather

While last week’s snowstorm and flooding across the American Plains was scary to experience, let alone watch from afar, it doesn’t look like the volatile weather is done yet. The National Weather Service says that water levels are expected to rise throughout this week and into next as the combination of melting snow and rain has overcome levies and dams to create a wide path of destruction, especially in Nebraska. [1]

For grain prices last week, I think that the market has factored in some of this negative weather. DTN’s Bryce Anderson described last week’s storm in great detail, calling last week’s storm across the U.S. Plains a “Billion-Dollar Bomb”. [2] This references not only the fact that the storm was categorically defined as a bomb cyclone but also the cost of the clean-up and/or lost assets (i.e. cattle) from the storm will likely exceed one Billion dollars!

Moving forward, it’s expected that the volatile weather will continue through to the end of March. [3] This confirms the theory that I posited last week that a solid start to Plant 2019 was becoming less of a certainty and more of a question mark. That being said, Top Farmer reminds us that watching markets during planting is still important, with the highs of the market usually coming some time between late May and early July. [4] At this point though, it’ll likely be a “wait-and-see” approach with a hope that warmer temperatures in April will be above-average and fields will dry out faster. [5]

Worth mentioning is INTL FC Stone’s most recent acreage estimates for Plant 2019. They’re forecasting corn acres seeded in the U.S. will come in at 90.4 million while soybean acreage will only drop to 87.7 million. For the record, out of all the estimates available, this is the highest number for soybeans and the lowest for corn. For comparison, the last acreage estimate from the USDA at their February Ag Outlook Forum in February was for 92 million acres of corn and 85 million acres of soybeans. For perspective, American farmers planted 89.1 million acres of corn and 89.2 million acres of soybeans last year. We’ll get the next Prospective Plantings report from the USDA on Friday, March 29th at 12PM EST.

Grain Prices Done with Short-Selling?

Last week we saw fund managers increase their net short position in all grains and oilseeds futures to a record level. Karen Braun of Reuters points out that the reported data by the CFTC was only through Tuesday, March 12th but that speculators were buyers throughout the rest of the week. [6] Individually, fund net-short positioning on corn through last week was the highest in at least five years while the short position in soybeans was the most since mid-January 2018. For canola, speculators are now sitting at a net-short position of more than 55,000 contracts.

The rebound off these record bearish positions though is likely part of the reason that we saw grain prices end in the green for the week. Here’s a breakdown of how front-month contracts performed last week for all futures-related grain prices. 

After the sell-off that grain prices saw in the first week of March, this sort of rebound basically puts grain prices back to where started March at. I might’ve been two weeks early, but it was at that time that I timestamped the reality that weather could save grain prices from the lows. Coming back to the present, new crop contracts also made up some lost ground last week, but not as much as nearby grain prices.

Coming back to bearish sentiment, TD Bank stated last week that they think the Canadian Dollar’s outlook has shifted “considerably” and could fall to 71¢ USD versus the 75¢ USD that you’re seeing today. [7] The reason for the bearish outlook are plenty, according to the Canadian big bank, naming the Loonie as a “problem children” within the G10 with not too many positives to find. This namely because of the poor economic metrics that Canada has seen lately (namely its GDP numbers), which is a function of oil prices continuing to be weak.

In fact, TD Bank is not expecting a lengthy rebound in oil prices “due to a combination of weak global demand and a likely pick-up in production in the U.S..” Add in the fact that there isn’t likely to be more Canadian interest rate increases, but that the U.S. Federal Reserve could do one more hike, the Canadian Dollar is poised to remain weak relative to its American Greenback counterpart.

Overall, grain prices are thinking more and more about this volatile weather’s impact on new crop prices, as well as the potential for a trade war ending. Perhaps those calling to beware the Ides of March last Friday were right and there are some bad things/events/actors looming. [8] For grain prices right now though, one could consider that to be a good thing.

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

At 8:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3333 
CAD, $1 CAD = $0.75 USD)

May Corn: unchanged at $3.733 USD or $4.977 CAD
May Soybeans: -1.5¢ (-0.16%) to $9.078 USD or $12.103 CAD
May Soybean Meal (per short ton): -$0.30 (-0.1%) to $310.50 USD or $414 CAD
May Soybean Oil (cents per lbs): +0.04¢ (+0.15%) to 29.47¢ USD or 39.29¢ CAD  
May Oats: +0.8¢ (+0.25%) to $2.778 USD or $3.703 CAD
May Wheat (Chicago): -1.5¢ (-0.3%) to $4.608 USD or $6.143 CAD
May Wheat (Kansas City): +0.8¢ (+0.15%) to $4.438 USD or $5.917 CAD 

May Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.553 USD or $7.403 CAD
May Canola: -0.2¢ (-0.02%) to $10.539/bu / $464.70/MT CAD or $7.403/bu / $348.532/MT USD

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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Mar. 13 - Checking in on Pulses as Grain Prices Correct
March 13, 2019 Brennan Turner
While this morning we dig into pulses, grain markets give up gains made in a solid rally yesterday, namely led by wheat prices.
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