January 11 – Grain Markets Gear Up for January WASDE

Good Morning!

Grain markets this morning are quietly mixed with oilseeds higher and wheat lower as the complex prepares for tomorrow’s January WASDE, out at 12 noon eastern.

“Patience is the ability to idle your motor when you feel like stripping your gears.” – Barbara om Scholz (American literary critic)

GrainCents

 

Grain markets this morning are quietly mixed with oilseeds higher and wheat lower.

Ahead of fresh rounds of NAFTA negotiations in Montreal, it’s rumoured that ranks within the Canadian government are becoming more pessimistic about a deal getting done. [1] That being said, the Canadian government didn’t do itself any favours by filing a WTO trade complaint against the US yesterday. [2]

This would be the equivalent of suing the same person that you’re trying to reconcile a marriage with. Tough to expect that relationship to go far.

As such, the Canadian Loonie is back below 80 cents USD this morning, which is helping canola prices a bit.

A new report out suggests that Canadian crude oil shipments by rail could nearly triple from 2017 to 2018. [3] Through the end of 2017, Canadian oil has been replacing Venezuela and Mexican supply in US Gulf Coast refiners as production in the latter countries wane.

This basically means that there will be more competition for Canadian grain on the railroads in 2018.

January 2018 WASDE Expectations

The January WASDE report tends to have a healthy history of surprising the market. The sentiment is generally bearish heading into this January’s WASDE grain report from the USDA.

US grain exports are tracking well behind where they were a year ago, while South American grain production isn’t expected to be that bad. US production numbers are not expected to change all that much either.

That being said, South American production numbers could easily be a bullish driver. This is especially the case if the USDA will acknowledge good growing conditions in Brazil, but dry weather in Argentina’s production belt.

Why do we expect better soybean production in Brazil? While the seeding conditions did start out rather dry, weather since the beginning of November has been characterized by average precipitation but below-average temperatures.

Today, CONAB (Brazilian USDA) will come out with their estimates of the Brazilian crop while AgResource is estimating a 111.7-million tonne soybean crop there. In Argentina, AgResource is estimating 55.5 million tonnes.

In the U.S., a soybeans stocks-to-use ratio of 10.3% is historically low, but there’s been huge crops each of the last three years! According to the USDA in December, this translates to a carryout of 445 million bushels of soybeans still available in America by the end of 2017/18.

The market, however, is expecting 472 million bushels in this January WASDE report. There have even been some estimates going into this January WASDE report of above 500 million bushels.

For corn, smaller production numbers in South America and strong corn-for-ethanol use are really the only bullish catalysts. In the U.S, it’s expected that corn inventories available on December 1st, 2017 was a new record of 12.43 billion bushels.

It’s widely expected that we’ll end the 2017/18 crop year with more than 200 million tonnes available globally.

Global wheat ending stocks are estimated at a record of more than 268 million tonnes. The only thing potentially bullish about wheat going into to this January WASDE grain report is the reduction is US winter wheat acres, which we discussed in yesterday’s Breakfast Brief.

january-wasde-estimates

 

Ukraine Grain Production, Export Numbers

In Ukraine, the government says that grain exports are slower than they were a year ago.

Nearly 21.4 million tonnes of wheat have been shipped out as of August 1st, down 10% from the same point a year ago. This includes 11.2 million tonnes of wheat (-7% YoY), which was comprised of 5 million tonnes of feed wheat (+2% YoY) and 6.2 million tonnes of milling quality (-11% YoY).

3.7 million tonnes of barley (-14% YoY) and 5.8 million tonnes of corn (-21% YoY) have also been exported through January 1st.

Looking forward, UkrAgroConult is estimating the Ukrainian wheat crop in 2018/19 at 25.1 million tonnes, down 1 million from this past year’s harvest. [4] Despite planted acres increasing to 15.5 million acres, the reason for the decline is inadequate snow cover, leaving winter wheat fields susceptible to winterkill.

UkrAgroConsult also is forecasting 25 million tonnes of corn off 10.6 million acres and 14 million tonnes of sunflowers off 16.2 million acres. Rapeseed production was pegged at 2.1 million tonnes, despite 20% of the 2.5 million acres planted this past fall expected to be lost to winterkill!

Yes, nearly 500,000 acres written off because of the challenges of seeding a fall oilseed crop in Ukraine.

GrainCents Global Grain Market Outlooks

We’ve recently opened up our grain markets outlooks on our FarmLead Insights page. Any non-GrainCents subscriber can review, but the in-depth commentary and analysis remains in GrainCents.

Click on any of the links below to get a feel for the quality content we’re producing in GrainCents

Lentils

Durum Wheat

Spring Wheat

Canola

Soybeans

Corn

Winter Wheat

Oats

Going into the January WASDE report, we’ll be watching a couple factors closely to determine our next GrainCents sales recommendation in different crops, namely canola, soybeans, and spring wheat.

To growth,

Brennan Turner
President | CEO
FarmLead
contact@FarmLead.com
@FarmLead or @GrainCents 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 = $1.255 CAD, $1 CAD = $0.7968 USD)

Mar Corn: -0.5¢ (-0.05%) to $3.488 USD or $4.377 CAD
Mar Soybeans: +0.8¢ (+0.1%) to $9.558 USD or $11.995 CAD
Mar Soybean Meal (per short ton): +$0.10 (+0.03%) to $316.50 USD or $397.21 CAD
Mar Soybean Oil (cents per lbs): +0.02¢ (+0.05%) to 33.47¢ USD or 42.01¢ CAD  
Mar Oats: +0.8¢ (+0.3%) to $2.518 USD or $3.16 CAD
Mar Wheat (Chicago): -2.8¢ (-0.65%) to $4.315 USD or $5.415 CAD
Mar Wheat (Kansas City): -2.8¢ (-0.6%) to $4.378 USD or $5.494 CAD
Mar Wheat (Minneapolis): -2¢ (-0.3%) to $6.32 USD or $7.932 CAD
Mar Canola: +2¢/bu / +$0.90/MT (+0.2%) to $11.215/bu / $494.50/MT CAD or $8.936/bu / $394.02/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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