Dec 20 – Contrasting Realities

FarmLead Breakfast Brief

Tuesday, December 20th, 2016

“Since we cannot change reality, let us change the eyes which see reality.”
– Nikos Kazantzakis (Greek author)

Good Morning!
At 6:25 AM CDT in the North American futures markets (*not cash prices*):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3401 CAD, $1 CAD = $0.7462 USD)

Mar Corn: -1¢ (-0.3%) to $3.523 USD or $4.721 CAD
Mar Soybeans: -9.5¢ (-0.9%) to $10.225 USD or $13.703 CAD
Mar Soybean Meal (per short ton): -$2.20 (-0.7%) to $314.20 USD or $421.067 CAD 
Mar Soybean Oil (cents per lbs): -0.41¢ (-1.1%) to 36.44¢ USD or 48.83¢ CAD 
Mar
 Oats: +0.8¢ (+0.35%) to $2.263 USD or $3.032 CAD
Mar Wheat (Chicago): –1.3¢ (-0.3%) to $4.038 USD or $5.411 CAD
Mar Wheat (Kansas City): -1.8¢ (-0.4%) to $4.123 USD or $5.525 CAD
Mar Wheat (Minneapolis): -0.5¢ (-0.1%) to $5.413 USD or $7.253 CAD
Mar Canola: -10¢ or -$4.40/MT (-0.85%) to $8.822/bu / $388.99/MT USD or $11.823/bu / $521.30/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.307 USD or $3.092 CAD
Mar Milling Wheat: -8.2¢ (-1.25%) to $4.772 USD or $6.396 CAD

Which feeling is worse:

Not selling any grain and the price goes lower?

Or selling a bit and if the price goes up, you still have some to sell?

Perhaps it’s time to consider posting a bit of your grain on FarmLead

Contrasting Realities

Grains this morning are mostly in the red, reversing the Turnaround Tuesday trend as bearish headwinds continue to guide the direction of the market heading into Christmastime. Soybeans pulled back 15 cents/bu yesterday as the closer we get to the new calendar year means the less risk of South American crop failure and Chinese buying demand switching to southern origins. Safras e Mercado is calling for a record 106.1M-tonne soybean crop in Brazil off of 83M acres while AgRural is estimating the winter cron crop to touch a new record of nearly 60M tonnes versus 40.7M last year. What remains supportive of the oilseeds complex is that global soyoil and soymeal stocks-to-use ratios are expected to come in quite low this year at 5.2% and 3.7% respectively (as per the USDA). However, the reality of good weather continues to create division from the bullish sentiment, possibly best exemplified by 2017 palm oil production to jump 6.6% year-over-year to 37M tonnes.

Rains in the forecast for Argentina continue to trot down on the soybeans complex but the long-range forecast does show some drier weather returning, albeit the precipitation over the weekend and this week is likely enough of a drink for the crops (for now). This is starting to the winds out of the sails of the soybean bulls, especially since managed money is net long about 121,000 lots versus holding a net short of nearly 30,000 contacts at this time a year ago, despite global carryout and a stocks-to-use ratio being nearly identical.

The talk on the amount of snow cover in Europe, the Midwest, and Southern Plains has been all the rage with the extremely cold temperatures as of late, and while some fields likely didn’t make it through the –30 C / -22 F, it’s probably no more than the usual. More specifically, in Europe, seeds hardening for the winter was likely delayed a bit in parts of southern Russia and southern and western Ukraine, but things across the rest of the continent seems to be in good shape. UkAgroConsult estimates that 83% of Ukraine’s winter crops are in “good or satisfactory” condition. Switching gears, we continue to see Minneapolis hard red spring wheat trade at 25-35% premiums above the Chicago soft red and Kansas City hard red winter wheat futures markets. This is mainly because, while there is a lot of it between the U.S. Northern States and Western Canada, there’s also decent demand for higher protein, the one spec that winter wheat will always fall short on.

One headline that we’re watching is the spread of bird flu again in Asia, which can put a damper on feedstuffs demand. South Korea has ordered the culling of 20M birds since the first case of the new strain of virus, H5N6, was reported a month ago, while the toll in Japan has been 800,000 birds and it’s unknown in mainland China after confirmed cases there. Staying in the People’s Republic, the Chinese government said that they will cut another 1.65M acres of corn production in 2017, mainly places where production has been low and unstable. The government also announced that it is supporting private-public partnerships (PPP) to spark some supply-side reform to their agricultural industry. The hope is that the success that PPPs have driven in other sectors will translate well into ag, but I would take caution in this as farming is comprised of many small stakeholders, a stark contrast to the reality of private investment only having to deal with a couple dozen steel or mining or gas companies in those industries.

To growth,

Brennan Turner

President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

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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