Apr. 28 – Just How Much?

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FarmLead Breakfast Brief
Friday, April 28th, 2017

“Take time to deliberate; but when the time for action arrives, stop thinking and go in.”
– Andrew Jackson (7th President of the U.S.A.)

Good Morning!

At 7AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3631 CAD, $1 CAD = $0.7336 USD)

July Corn: -1.3¢ (-0.35%) to $3.68 USD or $5.016 CAD
July Soybeans: -0.3¢ (-0.03%) to $9.575 USD or $13.052 CAD
July Soybean Meal (per short ton): -$0.50 (-0.15%) to $314.30 USD or $428.44 CAD
July Soybean Oil (cents per lbs): +0.11¢ (+0.35%) to 32.07¢ USD or 43.72¢ CAD  
July Oats: -0.5¢ (-0.2%) to $2.22 USD or $3.026 CAD
July Wheat (Chicago): +1.8¢ (+0.4%) to $4.33 USD or $5.902 CAD
July Wheat (Kansas City): +3.3¢ (+0.75%) to $4.37 USD or $5.957 CAD
July Wheat (Minneapolis): -0.3¢ (-0.05%) to $5.53 USD or $7.538 CAD
July Canola: -1.1¢/bu / -$0.50/MT (-0.1%) to $8.638/bu / $380.89/MT USD or $11.775/bu / $519.20/MT CAD

Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.204 USD or $3.005 CAD
July Milling Wheat: unchanged at $4.772 USD or $6.505 CAD

Going into Plant 2017, where do your grain sales sit?
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Just How Much?

Grains this morning are mostly in the red with wheat trying to find some more weather premium on some colder/wetter weather on the horizon. Soybeans enjoyed a decent day yesterday as U.S. export sales came in well above expectations at over 808,000 MT (or 30M bushels), which would be largest sale in the last 10 weeks. Conversely, there’s some negative consumer sentiment about soy oil in China as it relates to its GMO backdrop, which in turn could be a negative for continued growth of soybean imports by the People’s Republic. While we mentioned yesterday that most U.S. farm groups were pushing back against President Trump threatening to leave NAFTA, the U.S.D.A.’s Canadian attaché did come out and say that a re-negotiation of the free-trade agreement should include “fairer grain trading rules”.  More specifically, U.S. wheat delivered into Canadian gets downgraded mainly to feed while what’s considered a #2 or #3 quality wheat in Canada is usually graded a #1 as per U.S. wheat grading standards (Both the U.S. Wheat Associates and the Western Canadian Wheat Growers Association are both for an equal grain grading mandate). Overall, we know the original deal struck in 1993 is likely going to be re-worked but it’s hard to say, with President Donald Trump dancing between positions, just how much it’ll change.

The Buenos Aires Grain Exchange is reporting that the soybean harvest in Argentina is now 32%, a bit ahead of last year’s wet progress but still behind the 5-year average of 50%, and that about 2.6M acres have been abandoned (que the crop insurance call). That being said, the Exchange says that between good yields and good weather in the near-term, the size of the crop could be upgraded from their current 56.5M-tonne estimate (for the record, these production estimates already account for lost / abandoned acres). The U.S.D.A.’s attaché in Buenos Aires says that planted soybean area will drop next year though because of agronomic reasons (there’s a bit of a weed problem when planting bean crop after bean crop after bean crop) but also there’s less export taxes put on wheat and corn. As such, the bureau is forecasting corn acres in Argentina to increase 4% in 2017/18 to a record 12.35M acres, while wheat area should touch a 9-year high of 12.85M acres, up 10.5% YoY.

The International Grains Council is expecting decent crop production in 2017/18, meaning they’ve revised the global grains carryout number higher, mainly thanks to wheat and corn. For corn, globaly production is being forecasted by the I.G.C. at 1.026 Billion tonnes (+2M tonnes from previous estimate) while worldwide wheat output was increased by 1M tonnes to 736M, albeit they did acknowledge that there is slightly higher production risk in the northern hemisphere. Thanks to bigger crops in Europe and Canada, the I.G.C. is calling for a 71.2M-tonne rapeseed / canola crop in 2017/18, just shy of the record set in 2013/14. It’s also worth noting that thanks to good sales to Europe, Australian canola exports in 2016/17 are expected to climb 70% year-over-year to 3.2M tonnes. Heading into Asia, oilseed production in India is expected to increase by 7% in 2017/18 to 38.6M tonnes (but taken off of nearly 99M acres!)

In France, wheat crop conditions continue to get downgraded, with the portion of the crop rated good-to-excellent down 7 points from last week to 78% (10 points below last year too). Durum good-to-excellent crop ratings were similar, down 7 points week-over-week to 71% G/E (-19 points from the rating this time a year ago. French winter barley crops also came in at 71% G/E (-16 points YoY) while spring barley is doing a little better at 80% G/E (-5 points from last week, -14 points YoY). Here in North America, Plant 2017 is likely more than a week away still for many producers in Western Canada and parts of the U.S. Northern Plains as a lack of super warm temperatures are keeping things wet in the fields. For the crops already planted in these areas, there’s the possibility of frost showing its ugly side over the weekend. Further south into the Corn Belt, 100% of the eastern half of area will see rain this weekend through Tuesday, while only about 3/4s of the areas in the western half will get precipitation. Overall, the wet weather isn’t helping things and each incremental day it stays that way, the market will price in more risk and the question you should ask yourself from a grain marketing standpoint is, “how much waiting for the top should I do before locking something in?” Pro Tip: manage price risk exposure instead of speculating and just thinking “oh I think there’s a little more room to go.”

Have a great weekend!

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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