FarmLead Breakfast Brief
Thursday, April 20th, 2017
“Anybody can make something up and have it sound believable. The hard part is remembering all the lies you’ve told, and all the people you’ve told them to, and then living the lies that have become your life.”
– Paul Neilan (US Author)
Apologies but due to travel constraints, there’s no listing of the grain markets’ futures price data in today’s Breakfast Brief but you can click here to see their values.
Grains this morning are mixed as planting progress in North America continues to be the talk of the town. Oil is getting a bounce this morning which is supportive of the oil complex and ethanol while geopolitical risk continues to be weighed. Canola continues to gain on a weaker Canadian Loonie, spring fieldwork across the Western prairies being slowed by weather, and some concerns over colder temperatures in Europe negatively affecting rapeseed crops there. According to AgResource, Brazilian cash soybean prices are, on average 15% below what they were a year ago, and so even though farmers there have seen some small rallies, there’s still not a lot of selling going on, as across all of Brazil, they’re only about half sold this year’s crop (sounds like there’s more speculation going on that risk management. Read more of my comments on that subject here!). Staying in the risk management theme, more talk of rising debt levels amidst rising interest rates doesn’t make us believe we’re in the 1980s again, but we also don’t have to guess that talking about plans with your accountant and banker is a good idea.
In Ukraine, 94% of spring grains have been seeded, but just 8% of their expected 11.1M acres of corn have been planted. Given some of the good conditions this year, UkrAgroConsult raised its production estimate for all grains in 2017/18 by 500,000 to 61.4M tonnes, including 26.2M tonnes of corn, of which more than 3/4s (or 20M tonnes) should get exported according to the consultancy firm. Although on the other side of the world, Ukraine will have to compete with the Brazil’s larger corn crop this year for export destinations. The U.S.D.A. is currently expecting Brazil to produce 93.5M tonnes this year, a 40% jump over last year. The problem though is space. Much like soybeans, domestic corn prices, relatively to a year ago, are lower, and just like the slow soybean selling going on (as mentioned above), farmers are storing their beans. This will challenge corn for storage space and so, with no place to store it and no selling going on, that corn will start to just get piled on the ground as the safrhina harvest starts up (earliest stuff will be taken off in Mato Grosso in June). In order to help goad things along, the Brazilian government is working on setting up $159M USD in subsidies to help farmers sell their 2016/17 crop, in addition to buying 1M tonnes in the Mato Grosso region. Will it be enough? (I don’t think so)
Looking into tomorrow morning’s StatsCan 2017 acreage estimates report (comes out at 830AM EST), the big items to watch will be the canola and wheat numbers (as usual). Heading into the report, canola acres have a guesstimate range of 20.3M – 22.5M acres, compared to last years 20.37M (so you know there’s definitely more going in). For wheat, 23.28M acres were seed last year in Canada and the market is thinking this year it will land between 21.2M – 23M acres of all wheat, including somewhere between 4.8-5.8M acres of durum. In the pulses, the lentils acreage guesstimate ranges from 3.9M all the way up to 6.1M, which on the top end is above last years’ record 5.86M acres! For peas, most analysts agree that it’ll be similar to last year but the pre-report range is 3.6M – 4.8M acres. Rounding it out, Canadian soybeans area is expected to rise about the 5.5M acres planted in spring 2016, corn will be relatively unchanged, and oats should see a pick-up from the 2.83M acres seed last year, with the top end of estimates hitting 3.7M acres!
Finally, barley acreage was 6.4M acres last year but the market has nearly a 50% range from 4.4M to 6.4M acres. However, malt barley values are below what they were a year ago and buyers haven’t necessarily been scrambling for new crop just yet. Why? Canada is exporting a lot of the malt it produces and because Australia had a record crop this year and the U.S. has produced 2 large crops back-to-back, there’s an abundance of supply, which intuitively puts pressure on prices. Combine that with relatively low feed barley prices (relative to the last couple of years), there may be less than what even StatsCan is going to suggest (or what they are expecting the market to believe).
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