Apr 7 – Considering Options

“The only relevant test of the validity of a hypothesis is comparison of prediction with experience.”
– Milton Friedman (US economist)

Good Morning!

At 5:45 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3319 CAD, $1 CAD = $0.7508 USD)

May Corn: -0.3¢ (-0.05%) to $3.605 USD or $4.827 CAD
May Soybeans: -2¢ (-0.2%) to $9.395 USD or $12.579 CAD
May Soybean Meal (per short ton): unchanged at $308.90 USD or $413.58 CAD
May Soybean Oil (cents per lbs): -0.22¢ (-0.7%) to 31.15¢ USD or 41.71¢ CAD  
May Oats: -0.8¢ (-0.35%) to $2.18 USD or $2.919 CAD
May Wheat (Chicago): -0.8¢ (-0.2%) to $4.225 USD or $5.657 CAD
May Wheat (Kansas City): +0.3¢ (+0.05%) to $4.203 USD or $5.627 CAD
May Wheat (Minneapolis): +0.3¢ (+0.05) to $5.22 USD or $6.989 CAD
May Canola: -6.1¢/bu / -$2.70/MT (-0.55%) to $8.182/bu / $360.75/MT USD or $10.9541/bu / $483/MT CAD

Yesterday’s Winnipeg ICE Close
May Barley: unchanged at $2.228 USD or $2.983 CAD
May Milling Wheat: -2.7¢ (-0.45%) to $4.594 USD or $6.151 CAD

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Considering Options

Grains this morning are in the red like most of the rest of out the outside markets, despite the heightened level of geopolitical risk in the game after American President Donald Trump ordered a missile strike on Syria-government-controlled resources. The move comes in retaliation to a chemical bombing by Syrian forces on Syrian rebel areas on Tuesday, which killed more than 70 people, including at least 30 children. Since Russia has been backing the Syrian government, this compounds the tension between Putin & Trump, and with more uneasiness in the Middle East, oil is hitting a 1-monht high while gold is touching levels not seen since November’s US election as investors look to safer assets. Combine this with the fact that President Trump is having some very, very important meetings with Chinese President Xi Jinping in Florida which will obviously touch on trade.  Accordingly, the grains market is considering some geopolitical implications this morning before weather forecasts and South American harvest and North American planting speculation.

Speaking of the South American harvest, according to IMEA, Brazilian farmers have sold about 55% of their soybeans. Compare this against last year in largest-producing state, Mato Grosso, when 61% of the production was already sold. One thing to keep in mind though is the domestic price has dropped with the recent appreciation of the Brazilian Real (up 13% against the US Dollar in the past year) , including in Mato Grosso where prices are the lowest they’ve been in over 2 years. Despite this, Chinese buyers are still in the market as crush margins in the People’s Republic have started to improve and “have a sizeable amount of requirements left to secure for the May-July loading period,” according to Commonwealth Bank of Australia.

Next door in Argentina, AgResource tells us that domestic soybean prices are up nearly 3% since the start of the week (versus CBOT values down almost 1% in the past week) as the traders there are starting get a bit more spooked on what rains in the forecast will materialize. However, key growing regions are likely to miss where the rain is heaviest and warmer/drier weather is expected to open up the fields for combines again next week. Average guesstimates by the market today is that the U.S.D.A. will increase their estimate of the Argentinian soybean crop by 500,000 MT to 56M, slightly below Beunos Aires Grain Exchange’s call of 56.5M but way above the likes of TellusPlanet’s satellite-imagery-based forecast of 52.3M tonnes.

Switching gears, in France, the soft winter wheat crop is still rated 90% in good-to-excellent condition, indicating the start to a good crop there, albeit we did see similar numbers this time a year ago before rains depreciated the quality of the crop in May and June. Conversely, rains in the U.S. have been helping improving dry soil conditions, providing a bearish counter to the stronger-than-export U.S. wheat export sales from last week and the U.S. national winter wheat crop rating of 51%, down 8 points year-over-year. Across the 49th Parallel, the Commodity Weather Group is expecting the last 2 weeks of April to be wetter-than-normal in Western Canada, creating some tough conditions to get field work in before the rush to roll drills starts. This is obviously compounded by the fact that there’s a lot of work that wasn’t done in the wet conditions of last fall, especially considering that there’s about 2.3M acres of uncombined fields still sitting out between Alberta & Saskatchewan alone. Overall, the options of how to proceed efficiently and effectively to finish Harvest 2016, Fall Work 2016, and start Plant 2017 should considered in due course (although I’m hoping you already have been).

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
@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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