Apr 10 – Eyes Back on South America?

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FarmLead Breakfast Brief
Monday, April 10th, 2017

“Obstacles are those frightful things you see when you take your eyes off your goal.”
– Henry Ford (American industrialist)

Good Morning!

 At 6:45 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3416 CAD, $1 CAD = $0.7454 USD)

May Corn: +1¢ (+0.1%) to $3.605 USD or $4.836 CAD
May Soybeans: +4.8¢ (+0.5%) to $9.468 USD or $12.701 CAD
May Soybean Meal (per short ton): +$2.80 (+0.9%) to $310.20 USD or $416.15 CAD
May Soybean Oil (cents per lbs): -0.38¢ (-1.2%) to 31.24¢ USD or 41.91¢ CAD  
May Oats: -1¢ (-0.45%) to $2.155 USD or $2.891 CAD
May Wheat (Chicago): -0.3¢ (-0.05%) to $4.238 USD or $5.774 CAD
May Wheat (Kansas City): -1.8¢ (-0.4%) to $4.20 USD or $5.635 CAD
May Wheat (Minneapolis): unchanged at $5.183 USD or $6.953 CAD
May Canola: -4.5¢/bu / -$2/MT (-0.4%) to $8.221/bu / $362.49/MT USD or $11.029/bu / $486.30/MT CAD

Friday’s Winnipeg ICE Close
May Barley: unchanged at $2.223 USD or $2.983 CAD
May Milling Wheat: -2.7¢ (-0.45%) to $4.564 USD or $6.123 CAD

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Eyes Back on South America?

Grains this morning are mostly mixed as the market tries to price in rains in both North and South America, and some heightened geopolitical risk in the Middle East that is drifting into another week. Hedge funds playing in the futures game have moved from a healthy long in grain markets to a bit short in just last 6 weeks, which is making things look somewhat similar to the set up in April of last year before a 20% rally. There’s more analysts who are saying to consider look at contracting old crop stocks in the next 30 days or so to take advantage of any weather market bullish effects (post it on FarmLead this morning!). While there’s rain in the forecast for parts of the U.S. (which the market is ignoring for now because it’s a bit early in the year), American planted thus far is likely to show in this afternoon’s report from the U.S.D.A. about 6-7% versus the 4% average for the first week of April. Speaking of reports, tomorrow we’ll get the U.S.D.A.’s April installment of the world agricultural supply and demand estimates (W.A.S.D.E.) and while we’re not expecting a whole bunch of change on North American numbers, eyes will again be on South American estimates.

In Europe, growing conditions continue to look pretty good, including malt barley which is keeping a lid on any price rallies. The French soft winter wheat crop is still rated 90% in good-to-excellent condition, indicating a good start there, albeit we did see similar numbers this time a year ago before rains depreciated the quality of the crop in May and June. The U.S.D.A.’s attaché for the E.U. thinks that the bloc will produce a 151.7M-tonne wheat crop (including durum), which is second in size to only Coceral’s large estimate of 153.2M tonnes. Despite the production rebound, European wheat exports in 2017/18 are likely to land somewhere between 29< and 30M tonnes, mainly due to losing market share in the Middle East and North Africa to Black Sea players. Also affecting E.U. barley exports is the decision by Saudi Arabia to switch from that to corn for animal feed as the country’s poultry and dairy industries are growing.

Staying in Europe though, the U.S.D.A.’s attaché is expecting a solid rapeseed crop of 21M tonnes  to come off in 2017/18, a 3% bump over last year’s crop but still well behind the European Commission’s current forecast of 22.5M tonnes (comparatively, Coceral is at 21M tonnes, IGC at 21.5M). The good news is that rapeseed meal demand will continue to expand, albeit by only about 1% year-over-year) but more vegetable oils are being replaced by waste fats and oils, meaning rapeseed’s share of biofuels production is expected to decline. That being said, there’s some buzz that the EU is going to drop palm oil completely from being used to produce biodiesel. Not related, palm oil prices dropped 2.2% today after the Malaysian Palm Oil Board pegged the country’s March stocks at 1.55M tonnes, up 6.5% year-over-year as production of 1.46M exceeded forecasts, but so did exports at 1.27M tonnes.

Despite the recent rally in corn to push the difference between November beans and December corn below 2.50, soybeans are still more profitable in a lot of places. Heading back to South American, the Argentinian soybean harvest continues to be felled by muddy conditions thanks to intermittent rains, with suggestions that only about 6% of the crop has been combined thus far compared to 14% by this time last year and the 5-year average of 16% (as per AgResource). First yield reports are coming off at 47.4 bu/ac, which is about 20% below the 55.6 bu/ac seen at this time a year ago. That being said, AgResource is quick to point out that while the first few fields often have the best yields, it wasn’t too long ago in 2012 that the initial yield report turned out to have the lowest numbers. TellusLabs though continues to be the most bearish on Argentinian soybean yields though, suggesting, via their satellite imagery, final yield averages could come in at 40.9 bu/ac by the end of the growing season. Intuitively, the Argentinian soybean harvest, like last April, will continue to have a fair amount of eyes on it (including those in the sky).

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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