“Even if you are on the right track, you will get run over if you just sit there.”
– John Ray (English naturalist)
At 7:25 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3428 CAD, $1 CAD = $0.7447 USD)
May Corn: unchanged at $3.648 USD or $4.898 CAD
May Soybeans: +1¢ (+0.1%) to $9.453 USD or $12.693 CAD
May Soybean Meal (per short ton): +$1.10 (+0.35%) to $310.90 USD or $417.48 CAD
May Soybean Oil (cents per lbs): unchanged at 31.83¢ USD or 42.74¢ CAD
May Oats: unchanged at $2.225 USD or $2.988 CAD
May Wheat (Chicago): +0.3¢ (+0.05%) to $4.30 USD or $5.774 CAD
May Wheat (Kansas City): +1.3¢ (+0.3%) to $4.263 USD or $5.724 CAD
May Wheat (Minneapolis): +0.8¢ (+0.15) to $5.253 USD or $7.053 CAD
May Canola: -0.9¢/bu / -$0.40/MT (-0.1%) to $8.257/bu / $364.08/MT USD or $11.088/bu / $488.90/MT CAD
Yesterday’s Winnipeg ICE Close
May Barley: unchanged at $2.221 USD or $2.983 CAD
May Milling Wheat: -2.7¢ (-0.45%) to $4.601 USD or $6.178 CAD
Getting Back on Track
Grain markets this morning are mostly lower this morning with oilseeds living in the green, with soybeans notably rebounding from a 1-year low after rains over the weekend in Argentina have stalled some harvest progress there in both bean and corn fields. While there is some more rain in the forecast for the South American country, it’s hard to expect prices to see the rally they did this time a year ago through mid-June as there’s plenty of supplies in the global pipeline still. That being said, the UN is forecasting grain markets to be relatively tranquil in 2017/18, thanks to the bounty of grain available, although they do see less wheat but more coarse grains (including corn, barley, sorghum, etc.) to a new production record of 1.353B bushels. Also, India has opened its doors back up to Canadian pulse exports, extending its fumigation exemption, meaning we’re seeing bids and negotiations return on the FarmLead Marketplace (post your block of old or new crop today!). After a week hiatus of writing, it’s unlikely that I need to recap everything that’s been going on in the grain markets but it’s worthwhile to give you a different perspective on things and so we’re back on track this morning ahead of Plant 2017 (and if you’re a new reader that just joined the 10,000s of other Breakfast Brief readers in the last 7 days, welcome to a different take on grain markets).
The elephant that’s in the grain markets’ room right now is the U.S.D.A.’s stocks and acreage report that came out last Friday on March 31st. The big surprise came in the form of U.S. soybeans acres getting pegged at 89.5M, 1.3M higher than what the average pre-report guesstimate was and a whopping 6.1M acres bigger than last year (or a 7.3% jump year-over-year). Accordingly, as the market priced in more acres, soybean prices have dropped nearly 9% in the past month but we started getting bearish on the oilseeds markets all the way back in January (see our timestamped call here on the 2017 outlook), cognizant that there could be some good pops to take advantage of, but knowing in the long-term things were poised to head lower because of large expected oilseed acreage in both America and in Canada. This has only been compounded by the fact that the Brazilian soybean harvest has been coming in bigger than expected and crop development in Argentina has started to improve.
Not to drag It out more but the U.S.D.A.’s stocks report on Friday shows that there’s also 1.735B bushels of soybeans still in the U.S., a 13.3% jump from March 1, 2016! This number came in a little bit above pre-market expectations but given the record U.S. crop that came off in 2016, and despite relative decent domestic and export disappearance, we already knew there was a lot of beans still available. For corn, the existing inventories are a bit more puzzling as with 8.616B of still unused bushels, that’s 10% higher from last March, but the pace of feed use, export volumes, and ethanol crush suggests this number should be in fact lower and we expect to be revised lower in the next few months. U.S. wheat stocks jumped 20% YoY to 1.655B bushels, thanks to a massive winter wheat crop, and because of the corresponding drop in wheat prices over the past year are down about 20% (crop type dependent), acres are down significantly as well.
More specifically, U.S. winter wheat acres dropped 3.5M or nearly 10% to 32.7M while spring wheat acres fell 5% or 600,000 to 11.3M for Plant 2017. The biggest impact though on wheat was seen in the durum side of things as acreage is forecasted by the U.S.D.A. to decline 17% from last year to an even 2M acres. Combine this with Canadian durum acreage likely dropping closer to 5M acres from the 6.2M last year, we could start to see prices stabilize, albeit the European crop is looking pretty good right now. For corn, 2017 U.S. acreage came in a little bit below pre-report guesstimates at 90M acres, which is a 4M or 4.3% drop from 2016. As both stocks and acreage numbers for corn are looking bullish, futures and cash values have been holding their own.
This is likely also to do with the fact that there will clearly be less acres going into feed grains in 2017 in the U.S. While corn and wheat acreage are both down from last year, U.S. sorghum acreage is forecasted to fall 14% to 5.76M while American oats and barley will drop by 119,000 and 504,000 respectively. This doesn’t mean feed prices are going to climb up because we still have a large supply available, but yields will be something to watch for during Harvest 2017. Finally, with the spread between November soybeans and December corn futures now at 2.45, is it possible that we see a slight bump in corn acreage when all is said & done? Yes, but there’s still going to be a lot of oilseeds planted (and available) in 2017/18 and so I leave you with the question of what’s your marketing plan If there’s no Plant 2017 rally? (remember that if there’s any rally, the highs are usually found somewhere between mid June and early July). Before the drills roll, get your grain marketing on track and pencil out a plan with your team / family today.
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.