Apr 11 – Looking for Demand

 

“I don’t care too much what happened in the past. I prefer to focus on what is coming next and I am really looking forward to it.”
– Sebastian Vettel (Formula One race car driver)

Good Morning!

At 6:50 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3328 CAD, $1 CAD = $0.7503 USD)

May Corn: -0.8¢ (-0.2%) to $3.663 USD or $4.881 CAD
May Soybeans: +1.8¢ (+0.2%) to $9.435 USD or $12.575 CAD
May Soybean Meal (per short ton): -$0.10 (-0.05%) to $309 USD or $411.84 CAD
May Soybean Oil (cents per lbs): +0.19¢ (+0.6%) to 31.54¢ USD or 42.04¢ CAD  
May Oats: +1¢ (+0.45%) to $2.175 USD or $2.899 CAD
May Wheat (Chicago): -1.3¢ (-0.3%) to $4.275 USD or $5.698 CAD
May Wheat (Kansas City): -2.3¢ (-0.55%) to $4.233 USD or $5.641 CAD
May Wheat (Minneapolis): +1¢ (+0.2%) to $5.203 USD or $6.934 CAD
May Canola: -0.9¢/bu / -$0.40/MT (-0.1%) to $8.326/bu / $367.12/MT USD or $11.097/bu / $489.30/MT CAD

Yesterday’s Winnipeg ICE Close
May Barley: unchanged at $2.238 USD or $2.983 CAD
May Milling Wheat: unchanged at $4.594 USD or $6.123 CAD

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Looking For Demand

Grains this morning are quietly mixed as the market sets up for another report day, although corn had a good day yesterday on short-covering amidst plant delay concerns. At noon EST today we get the U.S.D.A.’s April estimates of global grain supply and demand numbers. Last month they surprised the market by increasing supply without much change to demand so the market is looking for some upgrades to the buy side of the equation.  Speaking of demand, AgResource tells us that soybeans continue to get shipped out of Brazil at a record pace with 27.6M tonnes now shipped or waiting to be put in a boat (AKA grain “committed”). Staying in the oilseed, palm oil prices in Malaysia continue to slip lower (putting pressure on canola) with bigger production and available supply, but there are some labour concerns that are keeping Indonesian workers away from coming across the border for the ramp up in planting over the next few months. Overall, there fundamentally continues supply-driven bearish headwinds and there’s more than just the bulls who are hoping for some fresh demand news from the U.S.D.A. today.

Looking at South America, the average guesstimate from the market is that crops are getting bigger. In Brazil, the market is expecting the U.S.D.A. to upgrade the corn crop there by nearly 1M tonnes to 92.4M and the soybean crop by almost 2M to 109.86M tonnes. The upgrades in Argentina are a little smaller, given some the precipitation issues there, with the market expecting a 300,000 raise for both corn and soybeans to 37.8M tonnes and 55.9M tonnes respectively. As it relates to where this marketing year’s inventories will end up, in America, the market is expecting ending stocks to all be bigger by 12-30M bushels from the last report at 2.35 Billion bushels of corn, 447M bushels of soybeans, and 1.145 Billion bushels of wheat. Globally, it’s the same thing, with carryout being raised across all crops to an average (pre-report guesstimate) of 221.8M tonnes of corn, 83.9M tonnes of soybeans, and 250.2M tonnes of wheat.

In China, since the government there is no longer subsidizing the price that it pays farmers for corn, producers are getting out of the coarse grain. According to the U.S.D.A.’s attaché in Beijing, this year, Chinese farmers are expected to plant 89.6M acres of corn, a 5-year low, whereas wheat acreage across the People’s Republic is expected to increase to 60.5M acres, a 15-year high! Despite the lower corn acreage, yields are expected to improve a bit, keeping production at a healthy 217M tonnes (IGC at 215.8M tonnes) while wheat production is forecasted at 131M tonnes (IGC at 128.3M). Switching gears, as per the U.S.D.A.’s crop progress report out yesterday, corn planting in the U.S. as of Sunday was 3% complete for the 2017/18 crop, matching the 5-year average but slightly behind trade expectations of 4% (it’s early so cool your jets if you’re thinking things are getting behind). The planting and emergence of the U.S. oats crop is a bit behind though with only 33% of the crop seeded (41% 5-year average) and 26% out of the ground (31% average). However, 53% of the winter wheat crop got rated good-to-excellent, a 2 point bump from last week and only 3 points back of last year’s 56% at this time in April.

Speaking of quality, it’s estimated that there’s up to 600,000 acres of unharvested oats that still need to be taken off this spring in Saskatchewan alone, or about 24% of the total provincial acres seeded to the cereal! While there seems to be sufficient supplies in the pipeline, you might see a quick pop towards May/June as the quality of what gets combined in the next few weeks is understood. Staying in Western Canadian prices, yellow peas continue to see decent demand with prices hunkering in between $7.50 – $8 CAD / bushel for old crop and some bids into the $6s for new crop (start a negotiation on a FarmLead bid today or post your own offer!), holding ground much better than their lentils pulse counterpart. This despite total Canadian dry peas acreage likely being similar to last year at 4.2M acres, with the majority of it going into yellows. Switching continents but in the same theme, Australian farmers will plant a similar number of wheat acres as last year with 33.1M acres going in, despite the record crop in 2016/17 and recent lower prices. Aussie wheat has seen some decent demand from Southeast Asian trading partners, but much like we talked yesterday about Europe losing some of its market share to Black Sea countries, the same can be said for the competition facing crops getting produced in the Land Down Undaa. What we know is that the crop will get produced, finding a home for it is another thing.

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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