April 18 – Corn Prices Heading for Heaven?

Good Morning!

Grain markets this morning are quietly in the green with corn prices and HRW wheat prices sitting the most propped up. 

“I find the great thing in this world is not so much where we stand, as in what direction we are moving: To reach the port of heaven, we must sail sometimes with the wind and sometimes against it – but we must sail, and not drift, nor lie at anchor.” – Oliver Wendell Holmes, Sr. (American poet)

graincents-trial

Corn Prices Heading for Heaven?

Grain markets this morning are quietly in the green with corn prices and HRW wheat prices sitting the most propped up.

In Grain Markets Today, Garrett walked us through how wheat prices did indeed end Tuesday in the green, driven by poor US winter wheat crop ratings and behind-schedule spring wheat seeding. Not everything was gained back that wheat prices lost on Monday, but Tuesday’s activity was more fundamental buying, whereas Monday’s losses could easily be considered more technical selling.

This morning, Kansas City winter wheat prices are up significantly though as tinderbox-like conditions are evident in the Southern Plains. With winds between 30-40 MPH and gusts of up to 60 MPH, the likelihood of more wildfires has increased and so the market is pricing based on some of the risks.

On the trade front, China has been trying to work with Europe to gain some backing to stand against the protectionist policies that US President Trump is trying to push out. [1] It’s been suggested by AgResource that some Chinese buyers are sourcing some Canadian and Brazilian soybeans for late summer movement. With US soybean prices still amongst the cheapest in the world though, you have to think it’s hard not to want some coverage with America. That is, before a tariff (if any) gets implemented.

What Does China Replace US Sorghum With?

There was a lot more attention paid to sorghum yesterday than any other crop as it grabbed a lot of headlines on the news that China was putting a 179% surcharge on US sorghum imports. [2] Since that sort of “tax” makes US sorghum uncompetitive with other grains, the question everyone is trying to answer is what other products can China import to replace the coarse grain potentially.

A few weeks ago for our GrainCents readers, we walked through what China might import instead of soybeans, and the impact on the likes of barley, winter wheat, corn, and DDGs, as well as possibly peas. Here are some of those charts, the likes of which we provide on a daily basis for GrainCents readers – start your free 3-week trial today!

Barley and feed wheat (under 12% protein) seem to be the logical options, with the Black Sea being the cheapest origins for these products. Russian barley exports are currently tracking about 95% ahead of last year’s pace with 4.6 million tonnes now exported.

 

Sidenote: did you know that you can do sorghum basis deals on FarmLead? (and basis deals on most other futures markets-related crops). Go ahead and head to FarmLead Marketplace Post New Offer page and see the simple process. You can’t negotiate on basis anywhere but the FarmLead Marketplace!

Looking for Premium in Corn Prices?

With corn planting sitting a bit behind where we were a year ago, should corn prices start to add a little weather premium? Well, it is just April 18, so we’re about three weeks away from being worried about the state of progress in the field when it comes to US corn and Plant 2018. After all, we’ve seen the American farmer plant more than 40% of the US corn crop in a single week!

However, historically-speaking, there is some seasonality that one can certainly enjoy when it comes to grain prices at this time of year. That being said, there are no guarantees that corn prices will climb in the next two months through the end of June, and today, new crop December 2018 corn prices in Chicago are sitting close to $4.10 USD /bushel.

The last time we saw those sort of corn prices for the new crop was last June/July, and before that, June 2016. To be clear, you’ve only had the opportunity twice in the past two years for these levels of corn prices.

Of course, there’s South America to think about. Last week we saw the USDA downgrade the Brazilian and Argentine corn crops to 92 million and 33 million tonnes respectively. For Brazil, the downgrade is due to a combination of lower acres and some weather delays/damage. Last week, for corn GrainCents readers, we also looked into other private and public estimates of the Brazilian corn crop.

One notable figure’s estimates always garner a headline is Dr. Michael Cordonnier of Soybean and Corn Advisor. This week, Dr. Cordonnier raised his estimate for the Brazilian crop by 1 million tonnes to 87 million. The good doctor notes that conditions in central Brazil are looking pretty deluxe, but rain is needed in southern areas of the South American country. [3]

Overall, the USDA says that less corn will get planted in the US in 2018/19, but with a smaller crop in South America and trade risk with China, is corn the safer bet for many American farmers?

To growth,

Brennan Turner

President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

 

At 7:05 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2575
 CAD, $1 CAD = $0.7953 USD)

Jul Corn: +1.3¢ (+0.32%) to $3.905 USD or $4.910 CAD
Jul Soybeans: +0.3¢ (+0.02%) to $10.575 USD or $13.298 CAD
Jul Soybean Meal (per short ton): +$0.30 (+0.08%) to $385.70 USD or $484.99 CAD
Jul Soybean Oil (cents per lbs): +0.01¢ (+0.003%) at 31.56¢ USD or 39.69¢ CAD  
Jul Oats: +0.8¢ (+0.32%) to $2.365 USD or $2.974 CAD
Jul Wheat (Chicago): +4.8¢ (+0.99%) to $4.863 USD or $6.114 CAD
Jul Wheat (Kansas City): +7.8¢ (+1.55%) to $5.073 USD or $6.378 CAD
Jul Wheat (Minneapolis): +3.3¢ (+0.52%) to $6.245 USD or $7.853 CAD
Jul Canola: -$0.70 (-0.13%) to $11.864/bu / $523.10/MT CAD or $9.435/bu / $416.001/MT USD

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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