Aug 1 – Is Upwards The Only Way?

fl_hubspot_logo_456x57.png
FarmLead Breakfast Brief

Tuesday, August 1st, 2017

“It is the nature of the strong heart, that like the palm tree it strives ever upwards when it is most burdened.”
– Philip Sidney (British poet)

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 = $1.2464 CAD, $1 CAD = $0.8018 USD)

Sept Corn: -2¢ (-0.55%) to $3.688 USD or $4.596 CAD
Sept Soybeans: -13.5¢ (-1.35%) to $9.86 USD or $12.29 CAD
Sept Soybean Meal (per short ton): -$4.20 (-1.3%) to $316.50 USD or $394.49 CAD
Sept Soybean Oil (cents per lbs): -0.25¢ (-0.7%) to 34.56¢ USD or 43.09¢ CAD  
Sept Oats: +1.8¢ (+0.6%) to $2.86 USD or $3.565 CAD
Sept Wheat (Chicago): +0.8¢ (0.15%) to $4.753 USD or $5.924 CAD
Sept Wheat (Kansas City): +1.8¢ (+0.35%) to $4.765 USD or $5.939 CAD
Sept Wheat (Minneapolis): +3.8¢ (+0.5%) to $7.35 USD or $9.161 CAD
Nov Canola: -9.8¢/bu / -$4.30/MT (-0.85%) to $9.176/bu / $404.60/MT USD or $11.437/bu / $504.30/MT CAD

Yesterday’s Winnipeg ICE Close
Sept Barley: unchanged at $2.446 USD or $3.048 CAD
Oct Durum Wheat: -2.7¢ (-0.3%) to $6.725 USD or $8.382 CAD
Oct Milling Wheat: -10.9¢ (-1.4%) to $6.092 USD or $7.593 CAD

How much of a rally is enough for the next sale?
How many buyers do you call to stay on top of prices?
Let buyers come to you. Post your grain on FarmLead!

Is Upwards the Only Way?

Welcome to August! Grain prices to start the 8th month of the calendar year are mostly in the red. A bearish surprise in yesterday’s USDA progress report is the main culprit this morning

Grain prices on the futures board were pushed down yesterday too though by a fresh forecast of rains in the western Corn Belt and cooler temperatures for the central Midwest.[1]. At this point in the growing season, soybeans prices are the most susceptible to price downgrades.

As such, the Stewart-Peterson call for $11.50 / bushel seems a little less likely.[2] Their forecast is based on 2 things: 45 bushels per acre soybeans and the market breaking through the $10.50 area of resistance on the charts.

World prices of lower protein have been subsiding in the past few weeks while higher protein has been creeping higher. However, on the futures board, Louise Gartner of Agriculture.com points out that “prices are obviously struggling to maintain any upward momentum.” [3] This continues to support our approach of ensuring you have all your wheat’s factors tested as soon as it gets off the field this year. Quality premiums are expected to go up – are you ready to take advantage?


July 31, 2017 USDA Crop Progress Report

As we expected and Garrett pointed out in his Grain markets Today column, yesterday afternoon’s USDA crop progress report showed more declines in the health of American corn and cereal crops.[4] Both corn and soybeans are right on pace with their averages for crop development. Corn silking and doughing and soybeans blooming and setting pods are all right around the 5-year average pace. [5]

However, when the market was expecting a 2% improvement, corn good-to-excellent (G/E) ratings dropped 1 point from last week 51%. It’s the lowest the US corn crop rating has been in a decade, minus the drought-year of 2012. Conversely, soybeans saw their G/E rating improve by 2 points from last week to 59% G/E. The market was expecting things to stay flat from last week.

The Lincoln state saw its G/E ratings for soybeans jump 7 points from last week to 66%. Indiana also saw a 4-point G/E increase from last week to 51%. Conversely, Iowa’s soybeans G/E crop ratings did lose 2 points from last week to land at 60%.

Spring wheat crops are now rated just 31% G/E, down 2 points from last week. The US spring wheat crop is now experiencing its worst rating since 1994 when record-keeping started.[6] The second worst was in 2006 when G/E ratings fell to 32% for this time of year.

Idaho saw the biggest drop, seeing the percentage of its spring wheat crops rated in good-to-excellent health drop a whopping 10 points from last week to 53%. Montana’s G/E ratings 4 points to just 9% rated G/E while the portion rated poor-to-very poor (P/VP) was raised 3 points to 58%. North Dakota’s P/VP percentage jumped 5 points to 44% while the G/E in ND fell 3 points to 29%.

Somehow, someway, in South Dakota, spring wheat crop ratings stayed at 31% G/E while P/VP improved by 2 points to 75%. Just to be clear though, that’s still a massive amount of the crop rated P/VP.

It’s worth noting that 9% of the US spring wheat crop has been cut, on pace with the 5-year average. However, the South Dakota spring wheat harvest is way ahead of pace with 46% of the crop now combined. It’s usually 31% at this time of year. On the flipside, just 3% of the Minnesota spring wheat crop has been cut when it’s usually 14%.

That being said, I counted no less than a dozen spring wheat fields being cut down on my drive from Minneapolis to Redwood Falls, MN for the Minnesota FarmFest this week. Stop by our booth in one of the big tents!

Rounding out the crop progress report, the US winter wheat harvest is 88% complete (86% 5-year average), 35% of oats have been harvested (45%), and the barley harvest is starting with 6% combined thus far (9%). From a quality perspective, oats maintained their G/E rating from last week at 51%. Barley conditions fell though, seeing a G/E rating of 49%. That’s down 2 points from last week.


European Rapeseed Production Prospects

Strategie Grains recently raised their EU rapeseed crop forecast to 21.9 million tonnes.[7] This is a 6.3% improvement from last year’s 20.6 million tonne harvest. Most of the increase was due to better prospects in France, which saw its output estimate increase by 520,000 MT for a total haul of 5.3 million tonnes. It’s nearly a 12% improvement from last year’s French rapeseed crop of 4.74 million tonnes

This is a bit surprising as seeded acreage fell by almost 6% from last year to 3.61 million acres for the 2017/18 crop. In France, the harvest is already ongoing with average yields of 64.7 bushels per acre matching 2009’s record levels.

Just to point an even story, the French Ag Ministry is pegging the rapeseed crop there at 4.67 million tonnes. Similarly, the International Grains Council is calling for a 4.6 million-tonne crop in France.


World Corn Competition

Yesterday’s Breakfast Brief mentioned the downgrade of the EU corn crop. It comes as no surprise then that Commerzbank came out and stated that Paris corn futures prices are too low.[8] The November contract on the Paris board hit a 16-month low recently. This suggests that US market is impacting overseas values, with analysts pegging the main reason as the aforementioned wetter forecasts for the American Heartland.

While US prices may be impacting those in Europe, it’s South American values that are likely the most affected, according to a Bloomberg report.[9] Brazil is currently harvesting a record corn crop of 97 million tonnes and exporting it at a torrid pace. With a shortage of storage in Brazil, there’s even more incentive for Brazilian farmers and shippers to move crop. The impact of this is that Brazilian domestic corn prices are at two-year lows. This is obviously attractive for international buyers.

Comparably, US new crop sales as of last week were only 4 million tonnes. It’s the lowest since 2010 and 44% lower than where they were a year ago. Trying to be the optimist here, you could argue the only way to go from here for corn exports is up.

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.

Most Recent Posts
Dec. 10 - Grain Markets Reverse Ahead of WASDE
December 10, 2018 Brennan Turner
Grain markets this morning are mostly lower ahead of tomorrow’s December WASDE report, with wheat prices the most notable, pulling back from its significant gains on Friday.
October 4: Corn Prices Edge Higher With October WASDE in Focus
October 04, 2018 Garrett Baldwin
Corn prices ticked higher Thursday as traders and analysts began to speculate on next week’s release of the October WASDE report.