Aug 12 – Who will own the podium?

FarmLead Breakfast Brief

Friday, August 12th, 2016

“When you’re on the victory podium, you’re a queen, but when you come down from it, you’re nobody. You cannot be too proud of yourself.”

– Yana Kudryavtseva (Russian gymnast)

Good Morning!

At 7:10 AM CDT in the North American futures markets:

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.2976 CAD, $1 CAD = $0.7706 USD)

July Corn: unchanged at $3.21 USD or $4.165 CAD

July Soybeans: -1¢ (-0.1%) to $10.008 USD or $12.986 CAD

July Soybean Meal (per short ton): -$0.70 (-0.2%) to $333.20 USD or $432.36 CAD

July Soybean Oil (cents per lbs): +0.13¢ (+0.4%) to 31.92¢ USD or 41.42¢ CAD

July Oats: unchanged at $1.69 USD or $2.193 CAD

July Wheat (Chicago): -0.5¢ (-0.1%) to $4.158 USD or $5.395 CAD

July Wheat (Kansas City): +0.5¢ (+0.1%) to $4.128 USD or $5.356 CAD

July Wheat (Minneapolis): +2¢ (+0.4%) to $5.055 USD or $6.559 CAD

July Canola: -2.9¢/bu / -$1.30/MT (-0.3%) to $8.057/bu / $355.25/MT USD or $10.455/bu / $461/MT CAD

Yesterday’s Winnipeg ICE Close

July Barley: unchanged $2.315 USD or $3.005 CAD

July Durum Wheat: +2.7¢ (+0.4%) to $5.474 USD or $7.103 CAD

July Milling Wheat: -0.5¢ (-0.45%) to $4.404 USD or $5.715 CAD

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Who Will Own The Podium?

The grains complex is quietly mixed as traders prepare for the 12PM ET USDA reporting of their August world agricultural supply and demand estimates. Oil markets are set on making their best 1-week gain since April after Saudi Arabia says that they’d like to help stabilize markets, which is supporting other commodities. US export sales data released yesterday showed 3.1M tonnes of US soybeans were sold last week (China’s insatiable hunger for beans clearly evident). 1 interesting export statistic discovered yesterday was a boat of 45,000 MT of French wheat (owned by Glencore) currently heading to North Carolina, surprising when there’s so much feedstuffs available in the US. It’s blatantly clear that cheap ocean freight is keeping international grain trade very competitive. Thus, with the large amount of global supplies, Commerzbank has maintained some lower price forecasts, while ABN Amro thinks the grains complex will trade sideways through the end of 2016 before finding its way back to the podium that is block sales potential thanks to some seasonal strength early in 2017.Going into the report, the average guesstimate for US corn yields is for 170.6 bu/ac (current USDA estimate is 168) while some analysts are suggesting that the market is currently pricing in a 172 bu/ac crop. From a report standpoint though, 170.6 bu/ac would produce a 14.76 Billion-bushel crop, which would translate into a 2016/17 carryout of 2.225B bushels, a 31% increase from this year’s estimated ending stocks of 1.716B-bushels. For soybeans, the trade is expecting the USDA to show a 47.5 bu/ac average yield (46.7 currently), meaning production will come within a hair of 4 Billion bushels at 3.941. While both strong domestic and export demand are expect to drop 2015/16 US soybeans ending stocks to 320M bushels from last month’s 350M, the trade expects the 2016/17 carryout to come in at 316M bushels. Wheat’s carryout is expected to fall slightly from last month’s estimates to 1.114 Billion bushels on account of higher feed usage.

If you’re not into the whole technology thing, don’t read the following.Descartes Labs combed through 5-terabytes of data for a couple months and back-tested things 11 years, to suggest that this year’s US corn crop will average 169 bu/ac. How do they know this? The New Mexico firm uses satellites to look at literally every single field(yes, every one) every single day (yes, their satellites takes a picture of everywhere on the earth every day to within inches of the ground) and then uses thousands of algorithms to process data from sensors, weather forecasts, and, of course, the pictures of fields. Compared to the USDA, Descartes Labs claims their dataset’s predictions over those 11 years had a lower margin of error than Washington’s at every point in the growing season.  Our friends over at Granular have some some of their own serious data analysis and came to the conclusionthat soybeans are, over the past 4 decades, more profitable than corn, but people still plant more corn!

Coming back to report expectations, things other than American yields we’ll be watching for include Black Sea and European wheat production, South American corn and soybean production, and any musical chairs on the international trade front. The Brazilian USDA,CONAB cut domestic corn production estimates again with total exports expected to fall 10M tonnes (or 33%) year-over-year to 20M (the USDA’s export number is 18.5M tonnes). In the Black Sea, Bulgari’s wheat harvest practically finished with 5.26M tonnes taken off (13.6% bigger crop than last year) while Ukraine’s wheat harvest is 99% completed, so far bringing in 26.1M tonnes (these numbers continue to amaze me, given the challenges Ukrainian farms face). Further to the west in Europe, CRM is forecasting a German crop of 23M tonnes whereas Strategie Grains is at 25M tonnes, making Germans the likely podium-owner when it comes to top EU wheat exporter in 2016/17.

Have a great weekend and stay safe out there during Harvest 2016.

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
@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.

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