Aug 18 – That Black Sea Though…

FarmLead Breakfast Brief

Thursday, August 18th, 2016

“And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department.”

– Andrew Carnegie (US businessman)

Good Morning!

At 8:00 AM CDT in the North American futures markets:

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.2827 CAD, $1 CAD = $0.7796 USD)

Dec Corn: -0.8¢ (-0.2%) to $3.39 USD or $4.348 CAD

Nov Soybeans: -9.8¢ (-0.95%) to $10.015 USD or $12.846 CAD

Oct Soybean Meal (per short ton): -$3.10 (-0.95%) to $331.20 USD or $424.83 CAD

Oct Soybean Oil (cents per lbs): –0.39¢ (-1.15%) to 32.77¢ USD or 43.32¢ CAD

Dec Oats: -1.8¢ (-0.95%) to $1.84 USD or $2.36 CAD

Dec Wheat (Chicago): -2¢ (-0.45%) to $4.41 USD or $5.657 CAD

Dec Wheat (Kansas City): –0.8¢ (-0.15%) to $4.433 USD or $5.686 CAD

Dec Wheat (Minneapolis): +0.3¢ (+0.05%) to $5.243 USD or $6.725 CAD

Nov Canola: +1.1¢ / +$0.50/MT (+0.1%) to $8.299/bu / $369.40/MT USD or $10.646/bu / $469.40/MT CAD

Yesterday’s Winnipeg ICE Close

Oct Barley: unchanged at $2.342 USD or $3.005 CAD

Oct Durum Wheat: +2.7¢ (+0.4%) to $5.559 USD or $7.13 CAD

Oct Milling Wheat: +8.2¢ (+1.4%) to $4.583 USD or $5.879 CAD

Recommendations are out to post on FarmLead

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That Black Sea Though…

Grains this morning are in the red as the market pulls back on some profit-taking and some wetter weather for areas that need it in the eastern cornbelt. The wetter weather in the Canadian Prairies are widening out quality premiums, especially in lentils and little less so in durum, and we’ve already seen some deals close on the FarmLead Marketplace indicating this (ordering your SGS tests to know what’s going in your bins!). Despite harvest pressures and relatively decent weather, grain prices have been rising thanks to short-covering in the futures markets, the lower US dollar, and demand starting to lift a bit as bin doors remain shut at these lower levels. While we know that we’re just getting into Harvest 2016 full tilt in North America (as well as some closely-watched crop tours), a lot of eyes are on the Black Sea as they’re currently the only place with some verified big yields and available supplies to meet some big, new crop year demand.Russia’s 8th-richest person and owner of EuroChem, Andrey Melnichenko, says that while he’s investing $6 Billion in potash mining, it could take at least a decade for the potash market to work the excessive supply in the market. With prices sitting between $220 – $230 a ton, this is a long ways from the heights of $900 a ton back in 2008, and Melnichenk says that if fertilizer producers are going to make a margin, they need to be smarter in the products they deliver, because the farmer is using more information to be smarter in the field (i.e. variable rate technology). At the end of the day however, there continues to be an oversupply in most fertilizers, including phosphate. In North America, prices remain subdued as production has remained relatively strong. BHP Billiton continues to build their Jansen, SK potash mine but has suggested that it could get mothballed if potash prices don’t rebound (decision will come in 2018). subdued

With some poor quality coming off, France is readily importing wheat from Eastern Europe with cargoes from Bulgaria and Romania already on boats and headed west. While it’s been noted at least some of this may be used to deliver against a contract into the US for feed wheat, the cheaper origin, plus the cheap freight makes it more profitable to do this sort of trade than originate grain locally and then try to clean the poor quality product getting delivered. Black Sea wheat prices are improving, as indicated by demand for better quality wheat that international buyers pick from France first. Russian & Ukrainian milling wheat prices are up 6% in the past month as France’s share of the world market is likely to fall about 5 points year-over-year to 7%.

While we know Russia is taking off another monster crop, they’re already sending it out of the country in droves, making sure they remain the world’s number one wheat exporter. So far in the first 5 weeks of the 2016/17 wheat marketing year, Russia has exported 2.35M tonnes, up 40% from last year’s already impressive numbers. Next door in Ukraine, farmers are likely taking off 63M tonnes of grain(+5% year-over-year), including a potential 27M tonnes of wheat and has also exported 2.4M tonnes of the cereal already this year (they could reach a record 41M tonnes of grain exports in 2016/17). While Russian and Ukrainian farmers continue to produce, its politicians do not: accusations are being hurled back and forth between Moscow and Kiev about sovereignty. Currently, troops from both countries are building up at the borders, with both sides at “combat ready” status. Like we saw briefly in spring 2014, this Black Sea tension may be a catalyst for wheat prices to pop, albeit likely for a short time.

To growth,

Brennan Turner

President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
1-306-665-8740 (Office)
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.

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