FarmLead Breakfast Brief
Monday, August 7th, 2017
“It’s the little details that are vital. Little things make big things happen.”
– John Wooden (College basketball coach)
At 6:55 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2673 CAD, $1 CAD = $0.7891 USD)
Sept Corn: +3.3¢ (+0.9%) to $3.698 USD or $4.686 CAD
Sept Soybeans: +8.8¢ (+0.9%) to $9.61 USD or $12.178 CAD
Sept Soybean Meal (per short ton): +$4.50 (+1.45%) to $309.80 USD or $392.60 CAD
Sept Soybean Oil (cents per lbs): -0.24¢ (-0.7%) to 33.45¢ USD or 42.39¢ CAD
Sept Oats: -1.5¢ (-0.55%) to $2.823 USD or $3.577 CAD
Sept Wheat (Chicago): +3.5¢ (+0.75%) to $4.583 USD or $5.807 CAD
Sept Wheat (Kansas City): +3.5¢ (+0.75%) to $4.63 USD or $5.867 CAD
Sept Wheat (Minneapolis): +4.5¢ (+0.65%) to $7.208 USD or $9.134 CAD
Friday’s Winnipeg ICE Close
Nov Canola: +6.1¢/bu / +$2.70/MT (+0.55%) to $8.954/bu / $394.79/MT USD or $11.347/bu / $500.30/MT CAD
Sept Barley: unchanged at $2.491 USD or $3.157 CAD
Oct Durum Wheat: +10.9¢ (+1.3%) to $6.743 USD or $8.546 CAD
Oct Milling Wheat: +8.2¢ (+1.1%) to $5.949 USD or $7.539 CAD
Aug 7 – A Big Week for Grain Markets
It’s a big week for grain markets.
On Thursday, Aug. 10, we could experience one of the most volatile days of the year.
The USDA will release the August WASDE report at noon EDT.
Expectations are for lower yields for most American crops, but the question is: “By how much?”
We’ll get more into the pre-report average guesstimates in Wednesday morning’s Breakfast Brief.
The market is clamoring for as much data as possible before this month’s WASDE report.
Here’s a bit more to start the week.
With the US Dollar at a 15-month low, US soybean exports have improved. As per US census data, 1.76 million tonnes (or 66 million bushels) of the oilseed were shipped in June, the largest since 1983.  This suggests that the USDA might be inclined to raise US soybean exports by 25 to 50 million bushels in Thursday’s WASDE report.
Bulls were excited this morning over the lack of rains that fell in the Midwest this past weekend. However, the cooler weather is somewhat keeping bulls in charge.
As mentioned in Friday’s Grain Markets Today column by Garrett, corn was able to push higher to recoup some losses from earlier in the week. The key line of resistance that the team at AgChieve is looking at is $3.75 for the December contract (see chart below). Sue Martin of Ag & Investment Services says that it’s time to move old crop corn and re-own through options. 
Western Canada Drying Out
Last week’s Saskatchewan crop report showed that growing conditions in most of the Canadian Prairie province have been deteriorating.  This trend is particularly the case south of the #1 Trans-Canada Highway.  As such, harvest has started in Saskatchewan on winter crops, with 47% of fall rye and 6% of winter wheat now in the bin. 2% of lentils and 1% of peas have also been combined.
Outside of the southern regions, most areas of Saskatchewan are catching rain here and there, and things are looking okay. However, because of the heat this summer, many Saskatchewan crops are on the verge of being ready for harvest. While consensus continues to be that cereals will be able to manage, the canola crop conditions seem to be getting worse.
In Alberta, the percentage of crops rated in good-to-excellent (G/E) health dropped by another 3 points to 57%.  Spring wheat G/E ratings dropped 4 points from last week to 59%, barley fell 5 points to 50% G/E, and canola was also down 5 points to 57% rated G/E. Like Saskatchewan harvest is starting in a few places in the south but the heat is getting combines out of the shed sooner than normal.
If it wasn’t for the moisture of last year, over the winter, and in the spring, there likely wouldn’t be much of 2017/18 crop in Western Canada. This news just shows you how important soil moisture year-to-year can be.
Big or Small Flax Harvest?
The Canadian Ag Ministry is currently forecasting a 2017/18 Canadian flax crop of 680,000 MT flax crop. Most analysts think that number is out to lunch. Despite some higher acreage in Western Canada, yields are certainly expected to be lower. Chuck Penner of Left Field Commodity Research is currently calling for 550,000 MT.  Combined with a 200,000 MT carryover from 2016/17 that is likely of questionable quality), there are some prospects for higher flax prices.
Across the border in North Dakota, 57% of the flax crop is rated in poor-to-very poor (P/VP) condition. Next door in Montana, it’s even worse: 77% of the flax crop is rated P/VP. With 24% fewer acres in America, total US flax production is only forecasted by Chuck Penner at 115,000. This is a whopping 48% decline from the 2016/17 US flax crop.
The ultimate price-direction factor is China though.
They’re currently sitting on a decent amount of supply. Combined with another year of decent harvests in the Black Sea who will regain some global market share, there are more options for China to choose from these days. If you can take a flax crop off, the recommendation is to put it in the bin and look for some better prices in the winter months. Selling into strength means setting price targets on FarmLead or otherwise starting in November or thereabouts.
Black Sea Harvest and Exports Accelerating
In Ukraine, harvest has started, but a smaller wheat crop is expected with average yields of just 54.1 bushels per acre, according to the USDA.  This is a 12% decline from last year’s crop. Ukrainian farmers planted 15.5 million acres of wheat this year.
4.6 million tonnes of barley have been combined thus far in Ukraine with another 2.4 million harvested in Russia. 22 million tonnes of wheat have been collected in Russia, with average yields up 3.6% over last year (which was a record crop mind you).
As per SovEcon, as of last week, 2.65 million tonnes of grains have been exported from Russia.  This is up nearly 21% compared to a year ago. This is a healthy acceleration, considering a week before, total Russian grain exports were tracking more than 4% behind last year’s pace. Wheat is certainly driving the Russian grain export bus with 1.55 million tonnes shipped out thus far . A week ago, Russian wheat exports were almost 37% lower than a year ago whereas now, they’re just 7.5% behind the 2016/17 speed.
European Grain Markets Update
Well-timed rains in France has led to ODA increasing their forecast for the French corn crop.  “Even though acreage is small,” yields are estimated to come in 8% above the average with a total crop of 13.5 million tonnes.
Compare this to the French Ag Ministry’s forecast of a 12.76 million tonnes.  The official forecast from them would be a 9% jump from last year’s harvest of 11.71 million tonnes. Compared to last year’s average French corn yield of 130.5 bushels per acre, the 2017/18 average yield is pegged at 147.5. Keep in mind that last year’s crop was limited by drier weather.
The French Ag Ministry also increased their soft wheat harvest to 36.8 million tonnes. This is a 34% increase from last year’s production, which was, again, affected by drier conditions. Average yields were pegged by the AgMin at 106.3 bushels per acre!
For their rapeseed crop, the French Ag Ministry pegged average yield at 61 bushels per acre. This is 7% above the long-term average yield. This also puts total production at 5.22 million tonnes, a 10% increase above last year’s 4.74 million-tonne harvest.
The better yields in France would also mean that it would overtake Germany as the top rapeseed producer in the European Union. Currently, the German farm co-op DRV is calling for a rapeseed crop of 4.78 million tonnes.
Speaking of Germany, rains there continue to downgrade their wheat crop’s quality. It’s estimated that as much of 40% of Germany’s wheat production will go into the animal feed market this year.  One of the country’s biggest grain buyers, Agravis says that protein is there, but test weight and falling numbers are significantly lower than their long-term averages.
Combines in southern Germany are at a standstill as they get 1 day of rain, then 1 day of no rain, and then the rain comes back. In the north though, crops aren’t yet ready for harvest and aren’t receiving as much rain as the south. As such, early estimates suggest yields and output could be better than last year. Overall though, due to the lower quality, 2017/18 German wheat exports may fall by as much as 15% from last year.
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.