August 17 – Questioning Higher Grain Prices

Good Morning !

At 7:40 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2626 CAD, $1 CAD = $0.792 USD)

Dec Corn: -0.8¢ (-0.2%) to $3.533 USD or $4.46 CAD
Nov Soybeans: +6.5¢ (+0.7%) to $9.318 USD or $11.765 CAD
Oct Soybean Meal (per short ton): +$2.90 (+1%) to $299 USD or $377.53 CAD
Oct Soybean Oil (cents per lbs): +0.15¢ (+0.45%) to 33.12¢ USD or 41.82¢ CAD  
Dec Oats: +3.3¢ (+1.25%) to $2.605 USD or $3.289 CAD
Dec Wheat (Chicago): -0.8¢ (-0.15%) to $4.463 USD or $5.634 CAD
Dec Wheat (Kansas City): +0.3¢ (+0.5%) to $4.473 USD or $5.647 CAD
Dec Wheat (Minneapolis): unchanged at $6.848 USD or $8.646 CAD
Nov Canola: +6.1¢/bu / +$2.70/MT (+0.55%) to $8.899/bu / $392.36/MT USD or $11.235/bu / $495.40/MT CAD

Yesterday’s Winnipeg ICE Close

Sept Barley: unchanged at $2.481 USD or $3.157 CAD
Oct Durum Wheat:  -27.2¢ (-3%) to $7.005 USD or $8.845 CAD
Oct Milling Wheat: +13.6¢ (+1.95%) to $5.583 USD or $7.049 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!

Questioning Higher Grain Prices

Grain markets this morning are mostly in the green again this morning as the bulls try to battle back against the bearish rains that have fallen and further precipitation in the forecast.

Canola fell for the 5th straight day as the Canadian Loonie gained on a weaker US Dollar. Harvest is nearby and so we’ll start to gain a better perspective on how the 2017 Canadian crop is shaping up. We’ll also get Statistics Canada’s crop production estimates in 2 weeks on August 31st.

Wheat prices continue to be pressured by abundantly cheap supplies coming out of the Black Sea. Yesterday, Egypt bought 355,000 MT of wheat. 295,000 MT was bought from Russia and the rest from Ukraine. The average delivered price was just under $209 USD / MT (or $5.70 USD / bushel or $7.25 CAD/ bushel).

Overall, bulls are looking for the next major headline but are failing to find it. Therefore, grain prices are finding a bit of a bid on the futures board in the morning but are challenged to close higher by end of day.


Corn Prices and Crop Development

It rained all day yesterday in Mitchell, SD at the Dakotafest trade show. However, all of the growers we chatted with welcomed the rain with open arms. The Dakotas have seen at least 2 inches of rain over the past week with some areas getting as much as 8 inches.

Another inch or two is forecasted for the next 7 days for the Dakotas and parts of Nebraska. Nearly half of North Dakota is considered to be experiencing extreme or exceptional drought conditions. At the start of the growing season, very little of the state was dry.

More rain in the Northern Plains is a good thing. It certainly will help add to the soil moisture profile that will be needed to help next year’s crop. It will likely also boost some crop prospects in the region.

For other parts of the Midwest though, the rains are a bit too late and won’t help crop development. [1]

WxRisk.com expects 75% of the I-states (Iowa, Illinois, & Indiana) and western Ohio to get rain in the next 10 days. These rains are critical for Iowa’s fields as 40% of the state is experiencing some level of drought.

Those areas that have been extremely dry are experiencing some tip-back issues.[2] This weather will certainly affect total yield and production numbers. Last week, before the USDA August WASDE grain report, our Doug Kirk commented on how the government wouldn’t likely account for tip back issues in their estimates.

That was the case as the USDA only lowered average US corn yields by a little more than a bushel to 169.5 bushels per acre. Everyone seems to be in agreement that the USDA will have to lower numbers in their next couple of world agricultural supply and demand estimates reports.

The problem is though that there’s still a lot of old crops out there and will keep a lid on new crop pricing rallies. This is a theme we’ve been talking about literally since the beginning of 2017.

Simply put, we’re running out of time for corn prices to be influenced by weather premium. Even with a lower yield number out from the USDA next month, we’ll be in the middle of bearish harvest pressures.

It’s also worth mentioning that Mexican corn importers are pausing their corn purchases until more is known about the NAFTA renegotiations.[3] This is bearish for demand and so bearish for corn prices as well.

Day 1 of NAFTA 2.0 Negotiations

Pull out your lawn chair, grab a few beers, and watch the party.

If day 1 was any indication, this NAFTA 2.0 renegotiation is a long way away from being wrapped up. [3]

There’s a lot of nervousness in the agricultural industries of all three participating countries, but at least US Trade Representative and head negotiator Bob Lighthizer acknowledged the gains made in agricultural trade through NAFTA.

However, he also said, “We feel that NAFTA has failed many, many Americans and needs major improvement.” [4]

The US seems to be focused on trade imbalances. They’re also looking to boost regulations around intellectual property protections, guards against currency manipulation, and more change dispute-resolution mechanisms. [5]

Ultimately, the Trump administration wants a major overhaul. ProFarmer Journal Washington analyst Jim Wiesemeyer says that Mexico, Canada, and the US all need to get on the same page. It’s tough to do so though when you’re not even in the same book.

Pulses Prices Getting a Pulse?

As I’ve mentioned, we’re at the time of year when old crop meets new crop. It’s no different for pulse crops like peas, lentils, and edible beans. These are markets where carryout is usually small so the smaller production numbers that we’ll likely start to hear about in the next couple of weeks are going to have some impact on price.

As our friend Chuck Penner from Left Field Commodity Research points out, buyers are also at a crossroads as they re-evaluate their coverage and needs over the next few months. [6]

We have seen yellow peas prices have some good support. Some $9.00 CAD/bushel for off-the-combine movement on the FarmLead Marketplace. Green peas prices though, continue to be pressured by readily available stocks and seasonal price declines.

Chuck points out though that green and yellow peas prices tend to bottom out in August or September.

Red lentil prices have also been trading sideways-to-lower as plentiful global supplies are allowing buyers to be timider. Lower producer though in Canada and Australia should offer a boost to prices. While red lentils have been sitting around 25¢ CAD/pound, we think it’s healthy to look at filling your existing new crop contracts before pricing more out. If you don’t have any coverage yet, consider booking in the 28 to 30 cent range.

For green lentils prices, we’re seeing bids on the FarmLead Marketplace almost 20 cents/pound higher than reds, which is a bit above the norm.

This is because the supply pipeline is a lot tighter than what we see in the red lentils market. Drought impacted larger US acres this year, which has been another bullish factor we’ve been watching.

Like reds, we’d recommend filling new crop contracts but if you have no sales on the books yet, ask yourself, “Other than the last 2 years, how many times have you sold your large green lentils for 45 CAD cents/lbs?”

I’m also not suggesting you sell your entire production. Just a 10% block. Post it on FarmLead here.

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. 7 - Will Canola Prices Rally on ABARES, StatsCan Reports?
December 07, 2018 Brennan Turner
Grain prices are mostly all in the green this morning, led by canola prices, which are finding some strength recently thanks to a slightly bullish StatsCan report and a weaker Canadian Loonie.
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.