FarmLead Breakfast Brief
Wednesday, August 2, 2017
“An ounce of performance is worth pounds of promises.”
– Mae West (American Actress)
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 = $1.24541 CAD, $1 CAD = $0.7974 USD)
Sept Corn: +3.5¢ (+0.95%) to $3.66 USD or $4.59 CAD
Sept Soybeans: +6.3¢ (+0.65%) to $9.705 USD or $12.171 CAD
Sept Soybean Meal (per short ton): +$1.90 (+0.6%) to $312.20 USD or $391.52 CAD
Sept Soybean Oil (cents per lbs): +0.21¢ (+0.6%) to 34.18¢ USD or 42.86¢ CAD
Sept Oats: +2.3¢ (+0.8%) to $2.825 USD or $3.543 CAD
Sept Wheat (Chicago): +4.3¢ (+0.9%) to $4.655 USD or $5.838 CAD
Sept Wheat (Kansas City): +3.5¢ (+0.75%) to $4.688 USD or $5.878 CAD
Sept Wheat (Minneapolis): +3.8¢ (+0.5%) to $7.218 USD or $9.058 CAD
Nov Canola: +4.1¢/bu / +$1.80/MT (+0.35%) to $9.046/bu / $398.86/MT USD or $11.344/bu / $500.20/MT CAD
Yesterday’s Winnipeg ICE Close
Sept Barley: +8.7¢ (+2.85%) to $2.517 USD or $3.157 CAD
Oct Durum Wheat: unchanged at $6.684 USD or $8.382 CAD
Oct Milling Wheat: -13.6¢ (-1.8%) to $5.946 USD or $7.457 CAD
Top Grain Markets Performance?
Grain markets this morning are back in the green, recovering some of yesterday’s losses.
Most of the decline in the grains complex yesterday was caused by improved corn and soybean prospects, combined with the outlook of more productive growing conditions.
INTL FCStone updated their forecasts for the US corn crop to 162.8 bushels per acre, producing a 13.59 Billion-tonne crop. As Garrett mentioned in his Grain Markets Today recap, Pioneer’s digging into individual states.  Their forecasting an average yield of 195.7 bushels per acre (bpa) in Minnesota right now, but just 184.2 bpa in Iowa. Illinois is currently pegged at 182 bpa, but Indiana is just 162 bpa. On the low-end of things, South Dakota and North Dakota currently have yield estimates pegged by Pioneer at 108.5 and 107.8 bpa respectively.
Other notable yield projects include Dr. Cordonnier’s forecast of 163.5 bushels per acre. Considering where crop ratings are, there seems to be more influence from poor performing fields than those looking healthy.
Brazil’s Slow Grain Sales Hurting America?
Brazilian farmers have been reluctant to sell grain this year, hoping for better prices (P.S. Hope is not a price risk management strategy). IMEA says that Mato Grosso growers have sold 83.1% of this year’s soybean harvest. That’s 8.3 points behind where their sales were at this time a year ago.
On new crop, Mato Grosso farmers’ soybeans sales are just 9.5%. Last year at this time it was 21.1%.
The slow sales have impacted not only prices on the other side of the equator but also corporate balance sheets. ADM reported its second-quarter results this week, highlighting a $276 million profit.  Profits in oilseed crush and origination dropped 97% from the same quarter in 2016 to $38 million. Meanwhile, ADM made $40 million in merchandising and handling, up from a $14 million loss a year ago.
I would conclude that prospects in North America have improved whereas currency factors have limited profitable wins in South America. ADM CEO Juan Luciano said on the company’s earnings call that Brazil is a bigger threat to US corn markets than soybeans are at this moment.
While soybean sales are lagging, corn sales are nearly on pace with what was done a year ago. As such, Luciano thinks that for exports, “the US (may be) able to compete in soybeans a little bit more during the second of 2017.”
Soybean Prices and Yields
Wheat prices on EU futures boards are approaching their lowest levels in the past 2 months. Rapeseed futures in Europe have also been falling. This story has put some impact on canola futures in Winnipeg dropping to a 1-week low yesterday. The biggest impact though is definitely from the soybeans complex.
Yesterday’s 35 cent drop on the soybean market was driven by two main factors. First, crop ratings on Monday showed an improvement. Second, rains in the forecast are providing near ideal growing conditions for the oilseed. The question I’m asking is what sort of impact did the heat in July have on the crop.
If we look again at Pioneer’s forecasting, soybean yields across the I-states in Iowa, Illinois, & Indiana are pegged at 52.5, 54.2, and 51 bushels per acre respectively. The high of the yield potential goes to Nebraska though at 57.8 bushels per acre. It’s worth mentioning that Wisconsin’s average soybean yield is pegged at 55 bpa while North Dakota is at 34.2 bpa.
Todd Hubbs from the University of Illinois tells us that the USDA’s number next Thursday on August 10th will only reflect crop conditions from the July 23rd report.  As such, he’s currently putting a national forecast at 46.6 bushels per acre.
Comparatively, while their corn yields are some of the lowest we’ve seen thus far, INTL FC Stone’s soybeans yield forecast is one of the highest at 47.7 bushels per acre. Dr. Cordonnier is at 46.5 bpa.
Todd notes that export numbers appear to be on track to meet their full-year target for 2016/17. However, crush numbers are going to have to pick up steam in July and August to meet the mark set by the USDA. It will have to be 5.7% more than what was crushed over the same period to be exact.
Russian Harvest Impacts Grain Prices
SovEcon says that Russian farmers are getting a little more active on sales after realizing the size of their wheat crop.  The grain analyst is expecting a 72.9 million-tonne wheat crop, with total grain production this year to be 117 million tonnes. Comparably, IKAR is currently calling for at least a 74 million-tonne wheat crop. Benson Quinn Commodities thinks that 75 million tonnes are doable.
12.5% protein wheat at ports in Russia are currently priced at 197 USD/MT ($5.35 USD/bushel or $6.70 CAD/bushel). Russian port prices for 11.5% protein wheat is currently priced around $183 USD/MT ($5 USD/bushel or $6.20 CAD/bu). A delayed harvest in Ukraine and rising demand from Saudi Arabia have helped push up Russian barley prices at the port to around $175 USD/MT ($3.80 USD/bu or $4.75 CAD/bu).
Thus far in the 2017/18 marketing season, Russia has exported 1.6 million tonnes of grain. That is 4.3% lower than what they did at the same point a year ago. What’s more notable is that wheat exports are down 36.7% from last year to just 791,000 MT shipped out thus far. The state center of grain quality suggests though that 78.5% of the Russian wheat crop will qualify for milling standards, versus 71% at the same time a year ago.
While Russia has been performing well, I don’t think many were expecting production to reach (and possibly top) last year’s 72.53 million-tonne record crop.
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.