Aug 1 – Grain Markets Weigh Weather vs Trade War

Good Morning!

Grain markets are mixed this morning as they weigh some negative weather across ongoing trade war risk.

“I inherited that calm from my father, who was a farmer. You sow, you wait for good or bad weather, you harvest, but working is something you always need to do.”  – Miguel Indurain (Spanish Athlete)

graincents-trial

Grain Markets Weigh Weather vs. Trade War

Grain markets are mixed this morning as we start the month of August. Today marks the start of the 2018/19 crop year for many crops, and it’s appropriate as the crop seems a bit early in many areas: seeing combines going in Western Canada anywhere, but southern Alberta or southwestern Saskatchewan before the end of July seems odd!

What’s not odd is that you’ll get our monthly recap of grain markets today on the FarmLead Insights page. We’ll be walking through how grain markets performed for the 12 main crops that we cover for our GrainCents readers, as well as some of the major topics that we’re watching.

The European Union is certainly an interesting factor that we’re monitoring. With some ongoing dry weather, we’ve highlighted the decline in production estimates for our Winter Wheat GrainCents readers in this past Sunday’s Weekly Digest. For example, German farmers are expected to take off somewhere around 20.5 million metric tonnes of wheat this year, down about 15% year-over-year. As such, the German farm group is asking for about €1 Billion in aid to compensate for lower yields on account of yield.

This in mind, we’ve continued to see wheat prices sit in the green as yesterday, Chicago, Kansas City, and Minneapolis wheat prices all closed 5-9 cents higher (depending on the contract). Apart from Europe, ongoing production concerns in Russia and Australia are all being watched by grain markets.

Grain Markets Pushed by Soybean Prices

As Garrett recapped in Grain Markets Today, soybean prices surged yesterday on some renewed optimism for China and the US to come to an agreement on trade. Also, some bulls referenced “stale” crop conditions, albeit as I mentioned in yesterday’s FarmLead Breakfast Brief, the US soybean crop is looking pretty good/advanced.

That being said, soybean prices are pulling back this morning as we’re seeing a correction. However, it’s certainly positive to receive the news that U.S. Treasury Secretary Steve Mnuchin and Chinese Vice Premier Liu He have been having a private conversation about getting rid of this trade war. [1]

This comes at a time that the price of Brazilian soybeans delivered to China are hitting crop-year highs seen in April. This has been the result of mainly a weaker Chinese currency, with the Yuan down about 8% since February against the US Dollar. For clarity, soybean prices on the international market are still traded in US Dollars, regardless of the trade war. The net result is that Chinese crush margins are now in negative territory.

In the meantime, it’s now been suggested that the farmer aid package could start to get released by September with farmers getting the cheques by October. [2] I won’t lie: this would be unprecedented regarding the speed of a new government program being introduced and executed upon.

However, 37% of farmers are “not at all confident” in the aid package being proposed by the US White House. [3] All things being equal, this game of musical chairs, worth literally trillions of dollars of trade around the world, is not over. Indeed, there are some negative consequences in the short-term, but it’s hard to anticipate the long-term consequences, but there are likely fewer winners than losers. [4]

For example, what do you think happens to soybean prices (and therefore canola prices) if everyone and their mother in Argentina and Brazil planted soybeans this coming fall as they start their Plant 2018 and 2018/19 crop year?

If your domestic grain prices were sitting at multi-year highs today, what would you be doing in terms of grain marketing for the upcoming crop year? Exactly.

That in mind, as we flip the crop year calendar for many crops today, get your target up on the FarmLead Marketplace and take advantage of this rally we’ve seen in the grain markets. You can easily post a firm price offer and give the entire list of over 800 credit-verified buyers on FarmLead the opportunity to pick it off.

Let’s start 2018/19 off right.

To growth,

Brennan Turner

President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

At 7:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3025 
CAD, $1 CAD = $0.7678 USD)

Sept Corn: -1.5¢ (-0.40%) to $3.708 USD or $4.830 CAD
Aug Soybeans: -11.5¢ (-1.27%) to $8.923 USD or $11.622 CAD
Aug Soybean Meal (per short ton): -$2.50 (-0.73%) to $338.70 USD or $441.15 CAD
Aug Soybean Oil (cents per lbs): -0.10¢ (-0.35%) at 28.63¢ USD or 37.29¢ CAD  
Sept Oats: 0.05¢ (0.21%) to $2.363 USD or $3.078 CAD
Sept Wheat (Chicago): 4.0¢ (0.72%) to $5.578 USD or $7.265 CAD
Sept Wheat (Kansas City): 5.3¢ (0.95%) to $5.618 USD or $7.317 CAD
Sept Wheat (Minneapolis): 2.8¢ (0.46%) to $6.090 USD or $7.932 CAD
Nov Canola: -$2.10 (-0.42%) to $11.310/bu / $498.70/MT CAD or $8.684/bu / $382.89/MT USD

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.