August 21 – Looking for Rebounds

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FarmLead Breakfast Brief
Monday, August 21st

“Success is how high you bounce when you hit bottom.”
– George S. Patton (US Army General)

Good Morning!

At 7:20 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2591 CAD, $1 CAD = $0.7942 USD)

Dec Corn: -3¢ (-0.8%) to $3.628 USD or $4.567 CAD
Nov Soybeans: -6¢ (-0.65%) to $9.318 USD or $11.732 CAD
Oct Soybean Meal (per short ton): -$2.40 (-0.8%) to $296.30 USD or $373.08 CAD
Oct Soybean Oil (cents per lbs): +0.08¢ (+0.25%) to 33.82¢ USD or 42.58¢ CAD
Dec Oats: -1.3¢ (-0.5%) to $2.575 USD or $3.242 CAD
Dec Wheat (Chicago): -1.5¢ (-0.35%) to $4.41 USD or $5.553 CAD
Dec Wheat (Kansas City): -1.5¢ (-0.35%) to $4.408 USD or $5.55 CAD
Dec Wheat (Minneapolis): -6¢ (-0.9%) to $6.765 USD or $8.5182 CAD
Nov Canola: -6.4¢/bu / -$2.80/MT (-0.55%) to $9.076/bu / $400.20/MT USD or $11.428/bu / $503.90/MT CAD

Friday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.507 USD or $3.157 CAD
Oct Durum Wheat: -2.7¢ (-0.3%) to $7.003 USD or $8.818 CAD
Oct Milling Wheat: -2.7¢ (-0.4%) to $5.577 USD or $7.022 CAD

Harvest starting up?
Where is your marketing plan sitting?
Don’t wait for a bid. Post your grain on FarmLead.

Looking for a Price Rebound?

Grain prices are slightly lower Monday as we prepare for the annual onslaught of data from this year’s Farm Journal Crop Tour (previously it was called the Pro Farmer Crop Tour, but it’s getting rebranded this year). The tour may see a brief interruption across the Midwest in the afternoon as millions of people prepare to look at the solar eclipse that will affect the skies in 14 states.

On the weather front, World Weather Inc. is expecting to see limited rainfall this week across the eastern Corn Belt; however, expected some needed in Iowa and Nebraska.

Allendale Brokers says that technical indicators for most of the grain and oilseeds complex are showing oversold. [1]

Also, there’s a seasonal tendency of a bit of rebound in grain prices at the end of August. [2]

Add in some likely bullish tour numbers, and we could see a nice pop in grain prices this week.

That said, old crop still left in the bin has become more of a liability, according to the Commodity Risk Management Group. [3]

Consider posting a few targets on FarmLead today.

Farm Journal Crop Tour 2017

Today, more than 2,000 scouts hit the road as they look to get a different perspective on what the US corn and soybean crop looks like, versus what the USDA painted in their August WASDE report.

Some of the questions that are looking to be answered include (but are not limited to):

  • Will we see more tipback and other issues from dry conditions?
  • How will widespread planting dates (and subsequent replant dates) affect yields? [4]
  • Will we see more of western vs. eastern Corn Belt divide of yield?

On that latter point, Benson Quinn Commodities notes that Iowa and Illinois tend to produce nearly 1/3 of the entire US corn crop. [5] Comparably, the Delta region’s 12 states only produce a little over 12%.

We’ll need a healthy improvement in other states to make up any yield reductions in Illinois & Iowa.

On the soybeans front, long-time analyst Jerry Gulke is looking for pod numbers. [6] He’s helping spread the buzz around how the NASS counting soybean stems to get to their average US yield of 49.4 bushels per acre.

With boots on the ground the ground through this week, we’ll get a better sense of what stems and pod numbers are looking like at this time of the growing season.

You can also take a 360-degree tour of just how the corn sampling will be done this week. [7]

Further methodology of the sampling and counting is available here.

Farm Finances on the Rebound?

John Deere came out with their 3rd quarter earnings numbers on Friday, showing a slight improvement over their 3rdquarter a year ago. However, the 17% improvement in farm and construction equipment sales was mainly due to higher sales and profits in the construction and forestry unit.

Farm equipment sales are better is in South American, where revenues are expected to climb by 20%. [8]

Conversely, Deere is expecting their farming division’s sales to drop by 5% across the European Union this year. They’re expecting a similar drop in Canadian and US farm equipment sales.

On that note, Economic Insights says that farm debt levels have been rising over the past few years. [9] From a debt-to-asset ratio though, the highest we’ve seen was in 1980 at 22.2%. The lowest we’ve seen was 11.3% in 2012.

Today, it sits around 14% for the average American farmer.

Wheat on the Rebound Too?

Wheat prices have certainly cooled off in recent weeks. Almost too much.

The decline has supported better international sales of US supply as prices are not getting a little more competitive with the likes of the Black Sea and Europe.

As our friends at AgChieve points out, this uptick in sales coincides with some support levels in Kansas City hard red winter wheat futures around that $4.10 – $4.15 level.

kansas-wheat-price-reversal-chart-august-2017
Kansas wheat prices might find some support after a 2-week reversal

Global Commodity Analytics is under the impression that a rebound up to $4.90 is certainly in the cards. [10]

The other thing that’s support wheat a bit is some of the rains impacting spring wheat harvest in the Northern Plains and Western Canada.

As Tregg Cronin of Halo Commodities points out, the prices that we saw in July were certainly encouraging more acres to get planted. [11]

However, futures values have retracted and basis levels have widened in a lot of places due to harvest pressures.

For winter wheat, whose acreage decisions must be made now, I’m expecting things to be slightly higher (Tregg suggests flat to lower).

For hard red spring wheat, I think that you’ll see North American acreage rebound in 2018/19 from its multi-year lows of acreage and production in 2017/18.

Be sure to read Grain Markets Today after the USDA crop report. We’ll also be checking in with our Doug Kirk, who is on the road with the crop tour. He’ll be giving us a full report and an inside scoop.

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.

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