FarmLead Breakfast Brief
Wednesday, August 23rd, 2017
“The healthiest competition occurs when average people win by putting above-average effort.”
– Colin Powell (US Army 4-Star General)
At 7:05 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2575 CAD, $1 CAD = $0.7952 USD)
Dec Corn: +1¢ (+0.3%) to $3.61 USD or $4.54 CAD
Nov Soybeans: +7.3¢ (+0.75%) to $9.448 USD or $11.881 CAD
Oct Soybean Meal (per short ton): -$0.10 (-0.05%) to $296.70 USD or $373.11 CAD
Oct Soybean Oil (cents per lbs): +0.72¢ (+2.1%) to 34.91¢ USD or 43.90¢ CAD
Dec Oats: -0.3¢ (-0.1%) to $2.453 USD or $3.084 CAD
Dec Wheat (Chicago): +3¢ (+0.7%) to $4.32 USD or $5.433 CAD
Dec Wheat (Kansas City): +2.3¢ (+0.55%) to $4.293 USD or $5.393 CAD
Dec Wheat (Minneapolis): +4.5¢ (+0.7%) to $6.608 USD or $8.309 CAD
Nov Canola: +14.5¢/bu / +$6.40/MT (+1.25%) to $9.255/bu / $408.10/MT USD or $11.639/bu / $513.20/MT CAD
Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.51 USD or $3.157 CAD
Oct Durum Wheat: -24.5¢ (-2.8%) to $6.752 USD or $8.491 CAD
Oct Milling Wheat: -13.6¢ (-2%) to $5.346 USD or $6.722 CAD
Below-Average Yields = Above-Average Grain Prices?
Grain markets are all higher this morning.
Soybean oil is leading the charge thanks to new regulation by the U.S. government. 
The US Commerce Department will begin collecting a levy on biodiesel imports from Argentina and Indonesia as they think governments there are subsidizing the production price.
Argentina’s biodiesel association, Carbio, says the move will “result in an immediate stoppage of sales to the US.” This statement is significant considering that Argentina accounts for about 2/3s of all American biodiesel imports, or about 916 million gallons last year.
The decision intuitively means that more US soybeans could go into crush to meet the domestic American biodiesel demand.
Given substitution effects, canola prices are also benefiting from the news as the Winnipeg ICE futures market heads higher.
Farm Journal Crop Tour Day 2
Crop scouts toured through Nebraska and the rest of Indian yesterday on Day 2 of the 2017 Farm Journal Crop Tour.
In Indiana, the crop’s potential is looking slightly above-average.  For corn, average yield estimates came in at 171.2 bushels per acre. Comparably, the 3-year average is 167.1.
On the soybeans front, things are looking like the 3-year average. This year’s tour found an average of 1168.8 pods in 3×3 square foot. The average is 1164.09
Brian Grete, who’s leading the eastern leg of the crop tour, says that there’s a lot of variability in the corn crops that his troupe has seen. 
He has been impressed though on the grain length of corn cobs, albeit it is still a bit early to be writing home about that. He’s also disappointed in soybean pod counts, saying “they have potential [but] there’s a lot of little pods,” meaning they’ll need good weather to help them fill out.
Over in Nebraska, there are more questions about the numbers that the tour showed up, considering the dry conditions the Cornhusker state has seen. Soybeans pod counts of 1131 per 3×3 square foot are more than 4% lower than the 3-year average of 1182.1. 
The 3-year average for the Nebraska corn yield on this tour is 162.5 bushels per acre. This year though, scouts are suggesting that the average is higher, at 165.4 bushels per acre. I’m wondering if Chip Flory and company look at this number and wonder if that’s where things will settle.
It seems that irrigated acres are helping pull up this corn yield number as the dryland fields are below average. 
Our own Doug Kirk is scouting along this western route and in an interview with Garrett, says that things in Nebraska could be better.
More specifically, “I expect that the [percent of] harvestable ears to the number of plants is low. There are questions about the size of ears concerning weight [and] the weight of the ear is a big determinant in yield averages.”
Overall, most agree that weather over the next 4-6 weeks will determine if the crop’s full potential is reached or not. 
Today, the crop tour’s Day 3 is working through Iowa and Illinois. We’ll get the final numbers of on Thursday night, and Doug will give us a full recap of his experience on Friday.
Brazil Heating Up or Slowing Down?
This week, Garrett and I have been discussing US grain export competition and the challenges that Brazil is bringing to the table. In July and August, Brazil’s corn exports are at record levels while harvest of the 2nd crop is nearly complete. 
This latter harvest is always bigger than the first, with this year coming in at 66.6 million tonnes, compared to its predecessor at 30.5 million.
Notably, this year’s 2nd crop is 46% bigger than last year’s 2nd crop.
INTL FC Stone is suggesting that, through the end of July, 74% of the record Brazilian soybean crop had been sold, with 73% of the first corn crop also contracted.
However, while sales are slowing as a percentage of total production, the aggregate volume contracted is, in fact, similar to the 2016/17 crop. Given the time of year, Brazilian farmers are trying to sell more soybeans to make room for the 2nd crop of corn.
Overall, despite unfavorable currency fluctuations for Brazilian farmers, they are continuing to sell. This intuitively makes it more challenging for farmers elsewhere in the world who are hoping for a price rally.
Ag Canada’s Crop Drops, Grain Price Hikes
Agriculture & Agri-Food Canada recently updated their estimates for the Canadian crop, with mostly lower numbers.  The total wheat harvest is estimated by the Ag Ministry at 27.3 million tonnes. Comparably, the USDA’s current forecast is 26.5 million tonnes.
A recent Reuters survey of 17 traders and analysts has an average guesstimate of 26.2 million tonnes. A similar Bloomberg survey has their average forecast at 26.4 million tonnes.
As a side note, CN Rail said that it moved a record 21.8 million-tonnes of Canadian grain in the 2016/17 marketing year. 
Ag Canada says that the Canadian durum crop continues to be disappointing. Average yields are forecasted at 36 bushels per acre. Technically, this is 50% better than the North Dakota forecasted average yield mentioned yesterday of 24 bushels per acre.
This adds up to a 5 million-tonne durum crop in the Great White North, which is a 5-year low. Comparably, the Bloomberg survey is calling for a 5.1 million-tonne crop.
With the smaller durum crop, the Canadian Ag Ministry is forecasting a durum price range of $7.35 to $8.15 CAD/bushel. Given the values we’ve seen trade on the FarmLead Marketplace around $10 CAD/bushel and nearly $8 USD/bushel, I think Ag Canada is low. Post your durum and find your best price.
For canola, the AAFC is calling for an 18.6 million-tonne crop, matching a recent Reuters survey. As we mentioned yesterday, Lanworth is at 18.4 million while Oil World is the most bullish at a sub-18 million-tonne number.
The USDA likely will revise their 20.5 million-tonne estimate lower in their next WASDE report on Tuesday, September 12th. The AAFC forecasts average yields at 34.6 bushels per acre.
As such, the AAFC does expect some higher canola prices as well. While the average new crop bid has dropped below $10 CAD/bushel in a lot of places, canola prices have been holding steady around that $500 CAD/MT on the futures board.
Ed White of the Western Producer notes that this is healthy considering other markets have been weakening. 
Ultimately, we’ll continue to reiterate our call to fill contracts and see where these below-average yields translate into new crop pricing (likely above today’s levels).
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