August 25 – Making Up Ground

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FarmLead Breakfast Brief
Friday, August 25th, 2017

“Those who profess to favor freedom, and yet depreciate agitation, are men who want crops without plowing up the ground.”
– Federick Douglass (American social reformer)

Good Morning!

At 7:15 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.28502 CAD, $1 CAD = $0.7999 USD)

Dec Corn: -1¢ (-0.3%) to $3.553 USD or $4.441 CAD
Nov Soybeans: -2.5¢ (-0.25%) to $9.44 USD or $11.801 CAD
Oct Soybean Meal (per short ton): +$0.90 (+0.3%) to $299.90 USD or $374.92 CAD
Oct Soybean Oil (cents per lbs): -0.32¢ (-0.9%) to 34.58¢ USD or 43.23¢ CAD  
Dec Oats: +1.3¢ (+0.5%) to $2.535 USD or $3.169 CAD
Dec Wheat (Chicago): +1.5¢ (+0.35%) to $4.36 USD or $5.451 CAD
Dec Wheat (Kansas City): +1.5¢ (+0.35%) to $4.348 USD or $5.435 CAD
Dec Wheat (Minneapolis): +4¢ (+0.6%) to $6.728 USD or $8.41 CAD
Nov Canola (Winnipeg): -3.9¢/bu / -$1.70/MT (-0.35%) to $9.125/bu / $402.35/MT USD or $11.408/bu / $503/MT CAD

Yesterday’s Winnipeg ICE Close
Oct Barley: unchanged at $2.327 USD or $3.092 CAD
Oct Durum Wheat: unchanged at $6.662 USD or $8.328 CAD
Oct Milling Wheat: +10.9¢ (+1.6%) to $5.464 USD or $6.831 CAD

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Making Up Ground

Grain markets are mixed this morning as the complex tries to digest impending weather coming up from the US Gulf Coast and the 2017 Farm Journal Crop Tour results.

Algeria bought 590,000 MT of milling wheat for November movement at an average delivered price of about $200 to $201 USD / MT (or $5.45 USD and $6.85 CAD/bushel).

Over in India, the government revised their 2016/17 total crop to 275.7 million tonnes. [1]

That’s 2.3 million tonnes higher than the last estimate and 4% higher than the previous record set in 2013/14.

All-pulses output was pegged by the Indian Ag Ministry at nearly 23 million tonnes. This figure is more than 19% higher than the previous record of 19.25 million tonnes, again set in 2013/14. Comparably, the 5-year average of pulse crop production in India is 17.63 million tonnes.

The current monsoon season rains are running about 6% behind normal or about 94% of the historical average. [2] Thus far in August, rainfall is about 20% below average, increasing concerns over available moisture for the coming rabi (winter) crop planting season, which starts in October.

Here in North America, Donald Trump continues to suggest that he might just end up terminating the NAFTA deal, instead of trying to renegotiate it. [3]

Tropical Storm Harvey has a high chance of getting upgraded to a hurricane just as it makes landfall on the US Gulf Coast. [4] The storm could bring down more than 40 inches of rain in just six days. From an agricultural standpoint, those with rice, corn, or cotton crops ready to harvest will have to hurry to get it in.

Oil markets are also bracing for the effects that a storm of this nature could have. 10% of crude-oil production in the Gulf Coast has been shut down ahead of the storm’s arrival. More simply, a fair amount of drilling and processing production is in the direct line of the storm. [5]

And when oil prices go up, grain and oilseed prices aren’t far behind.

Farm Journal Crop Tour Day 4

The 2017 Farm Journal Crop Tour wrapped up yesterday with all scouts meeting up in Rochester, MN for a final supper and goodbye. There’s always going to be a talk of variability on crop tours this large and this year was no different. [6]

However, this year, there seemed to be more chatter about western corn belt versus eastern corn belt. [7]

This sort of situation was something that I pointed out was possibly nearly three months ago, all the way back in the Breakfast Brief of June 2nd.

In Iowa, things are running behind where they usually are. Final corn yields in Iowa came in at 179.8 bushels per acre. That’s only 1.4% below the 3-year average of 182.4. [8] For Iowan soybeans, 3×3 square foot pod counts came in at only 1,092.9. This figure is a 9.4% decline from the 3-year average of 1,205.7 pods.

In Minnesota, things are looking bearish for corn. [9]

Average yields in the Gopher State came in at 191.5 bushels per acre. This figure is 5.6% higher than the 3-year average of 181.3 bushels per acre. For soybeans, the average pod counts in a 3×3 square foot came in at 1,020. That’s 6.1% lower than the 3-year average of 1086.1 pods.

We’ll get the final nationwide estimates from Chip Flory and company later today but here are my takeaways of this year’s Farm Journal Crop Tour:

  1. Maybe the USDA isn’t so wrong on corn yield. I’m guesstimating today that their September WASDE report will show a 167 point something number. The Farm Journal Crop Tour corn yield number should likely be similar later today.
  2. Soybean pods are smaller and lower in number than they’ve been in years passed. The USDA might drop the yield in their September WASDE but I’m expecting a number around 48 – 48.5 bushels per acre from the Farm Journal later today.
  3. I’m kind of jealous of our Doug Kirk, who got to spend 4 days on the Western leg! You’ll be able to read up on Doug’s thoughts on his experience later today in the FarmLead Insights section.

International Grains Council Update

The IGC came out with an update list of projections for supply and demand in the agricultural industry in this week.

The biggest thing to note is the broken record that is world wheat carryout will be a record. [10] By the end of 2017/18, the IGC is forecasting there to be 248 million tonnes still available in the world. As per the August WASDE report, the USDA is projecting an even larger carryout of 264.7 million tonnes.

The Black Sea obviously has been a major factor in the continuous growth of wheat numbers. The IGC, in this report, raised their estimate of the Russian wheat crop to 80 million tonnes! They also increased their estimates of the Ukrainian and Kazakhstani wheat harvests to 26 and 13.8 million tonnes respectively.

As Garrett mentioned in Grain Markets Today, SovEcon raised its forecast to 78.9 million tonnes. [11]

SovEcon is also estimating that Russia will export 32.4 million tonnes of wheat this year, making them the top exporter for 2017/18.

In Europe, the IGC is forecasting a soft wheat crop of 139.5 million tonnes. This figure is nearly in-line with the European Commission’s estimate of 139.4 million, who are using an average yield of 87.7 bushels per acre across the bloc.

While this is an improvement from last year, European wheat exports are expected to perform poorly due to competition from the Black Sea. EU exports are being scheduled: only 2.03 million tonnes got shipped out through this past Monday. That’s down 55% compared to the same pace a year ago.

For corn, the IGC is expecting 2017/18 ending stocks to close at 196 million tonnes. This estimate represents a decline of 32 million tonnes or -14% from 2016/17’s carryout . It’s also nearly 5 million tonnes lower than the USDA’s 2017/18 carryout forecast of 200.9 million tonnes.

As harvest continues to progress in the Black Sea, the IGC notes that barley yields in Ukraine and Russia are both exceeding last year. [12]

On the demand side, the IGC notes that Saudi Arabia is buying more barley, while China is buying much less. [13]

Tregg Cronin of Halo Commodities pointed out last week that the USDA’s global balance sheet for barley has tightened to 18.2 million tonnes. [14]

This would be the lowest since the 1983/84 marketing year. Should we expect way higher prices? It seems that feed buyers are fairly content right now, given the amount of feed supply (namely corn and wheat) available globally.

In canola, the IGC notes the Canadian production will be similar to the previous 2 years, despite the 18% increase in acreage compared to last year. [15] It’s a similar story in Australia as acreage was up 14% this year but dryness will push production down by 29% against last year’s big crop. In Europe, the IGC is forecasting a rapeseed crop of 21.7 million tonnes. [16]

This is a 6% incline from last year’s output.

Will it make up for lower Australian and Canadian production though? Probably not.

Have a great weekend!

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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