FarmLead Breakfast Brief
Friday, October 13th, 2017
“Nobody gets lucky all the time. Nobody can win all the time. Nobody’s a robot. Nobody’s perfect.”
– Johnny Weir (American figure skater)
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 = $1.2497 CAD, $1 CAD = $0.8002 USD)
Dec Corn: unchanged at $3.49 USD or $4.361 CAD
Nov Soybeans: +2.5¢ (+0.25%) to $9.945 USD or $12.428 CAD
Dec Soybean Meal (per short ton): -$0.20 (-0.05%) to $326.10 USD or $407.52 CAD
Dec Soybean Oil (cents per lbs): +0.40¢ (+1.2%) to 33.68¢ USD or 42.09¢ CAD
Dec Oats: +3.5¢ (+1.35%) to $2.653 USD or $3.315 CAD
Dec Wheat (Chicago): +0.8¢ (+0.15%) to $4.313 USD or $5.389 CAD
Dec Wheat (Kansas City): +0.5¢ (+0.1%) to $4.268 USD or $5.333 CAD
Dec Wheat (Minneapolis): +3.5¢ (+0.55%) to $6.148 USD or $7.682 CAD
Dec Canola: +5¢/bu / +$2.20/MT (+0.45%) to $9.036/bu / $398.42/MT USD or $11.292/bu / $497.90/MT CAD
Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.579 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $6.12 USD or $7.821 CAD
Dec Milling Wheat: -8.2¢ (-1.3%) to $5.031 USD or $6.287 CAD
A Bullish Friday the 13th Grain Markets?
Grain prices are mostly in the green today thanks to some follow-on buying after yesterday’s WASDE report.
On Thursday, the USDA released its monthly report on world agricultural supply and demand estimates, better known as the WASDE.  Before the report, markets had focused on corn and soybean yields.
After rising yield estimates in August and September, many farmers probably felt worried that additional increases and lower prices were in store for them. The USDA might’ve helped things out a bit.
The U.S. Corn Crop Grows
This USDA once again increased corn yields.
This time, the agency projects increasing average US yields to 171.8 bushels per acre.
That figure is up nearly 2 bushels from the September estimate and a good hike from the market’s pre-report expectation of 170.1. It is also the second-best yield ever after last year’s record of 174.6 bushels per acre.
Record yields have been forecasted in most of the southeastern states, including Mississippi, Louisiana, Alabama, Georgia, but also in northern states like Michigan and Pennsylvania. Yields were raised in all three i-states (Illinois, Iowa, & Indiana).
This trend would put total production at nearly 14.3 Billion bushels, also the second-largest number after last year’s record 15.15 Billion-bushel crop. The increase likely would’ve been higher if it wasn’t for harvested acreage was decreased by 400,000 acres.
What’s interesting to factor in here though is that the US corn harvest is behind schedule (as mentioned in Wednesday’s Breakfast Brief). The last time harvest was this delayed was in 2014. As pointed out by Reuters, that year, the USDA ended up lowering the US average corn yield by 3.2 bushels from its October estimate. 
Is that the bullish indicator we need to wait for until January?
Before answering that, it is worth US ending stocks were raised slightly to 2.34 Billion bushels, although the USDA did raise corn-for-feed demand by 25 million bushels.
As Garrett mentioned in some initial reactions to the October WASDE report, The market reacted positively to the news though as the global 2017/18 corn ending stocks were lowered below 201 million tonnes.
Of note was lower carry out in China and Mexico. For the People’s Republic, the USDA thinks they’ll end the year at 79.2 million tonnes as they continue to work through their mountains of multi-year-old corn. For Mexico, 2017/18 ending stocks were lowered by about 1.5 million tonnes to 4.78 million. This figure would be a 26% decline from last year’s ending stocks figure.
Check out some great charts recapping the October WASDE here in Grain Markets Today.
Finally Getting Bullish on Soybeans!
The USDA dropped average US soybean yields to 49.5 bushels per acre when the market was expecting a 50-handle. September’s estimate was 49.9 bushels per acre.
This revision helped November soybean prices on the Chicago futures board test $10 USD/bushel. The January 2018 contract is still sitting in double digits after yesterday’s run-up.
However, because of the harvested acreage number increasing by 740,000 acres, US soybeans production remained unchanged at 4.43 billion bushels. This number is a new production record though.
Good demand numbers helped push American 2017/18 ending stocks down to 430 million bushels. Comparably, the market was expecting 447 million while the September’s WASDE report showed 475 million bushels.
Given these production levels and carry out numbers, this would suggest the highest American soybeans stocks-to-use ratio in a decade of 10%.
Globally, total 2017/18 soybeans production was lowered by 560,000 MT. Further, 2017/18 ending stocks were dropped by nearly 1.5 million tonnes. The change was attributed mainly to smaller carryout in the US and Brazil, both thanks to solid export demand.
It’s worth noting that Brazil has captured a greater share of global soybean export growth in the past 5 years.  They own nearly half while the US only has accounted for 40% of the growth.
For canola, there wasn’t much changed in this USDA report. Canadian production was stayed at 19.9 million tonnes, well below Statistics Canada’s current forecast. We won’t get an update from the latter on their estimates of Canadian grain production until December 6th, 2017.
In the US, harvested canola acres are up 20%, but yields are 24% lower. This figure equates to a 1.27 million-tonne American harvest. That’s 9% lower than 2016’s harvest of 1.4 million tonnes.
Global carryout numbers of canola/rapeseed for the end of 2017/18 was lowered below 5 million tonnes for the first time since 2012/13.
While this report is a nice change of rhetoric from the USDA, some clear supply headwinds are in the air. As we’ve mentioned for the past few weeks, we’ll be looking to South America for weather/planting premiums for the next pop, similar to last year’s action in oilseeds.
Withering Wheat Markets
On the wheat front, things continue to be bearish according to the USDA.
Total world production was raised yet again, this time by more 6 million tonnes to 751.2 million tonnes. The increases were attributed to:
- Canada: +500,000 from the September estimate to 27 million tonnes;
- Russia: +1 million to 82 million tonnes;
- Europe: +2.2 million to more than 151 million tonnes; and
- India: +2.4 million to 98.4 million tonnes.
These figures more than offset a 1 million-tonne drop in Australia to 21.5 million tonnes of wheat production in 2017/18.
For the Land Down Undaa , this number seems a bit puzzling as it is on the top-end of all estimates out there. Further, the USDA is forecasting that Australia will export 18 million tonnes of wheat this year.
That seems very, very unlikely.
This means that there possibly is 3-5 million tonnes of wheat export business that will go somewhere. Most guesses are that Black Sea (looking at you Russia) will win the business.
However, we did note in yesterday’s Breakfast Brief, how at least 1 new customer of Russian wheat isn’t too happy with its quality.
It’s also a bit surprising that the USDA didn’t downgrade the 2017/18 Argentinian wheat crop despite the stress it’s receiving (too much moisture in the north, not enough in the south).
Ironically, the USDA increased the 2016/17 Argentinian wheat crop by nearly 1 million tonnes to 18.4 million.
Hitting the bearish nail on wheat’s head, the USDA raised global wheat ending stocks 2017/18 by 5 million tonnes to 268 million! That’s a 5% jump year-over-year. The most notable are Russia’s ending stocks climbing 60% from last year’s 10.8 million tonnes to end 2017/18 at 17.3 million.
Final October WASDE Report Reactions
Overall, one could certainly argue that this was a pretty positive report for farmers. While wheat lagged behind, both corn and soybeans ticked up higher.
As mentioned previously, we’re looking to South American weather/planting premiums to creep back into the market before the end of the calendar year. We’ve been making the call since the start of September to considering holding on to those oilseeds for this reason.
Ultimately though, there’s a lot of grain in the world. We continue to need a production scare, and the best candidate is going to be South America. Sure, Australia is experiencing some challenging weather. However, any yields below average on the paddocks of the Land Down Undaa is seemingly offset by above-average yields found in Black Sea fields.
Harvest is nearly finished for most Western Canadian farmers and corn, and soybean harvest is hitting full-tilt everywhere else across North America. This rally in soybeans shouldn’t be ignored.
We continue to see healthy corn and feed grain sales in Ontario, Western Canada, and North Dakota on the FarmLead Marketplace.
If you’re looking to book that next load, post it on the Marketplace and let the best market price find your grain (instead of you just calling around for it).
Have a great weekend!
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