Jan 26 – Conflicts of Interest?

FarmLead Breakfast Brief

Thursday, January 26th, 2017

“Never in the field of human conflict was so much owed by so many to so few.”
– Winston Churchill
(British Prime Minister)

Good Morning!
At 6:55 AM CDT in the North American futures markets (*not cash prices*):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3111 CAD, $1 CAD = $0.7627 USD)

Mar Corn: -2¢ (-0.55%) to $3.643 USD or $4.776 CAD
Mar Soybeans: -3.5¢ (-0.35%) to $10.518 USD or $13.79 CAD
Mar Soybean Meal (per short ton): -$1.50 (-0.45%) to $341.80 USD or $448.15 CAD 
Mar Soybean Oil (cents per lbs): –0.07¢ (-0.2%) to 34.80¢ USD or 45.63¢ CAD 
Mar
 Oats: +3.3¢ (+1.25%) to $2.633 USD or $3.452 CAD
Mar Wheat (Chicago): -0.5¢ (-0.1%) to $4.24 USD or $5.559 CAD
Mar Wheat (Kansas City): -0.3¢ (-0.05%) to $4.375 USD or $5.736 CAD
Mar Wheat (Minneapolis): +1.8 (+0.3%) to $5.593 USD or $7.333 CAD
Mar Canola: +2.3¢ or +$1.00/MT (+0.2%) to $8.054/bu / $399.20/MT USD or $11.871/bu / $523.40/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.308 USD or $3.026 CAD
Mar Milling Wheat: -5.4¢ (-0.85%) to $4.899 USD or $6.423 CAD

How much of a rally do you need before posting a target?

Are you just waiting for bids?

Let’s actually start marketing grain instead…

Conflicts of Interest?

markets are again in the red this morning, pulling back from a bit of a rebound yesterday, despite the Dow stock market closed above 20,000 (a new record), with most responsibility being put on President Trump’s executive orders to build up America (i.e. infrastructure, defense, and other spending). While farm groups remain uneasy without trade relations being a core focus of the new administration, we’re still looking for clarity on how Trump is going to build up America’s domestic demand for grain. That being said, one of The Donald’s special advisers on regulatory reform is Carl Ichan who owns a good chuck of ethanol processor CVR Energy but the shares of that company have gained nearly 10% since the election. Why? Expectations are that the biofuel rules will change. How will that happen? People like Carl Ichan advising on things which has many questioning the conflict on interest there.

On the other side of the pond, the United Kingdom is going through the process of getting out of the E.U.. The impending “Brexit” hasn’t caused many massive currency swings in the Eurodollar but the Netherlands, France, & Germany all face national elections in 2017 which, between a Donald Trump Presidency and the UK exit, we could see some more aggressive FX (currency) moves. CME Group Senior Economist Erik Norland believes that a weaker Euro would be a bad thing for US farmers as it would keep agricultural prices lower (international buyers would source from the cheaper-currency option). As the Eurodollar is arguably the 2nd most influential commodity in the grains markets (other than the U.S. Dollar), where it goes, so could other major ag exporting currencies like Canada, Russia, & Brazil! Separately, the recent Alltech Global Feed survey pegged Spain as the top European livestock feed producer in 2016, growing 8% from 2015, while global feed production hit a record of 1.03B tonnes (+3.7% year-over-year), despite 7% fewer feed mills. The other shining stars were Africa (+13% YoY) and the Middle East (+17%).

Heading across the Mediterranean Sea, Morocco wheat imports are expected to come in at 5.5M tonnes in 2016/17 because of domestic production hitting a 9-year low. With tight stocks, the North African country is expected to import more, especially since, as of January 1, 2017 only 100,000 MT of barley, 150,000 MT of common wheat, and 60,000 MT of durum remained in its coffers. With a decline in production, the Moroccan Ag Ministry is forecasting wheat and barley area in 2017/18 to grow by 50% this year to 11.9M acres, albeit their planting season started late because of rain delays. Moving back to North America, WeatherBELL is forecasting that early planting for the 2017 American crop is out of the question due to anticipated colder temperatures as the chatter moves away from the weak La Nina and back towards an El Nino event developing (if it’s not one, it’s the other, right?).

Finally, the market continues to look to South American weather with Allendale Brokers pointing out that the bulls are favouring some rains in the forecast again for Argentina while the bears are trumpeting the rains in Brazil supporting the finishing of the soybean crop there. What we know for sure is that the size of the aggregate South American soybean crop looks to be a record and with more soybeans going into the ground in both Canada and the U.S. in 2017, on-farm efficiencies will be needed to turn a profit in 2017 according to Mark Jensen, Chief Risk Officer of Farm Credit Services of America. The lender says that, over the next 4 years, they are expecting corn prices to sway somewhere between $3 and $4.50 USD / bushel and soybeans between $9 and $9.50 USD / bushel. While we can control what we do in the field (minus the Mother Nature effect), having a disciplined marketing plan in 2017 will be critical and with prices where they are now, locking some profit shouldn’t be too conflicting. Get in the 2017 grain marketing risk management game and post your next 10% block of old OR new crop on FarmLead today!

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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