November 21 – Effect of Crop Progress on Grain Prices

Good Morning!

Today’s Breakfast Brief digs into crop progress figures in both the U.S. and South America. We also look at some comparative export numbers and whether livestock prices will offer feed grain prices any more upside.

 

“Shallow men believe in luck. Strong men believe in cause and effect.” – Ralph Waldo Emerson (American author)


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Selling it for a bigger profit.
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Grain markets are mixed this morning with wheat languishing on some export numbers and futures selling. Canola prices and soyoil are bouncing off their downside knee-jerk reaction of new import taxes on vegetable oils by India.

Yesterday we also got some policy updates.

First, Nebraska’s Public Service Commission approved the Keystone XL pipeline to run through the state. It is a different route than what pipeline owner TransCanada Corp. had sought, but it is a policy win and should finally bring this long-standing debate to a close. [1]

Second, the progress of NAFTA re-negotiations has slowed. American demands aren’t being met with counter-proposals from Canada or Mexico. [2] More specifically, the US is looking for an end to the protection of Canadian dairy, poultry, and egg industries, also known as supply management. [3]

Dan Huber of the Huber report thinks that a nice short-covering rally may be in our cards between now and the end of the year. [4] “There’s an old adage that if the bears get Turkey for (US) Thanksgiving, the bulls get it for Christmas,” he said in a recent AgDay interview.

As Garrett mentioned in Grain Markets Today, wheat prices slumped yesterday on worse-than-expected export numbers last week. A year ago, 434,000 tonnes of U.S. wheat was shipped out.

This year, less than half of that number.

On the flipside, Russia continues to impress with 14.8 million tonnes of wheat exported thus far in 2017/18, as of last week. This is up 26% year-over-year. The average price sitting at Black Sea ports is $192 USD/tonne (or $5.25 USD and $6.70 CAD per bushel).

For U.S. soybean exports, it’s the opposite. Todd Hubbs of the University of Illinois notes that most actual sales and pace of shipments are behind last year. [4] However, Hubbs expects the current 2017/18 USDA export target of 2.25 Billion bushels (or 61.25 million tonnes if you’re using GrainUnitConverter.com) to get hit.

The only variable really is crop progress in South America.

Oats Prices, Barley Prices Firming?

AgCanada says that Canadian oats are moving to the U.S. at a record pace. [5] The AAFC is expecting oat prices to firm up going into Christmas, although, I’ll admit, I’m not expecting a huge spike.

For barley, the AAFC notes that feed barley prices remain strong. This is because of some lower-than-expected feed supplies and stronger livestock futures prices.

As mentioned in yesterday’s Breakfast Brief though, there’s a fair amount of American corn and DDGs trying to make its way into Canada for animals to feast on.

Supporting this theory is that the premium between barley and corn is at a three-year high. One could posit that what goes up, must come down.

However, we continue to think that larger herd size in the U.S. is supportive of feed grain prices in general. This doesn’t mean that prices are going to skyrocket higher, just that they may stay around where they’re at today.

As we mentioned previously, literally ”giving a cow” is supportive of corn prices (and that of other feed grains).

As such, we’re not opposed to locking in some movement before the holidays. If you’re looking to defer payment until the new calendar year, we haven’t seen a verified FarmLead buyer turn down that request in the last three years.

Go ahead and post some feed grain on the FarmLead Marketplace today.

Where’s the Crop Progress?

According to the most recent USDA crop progress report, 88% of the US winter wheat crop has emerged. [6] This is right in line with the five-year average and last year’s number. However, the portion of the winter wheat crop rated good-to-excellent (G/E) did drop by 2 points week-over-week to 52%.

Last year, that G/E number was 58%. The five-year average is 54% though.

It’s worth noting that those areas that are dry – namely Montana, South Dakota, Nebraska, and Oklahoma – saw drops of 3 to 7 points in their G/E number from last week.

Thanks to some cooperative weather recently though, the U.S. corn harvest is now at 90% complete, This figure is a good improvement and now sits only 5 points back of the 5-year average.

The American soybean harvest is practically wrapped up, with just 4% of the crop still left to get combined as of Sunday.

AgRural says that soybean planting in Brazil has caught back up to last year’s torrid pace, now with 73% of the crop seeded. This is above the five-year average of 68%.

For Brazil’s first-crop corn, 63% of acres have been seeded.

This is slightly behind the five-year average of 65% and well behind last year’s 79%.

Some heavy rains in Brazil are being forecasted over the next few weeks, with total levels reaching between 4 and 9 inches in some areas. Some rains are also expected in northern Argentina, but over the same two weeks, low amounts of precipitation and rising temperatures are more expected.

This weather though hasn’t been able to add much premium to the market. For soybeans to spend some significant time above $10 USD/bushel on the futures board, you’ll need a weather spark in South America.

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

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 = $1.2788 CAD, $1 CAD = $0.782 USD)

Mar Corn: -1.5¢ (-0.4%) to $3.543 USD or $4.53 CAD
Jan Soybeans: -0.5¢ (-0.05%) to $9.895 USD or $12.653 CAD
Jan Soybean Meal (per short ton): -$1.50 (-0.45%) at $320.50 USD or $409.85 CAD
Jan Soybean Oil (cents per lbs): +0.2¢ (+0.6%) to 34.30¢ USD or 43.86¢ CAD  
Mar Oats: -2¢ (-0.75%) to $2.69 USD or $3.44 CAD
Mar Wheat (Chicago): -1¢ (-0.25%) to $4.375 USD or $5.595 CAD
Mar Wheat (Kansas City): -0.8¢ (-0.18%) to $4.33 USD or $5.537 CAD
Mar Wheat (Minneapolis): -1¢ (-0.15%) to $6.41 USD or $8.197 CAD
Jan Canola: +2.3¢/bu / +$1/MT (+0.2%) to $11.725/bu / $517/MT CAD or $9.169/bu / $404.29/MT USD

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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