Dec. 1 – Calling The Future

FarmLead Breakfast Brief

Thursday, December 1st, 2016

“Education is the passport to the future, for tomorrow belongs to those who prepare for it today.”
– Malcom X
(US Human rights activist)

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 = $1.339 CAD, $1 CAD = $0.7468 USD)

Mar Corn: +1¢ (+0.3%) to $3.493 USD or $4.677 CAD
Jan Soybeans: +5.3¢ (+0.5%) to $10.375 USD or $13.893 CAD
Jan Soybean Meal (per short ton): +$1.50 (+0.45%) to $319.80 USD or $428.73 CAD 
Jan Soybean Oil (cents per lbs): +0.15¢ (+0.4%) to 37.14¢ USD or 49.73¢ CAD 
Mar
 Oats: +5¢ (+2.35%) to $2.173 USD or $2.909 CAD
Mar Wheat (Chicago): +0.8¢ (+0.2%) to $4.115 USD or $5.403 CAD
Mar Wheat (Kansas City): +1.3¢ (+0.3%) to $4.115 USD or $5.51 CAD
Mar Wheat (Minneapolis): +4.5¢ (+0.85%) to $5.39 USD or $7.217 CAD
Jan Canola: +3.2¢/bu / +$1.40/MT  (+0.25%) to $8.909/bu / $392.82/MT USD or $11.929/bu / $526/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.309 USD or $3.092 CAD
Mar Milling Wheat: +2.7¢ (+0.4%) to $4.837 USD or $6.477 CAD

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Calling The FutureGrains this morning are in the green as South American weather premiums start to find their way back into the market and O.P.E.C. actually agreeing to cut production for the first time since the financial crisis in 2008. The bloc agrees to cut production by a combined 1.2M barrels/day to 32.5M barrels/day of total production, but for only 6 months, albeit there is an option to extend the production cut another 6 months to the end of 2017. This is obviously supporting the oilseeds complex this morning, whereas the spread between winter and higher-quality spring wheat continues to widen as snow is expected to fall on dry areas of the Southern Plains (where U.S. winter wheat is predominantly grown). Overall, we don’t know what next year’s wheat crop will hold but the opportunities today suggest that if you’ve got decent quality, you should be getting a much better price for it, compared to feed wheat, than you have in the past.

Strategie Grains continues to reiterate its call that European Union wheat acres are unlikely to decline in 2017/18 and with the weather unknown at this point, they’re projecting a bigger crop than this year’s rain-riddled downturn. With a soft wheat production forecast of 152.9M tonnes, this would represent at 5.5% increase from this year’s 145M-tonne (which was technically a 9% drop from 2015’s record 159.4M tonnes…key word here being record). This in mind, Strategie is expecting that next year, with the rebound in production, the EU will recover the exports it lost to the Black Sea this year (albeit, it should be noted that on-farm storage in the Black Sea are increasing, disrupting usual harvest pressures). Conversely, Strategie is expecting durum wheat acres to drop as a result of lower margins but rapeseed margins will continue to be good but not good enough to offset the production risk without seed treatment capabilities.

In the Land Down Undaa, grain trading company Nidera is going against the grain, calling for a record wheat crop of 31-33M tonnesthis year, beating the previous record of 29.9M tonnes set 5 years ago. While currency effects have allowed for Black Sea wheat to fill Asian market needs in the past, freight advantages are now making Argentinian and Australian -origin wheat more competitive, especially since protein is coming in a little bit above expectations (well, at least in the Eastern half of Australia it is). With protein on the mind, new reports suggest that China will need more feedstuffs in the next decades as the growing middle class switches their diet away from more grains to more meat. On that note, China continues to buy U.S. soybeans like it’s going out style, announcing another purchase yesterday, albeit it was the first since last Monday, suggesting that the checkbook could be switching to South America, now that we’re in the month of December. Simply put though, China continues to be the most important partner for North American soybean growers as they buy about 1/3 of all American production and nearly 75% of Canadian output, or about 30M and 4.5M tonnes exported from each country, respectively.

The U.S.D.A. released their 10-year baseline numbers this week(used for government budget reasons) and it raised a few eyebrows. Throwing their first forecast into the ring, the U.S.D.A. is expecting 90M acres of corn and 85.5M acres of soybeans (a record) to get planted across America in 2017 (-4.8% and +2.1% year-over-year, respectively). From a production standpoint, the U.S.D.A.’s first estimate of next year’s crop suggests more trendline yields of 170.8 bu/ac corn and 47.9 bu/ac soybeans (-2.6% and -8.8% from this year’s records). Finally, wheat acreage is expected to be down 4.4% from 2016 to 48.5M acres with yields down more than 10% to 47.1 bu/ac. Compared to the U.S.D.A.’s estimates, most private forecasts are calling for way less wheat acres, a few more million bean acres, and similar corn numbers, which would suggest that it still keeps the title of most acres, and prices potentially getting back to $4/bushel on the Chicago board. What we know for certain is that these are likely to change between now and the March 31st Acreage Estimates.

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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