FarmLead Breakfast Brief
Wednesday, December 14th, 2016
“The battle is all over except the ‘shouting’ when one knows what is wanted and has made up his mind to get it, whatever the price may be.”
– Napoleon Hill (U.S. author)
At 7:00 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3086 CAD, $1 CAD = $0.7642 USD)
Mar Corn: -1.3¢ (-0.35%) to $3.598 USD or $4.708 CAD
Jan Soybeans: -5.8¢ (-0.55%) to $10.223 USD or $13.377 CAD
Jan Soybean Meal (per short ton): -$1.90 (-0.6%) to $313.20 USD or $409.84 CAD
Jan Soybean Oil (cents per lbs): -0.12¢ (-0.35%) to 36.66¢ USD or 47.97¢ CAD
Mar Oats: +1.5¢ (+0.65%) to $2.34 USD or $3.062 CAD
Mar Wheat (Chicago): -3.5¢ (-0.85%) to $4.14 USD or $5.417 CAD
Mar Wheat (Kansas City): -2.3¢ (-0.55%) to $4.13 USD or $5.404 CAD
Mar Wheat (Minneapolis): -1.3¢ (-0.25%) to $5.365 USD or $7.02 CAD
Jan Canola: -2.3¢ or $1/MT (-0.2) to $8.926/bu / $393.56/MT USD or $11.68/bu / $515/MT CAD
Yesterday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.30 USD or $3.092 CAD
Mar Milling Wheat: -10.9¢ (-1.65%) to $4.888 USD or $6.396 CAD
Getting Priced Out
Grains this morning are mostly in the red as the market pulls back ahead of today’s US Federal Reserve interest rate announcement(amidst elevated economic uncertainty thanks to President-Elect Donad Trump) with soybeans in the red on an improved weather outlook for Argentina (rain is in the forecast!). About 60% of the Argentinian soybean crop has been planted thus far and farmers there have about 2.5 weeks left to get the other 35% of acres in by January 1st, when, on average, 95% of the crop is planted by. Insurance giant MetLife says that grain prices in 2017 will reach a turning point: either we’ll see a crop failure somewhere and prices can start to rebound or we’ll have trendline yields again and prices remain subdued (they favour the former to happen, citing bullish acreage numbers). On that note, U.S. corn farmers are staying stubborn and unwilling to sell at current prices, but we have seen basis levels improve lately, a trend that could continue as the market tries to price out some grain to get it out of bins and ground piles.
French winter wheat acres are expected to remain above their 5-year average, with 18.1M acres getting seeded, including 12.8M acres of soft wheat (highest since 1993 but just slightly above last year’s acreage) and 894,500 acres of durum (the first drop in the past 3 years, but only down by 19,770 acres from last year). While the lack of change to wheat acres is a bit surprising after this past year’s poor harvest, French farmers are decreasing their barley acres for the first time in 5 years to 3.41M and rapeseed area by 5.1% from last year to 3.58M acres. While France focuses on next year’s crop, Australia’s is just coming off, but it’s coming off quickly as CBH Group is reporting record daily deliveries, taking in almost 10M tonnes across their locations in just 1 week to start December! While the grain continues to come in, A.B.A.R.E.S. isn’t as optimistic as the U.S.D.A. for Aussie wheat exports, blaming increased global competition and pegging outbound shipments from the Land Down Undaa at 22.4M tonnes, versus the 24.5M tonnes call in Friday’s W.A.S.D.E. (record was 24.66M in 2011/12).
Speaking of exports, China is expected to ship 2M tonnes of corn from its stockpiles after new data received suggests that Beijing is getting serious about reducing its gluttony of supply, which is pegged at between 150M – 240M tonnes of the coarse grain (oh, and they’ll be harvesting another 200M-tonne crop this year). Switching gears to company news, Monsanto’s shareholders approved the move to merge with Bayer while one of Bayer’s licensing partners, Stine Seed, is expanding a program to allow growers to replant the stuff they grew this year from the seed they bought last year! This is relatively unprecedented considering that seed companies make most of their money from farmers buying new seed every year to ensure they’re profiting off of the technology that cost them billions of dollars to develop.
Staying in soybeans, Karen Braun from Reuters points out that, in terms of fundamentals, the soybean complex is looking very similar to last year, yet prices are above $10 / bushel on the Chicago board and the market is very long, not in the $9s and sitting in a net short position like they were a year ago. With prices up nearly 20% versus where they were a year ago, yet carryout is relatively unchanged thanks to supply and demand growing in tandem, mainly thanks to a record crop in the US and a likely monster out of South America, assuming that weather over the next 1-2 months remains benign(which it looks like to be the case). Add in that soybean acres are likely to increase by a few million, this will put pressure on things to the downside as we get nearer to spring, especially as demand switches from North to South America. More acutely, U.S. acres are mostly decided between November and January, with most changes thereafter being marginal. As such, you might see 1 million or so acres swing back to corn but with the coarse grain still under $4/bushel, a lot of bean acres are getting bought today (and they should probably be getting priced too).
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.