FarmLead Breakfast Brief
Thursday, December 15th, 2016
“The difference between a hero and a coward is one step sideways.”
– Gene Hackman (U.S. Actor)
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 = $1.33216 CAD, $1 CAD = $0.7507 USD)
Mar Corn: -1.5¢ (-0.4%) to $3.605 USD or $4.802 CAD
Jan Soybeans: -1.3¢ (-0.1%) to $10.225 USD or $13.621 CAD
Jan Soybean Meal (per short ton): -$0.80 (-0.25%) to $312 USD or $415.61 CAD
Jan Soybean Oil (cents per lbs): +0.12¢ (+0.35%) to 37.04¢ USD or 49.34¢ CAD
Mar Oats: -0.3¢ (-0.1%) to $2.295 USD or $3.057 CAD
Mar Wheat (Chicago): -3¢ (-0.7%) to $4.15 USD or $5.528 CAD
Mar Wheat (Kansas City): -2¢ (-0.5%) to $4.18 USD or $5.568 CAD
Mar Wheat (Minneapolis): +1.8¢ (+0.3%) to $5.43 USD or $7.233 CAD
Jan Canola: +6.4¢ or $2.80/MT (+0.55) to $8.836/bu / $389.61/MT USD or $11.771/bu / $519/MT CAD
Yesterday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.30 USD or $3.092 CAD
Mar Milling Wheat: +2.7¢ (+0.45%) to $4.822 USD or $6.423 CAD
Grains this morning remain quietly in the red as the market balances continued strong export demand against the outlook of some decent weather for Argentina (which pushes soybeans lower), as well as being pressured by a higher U.S. dollar thanks to the U.S. Federal Reserve interest rate increase yesterday. A fair amount of crop could be further stressed if the rains next week don’t end up falling, whereas contrasting the precipitation for Argentina will be some drier weather in most parts of Brazil over the next week. The soybean crushers group in Brazil, Aboive, is expecting 58M tonnes of soybean exports in 2017, off a 101.7M tonne crop (USDA at 58.4M and 102M respectively). Later today we’ll get the NOPA crush number for November, which is estimated to come in at 162.6M bushels. Simply put, the market continues to trade South American weather, wheat origin headlines, with corn being pulled by either side (depending which rhetoric is being pounded harder on any given day), with currency effects playing the outlier (especially with the Fed more in play now).
As expected, yesterday the U.S. Federal Reserve raised their key benchmark rate by 0.25% or 25 basis points to 0.75%, which is technically just their 2nd increase in the past decade! Chairwoman Janet Yellen cited strength in the U.S. economy signs that inflation is increasing as the justification for the hike. The Fed said that they would likely raise interest rates another 3 times in 2017 but that President-Elect Donald Trump slashing taxes and increasing spending could force them to act sooner than planned in order to tackle inflation and therein, rising prices. The Canadian Loonie pushed down below 75 cents USD, which was a bit of surprise because everyone knew that this rate hike was coming, What’s good for the U.S. economy tends to be good for Canada but with average Canadian household debt-to-income standing now at a record 167%, any following by the Bank of Canada with their interest rate increases could put a lot of pressure on people and remains a key risk in the Canadian economy.
On the trade front, an E.U. employment committee voted 27-24 for motion to tell the European Parliament that is should reject the EU-Canada trade deal, C.E.T.A.., on the premise that it could destroy over 200,000 E.U. jobs. While the E.U. trade committee is the one in charge of the free trade agreement, other committees like foreign affairs and the environment can offer their opinions before the Parliamentarian vote in February. Switching to the other big trade deal on the ropes, Japan ratified the Trans-Pacific Partnership last week, signaling to the rest of the countries that it wants to be open for doing business with, even if Donald Trump says he doesn’t want to sign it. My guess is that The Donald will sign something if there’s a few concession made by the other countries, or else China could step in to play a role, but likely not in the form of the T.P.P. but strong regional trade play in Southeast Asia.
The Russian Ag Ministry says that in the past decade and a half, Russian grain export capacity has exploded from just 5M tonnes to 45M tonnes this year. While production in the Black Sea country has increased by one-third or about 30M tonnes in the past decade, touching roughly 115M tonnes this year, the government is aiming for 130M tonnes of production by 2030. While some think this is ridiculous, there are millions of unseeded acres around Russia that could make it happen (albeit I do agree that the timeline is a little aggressive). On that note, despite record global wheat production and carryout and even more winter wheat acres were planted in Russia this year, more analysts are getting optimistic that wheat prices can continue to improve as acres elsewhere, namely the U.S. and Ukraine, fall. However, we still must work through this gluttony of wheat that’s out there, which means more sideways trading is likely, or at least gains will be limited.
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.