FarmLead Breakfast Brief
Monday, December 19th, 2016
“I really believe that everyone has a talent, ability, or skill that he can mine to support himself and to succeed in life.”
– Dean Koontz (US author)
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 = $1.3367 CAD, $1 CAD = $0.7481 USD)
Mar Corn: -1.5¢ (-0.4%) to $3.548 USD or $4.742 CAD
Mar Soybeans: -7.5¢ (-0.7%) to $10.393 USD or $13.892 CAD
Mar Soybean Meal (per short ton): -$2.30 (-0.7%) to $319.10 USD or $426.55 CAD
Mar Soybean Oil (cents per lbs): -0.12¢ (-0.3%) to 36.91¢ USD or 49.34¢ CAD
Mar Oats: +2.8¢ (+1.25%) to $2.268 USD or $3.031 CAD
Mar Wheat (Chicago): +1.3¢ (+0.3%) to $4.105 USD or $5.487 CAD
Mar Wheat (Kansas City): +3¢ (+0.7%) to $4.178 USD or $5.584 CAD
Mar Wheat (Minneapolis): -0.5¢ (-0.1%) to $5.438 USD or $7.268 CAD
Mar Canola: -0.2¢ or -$0.10/MT (-0.02%) to $8.919/bu / $393.28/MT USD or $11.923/bu / $525.70/MT CAD
Friday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.30 USD or $3.092 CAD
Mar Milling Wheat: +5.4¢ (+0.85%) to $4.846 USD or $6.477 CAD
Heading into the final week of trading before the Christmas holidays / slowdown, grain markets are mixed as the winter wheats are getting a boost thanks to the cold weather concerns (I have limited conviction that there’s much damage to speak of), albeit EU winter wheat conditions remain positive, while the soybean complex pulls back on Argentinian precipitation while. Weekend rains in the region is pushing back on the bullish “the crop is lost” mentality and while the dry period isn’t over yet, these rains and the ones in the forecast this week will help things significantly. On that note, as 2016 draws to an end, Argentina has had one of its best exporting seasons, with almost 90M tonnes of grain and products shipped out this year (certainly makes the Argentinian government happy, given that about 25 – 35% of their budget is supported by taxes earned from grain exports!).
As we do near the calendar flip, thanks to strong demand, soybeans have easily been the star of the show in 2016, up 20% this year (from a grains-related standpoint, only ethanol was better, up 45% in 2016). With the record crop in the U.S. and a big one on the horizon from Argentina and Brazil combined, there may be some rallies in January 2017, but most analysts aren’t expecting soybean prices to get much better. This is especially true when you consider where corn prices are relative to soybeans right now as the ratio of the December 2017 corn contract to November 2017 soybeans is 2.63, above the 2.5 level that divides the two crops on most farms. In years past when we saw a similar number, namely 1997, 2006, and 2014, we saw soybean acres jump 9%, 5%, and 8% respectively. Accordingly, taking an average of about a 6-7% jump, this would suggest something closer to 89-90M acres in 2017, versus the U.S.D.A.’s current estimate of 85.5M acres (and a big jump from the 83.7M in 2016).
With the U.S. Dollar hitting a 14-year high on Friday, the pressure remains on commodities as U.S.-Dollar denominated goods become more expensive for international buyers. On the flipside, the higher Greenback has put more pressure on other currencies like the Canadian Dollar, which is down below 75 cents USD again this morning. This is supportive of Canadian grain exports, which is necessary since Canadian grain exports are tracking behind last year’s pace, especially for wheat and canola, down 21% and 3% compared to this time a year ago. The good news is that domestic demand for canola has been picking up the slack, but as negative basis levels remain below 5- and 10-year averages, with better export demand, it’s unlikely the cash price can pick up without support from basis narrowing a bit.
Overall, the markets continue to trade more supply than demand but with most the crop known, the first 3 months of 2017 are going to be solely about demand. It doesn’t look like there’s chances of any weather hiccups next year and with a strong early-season U.S. export season, Darin Newsom from DTN says that grain prices may be overpriced. This means that those old-crop bushels that remain unpriced, especially corn and soybeans, are susceptible to lower returns in the coming months as demand switches to South America. Further, taking advantage of some double digits cash values that are available for new crop soybeans and/or canola is never a bad idea. Take a moment this week ahead of Christmas and post your target on FarmLead and let more buyers deal with you or give us a call for some support around where you might want to price things.
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.