Dec 8 – In The Heat of Battle

FarmLead Breakfast Brief

Thursday, December 8th, 2016

“Sometimes by losing a battle you find a new way to win the war.”
– Donald Trump
(Current US President-Elect)

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 = $1.3196 CAD, $1 CAD = $0.7578 USD)

Mar Corn: +1.5¢ (+0.4%) to $3.595 USD or $4.744 CAD
Jan Soybeans: -4.8¢ (-0.45%) to $10.443 USD or $13.78 CAD
Jan Soybean Meal (per short ton): -$0.90 (+0.3%) to $319.60 USD or $421.75 CAD
Jan Soybean Oil (cents per lbs): -0.29¢ (-0.75%) to 37.64¢ USD or 49.67¢ CAD  
Mar Oats: +3¢ (+1.35%) to $2.258 USD or $2.979 CAD
Mar Wheat (Chicago): +6¢ (+1.5%) to $4.07 USD or $5.371 CAD
Mar Wheat (Kansas City): +5¢ (+1.25%) to $4.05 USD or $5.344 CAD
Mar Wheat (Minneapolis): +4¢ (+0.75%) to $5.33 USD or $7.034 CAD
Jan Canola: -5¢/bu / -$2.20/MT (-0.4%) to $9.097/bu / $401.10/MT USD or $12.004/bu / $529.30/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.343 USD or $3.092 CAD
Mar Milling Wheat: -2.7¢ (-0.4%) to $4.888 USD or $6.45 CAD

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In The Heat of Battle

Grains this morning are mostlymixed with weather in South America and technicals in the driver’s seat. Canola continues to trade sideways after Tuesday’s StatsCan report, pulling back on a stronger Canadian Dollar despite oil markets pulling back below $50 USD / barrel (the Loonie and oil often move in tandem). Wheat is driving back higher this morning thanks to Algerian & Saudi Arabian tenders, as well as the Indian government has removed its 10% wheat import duty after domestic prices were at record highs in November. As such, it’s been suggested that as much as 5M tonnes could be imported this year (we already know they’ve bought stuff from Australia & Black Sea). While Indian farmers continue to tend to their rabi winter crops, the government there is sure doing its part to make the battle of farming a bit hotter, what, between this lack of wheat import restrictions now and the abolishment of specific rupee currency notes.

While many are still questioning some of the numbers behind StatsCan’s production report on Tuesday, new legislation introduced by the Canadian government is meant to give the data-collecting and processing agency more independence to ensure its results can’t be skewed by government (hopefully they can improve some of their survey methods too). The Bank of Canada held their interest rate steady yesterday, noting that inflation is below expectations and growth is slowing as business investment and non-energy exports are disappointing. This “steady is the course” position is likely divergent from the U.S. Federal Reserve’s, who are set to meet next week and raise interest rates for the first time since January. With President-Elect Donald Trump’s “spend-to-grow” rhetoric (also known as expanding fiscal policy), more rate increases are expected to help control inflation (also known as tightening monetary policy).

While U.S. farmer confidence is on the rise thanks to the recent price rally, some forecasters are being Debbie Downers. Commerzbank suggests that wheat prices aren’t likely to recover in 2017 as, while demand has been stable, plentiful supplies and similar production expectations will keep rallies in check. The German financial institution also is a bit bearish on the soybeans complex as they posit that between bigger acres in the US next year and a seemingly large South American crop, there is “likely to be ample supply available internationally to ensure that there is no shortage” in 2017. All in all, by this time next year, Commerzbank expects Chicago wheat to trade at $4.10/bushel (December 2017 contract currently trading at $4.60), Paris wheat at €160 per metric tonne (currently at €172), Chicago corn at $3.80 ($3.87 today), and soybeans at $9.00 / bushel (the November 2017 contract is trading at $10.29 today).

On that note, demand by China continues to be relentless and with Argentina’s weather watchers, this is helping keeping the market from acknowledging record global production! Brazil’s crops continue to look good (all analysts forecasting over 100M tonnes) as decent rains have helped replenish soil moisture on land dried out last year. As such, the word “safra recorde” or “record crop” is getting flung around a bit in Brazil and because grain exports have really slowed down in this calendar quarter (as indicated by ship-wait-in-port times down to less than a week in most places), shippers are impatiently waiting to roll out again come January. Brazil is expected to retain its positions as the #1 exporter of soybeans in the world (57-60M tonnes this year versus America’s 55M) and the #2 exporter of corn (25M-30M tonnes while the US is expected to ship out 56.5M this year). Ultimately, given where prices are currently at, the battle between South and North America for international grain buyers attention may the most heated ever.

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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