November 3 – Farmers Selling Into Strength on Better Prices
Good Morning!
Grain markets this morning are mostly higher as we dig into the potential for canola prices, where corn prices are not heading, and the competing pace of exports.
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“Strength and growth come only through continuous effort and struggle.”
– Napoleon Hill (American author)

Grain markets are mixed this morning with wheat prices trying to extend yesterday’s rally.

One of the headlines what wheat prices are grabbing onto is from the United Nations who are noticing the higher industrial use of cereals. [1]

Speaking of demand, India is not looking to use more pulses, at least from abroad anyway. An Indian pulses market analyst mentioned this week that the Indian government is considering import tariffs for peas and lentils. [2]

I can understand where the government is coming from. They expect Indian farmers to harvest the second-largest pulse crop ever at 21 million tonnes. The large crop comes after the country set its record last year!

Overall, there are some bearish factors out there in just pulses but other crops. We recently looked at the performance of grain prices for October and what affected grain markets in general.

With cash prices improving a bit in the past few weeks though, we have seen some strong selling on the FarmLead Marketplace.

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Finding New Demand for Canola Prices

Canola prices met some resistance yesterday.

The January 2018 contract nearly touched highs set in July. A rising Canadian Loonie also made it difficult for canola prices to squeak out more gains.

There are several bullish factors that canola traders are eyeing.

One is how the U.S. will adapt to less soy oil imports from Indonesia and Argentina.

After placing heavy tariffs on them, it’s expected that U.S. imports will decline and domestic American demand for soy oil will increase to meet biodiesel capacity.

However, there’s a debate that too much American soy oil gets exported, and there’ll be a shortfall. More specifically, Scott Irwin from the University of Illinois thinks that some of the 13.8 Billion pounds of soy oil used for food, feed, and cosmetics in the U.S. could be diverted to the biodiesel sector. [3]

Enter canola.

Canadian canola oil could be used directly by American biodiesel plants, or replace soy oil in food, feed, and/or cosmetic markets.

It’s not going to happen immediately, but it’s one bullish factor that we’re keeping our eye on for canola prices.

Grain’s Exhilarating Exports

As Garrett mentioned in Grain Markets Today, the USDA announced yesterday the private sale of corn to Mexico for 53.4 million bushels (or nearly 1.4 million tonnes if you were converting bushels into tonnes at GrainUnitConverter.com).

However, the USDA’s report of export sales last week totaled just 31.9 million bushels (810,300 MT).

This was below the market’s expectations, but corn prices did end higher on the day.

Total U.S. wheat sales last week were pegged at 12.8 million bushels, or slightly less than the 350,000 MT that the market was expecting on the low end of trader’s expectations.

Also, after the market close yesterday afternoon, it was announced that 16.4 million bushels (or 450,000 MT) of US wheat were sold to Iraq.

For soybeans, the USDA said that 72.8 million bushels were booked last week by international buyers. This is equivalent to nearly 2 million tonnes! In one week!

That was interpreted as bullish since the market was expecting a little more than 60 million bushels.

Comparably, on the other side of the equator, Brazil shipped out 2.49 million tonnes in October. [4]  This would’ve been a record if not for October 2014/15’s number, which is just above 2.5 million tonnes.

This year’s Brazilian export pace though is up 25% or more than 12.5 million tonnes than what was shipped out a year ago.

This puts total Brazilian soybean exports within a few million tonnes of the USDA’s current total marketing-year forecast of 64 million tonnes. And there are 3 months left to go!

There are already 1.5 million tonnes of Brazilian soybean scheduled to sail in November.

Might we see the USDA update their number in next week’s November WASDE report?

For corn, Brazil exported a record 5 million tonnes of corn in October. This would put in on track to hit the USDA’s target of 34 million tonnes of outbound shipments for 2017/18.

Where Are Corn Prices Headed?

Earlier this week, I discussed the opportunities of capturing the carry in the corn market.

When you consider how many farmers are likely to take advantage of those better prices down the road, it puts pressures on said prices.

More corn that is contracted, demand will drop. This means that corn prices for those movement periods decline.

What’s certain is that average monthly corn prices have been below $4 USD per bushel for 37 consecutive months (yes, more than 3 years).

We tried a few weeks ago to make a bullish case for corn prices thanks to a larger livestock herd in the U.S. a few weeks ago.

However, Todd Hubbs from the University of Illinois thinks that that is an unlikely scenario. [5]

Instead, Mr. Hubbs is looking to either ethanol or supply-side shock to be the catalyst for higher corn prices.

The past few weeks I’ve been talking about how the average U.S. corn yield might fall because of the delay in this year’s harvest.

The delay in the soybean planting season in Brazil gives the best chance for a corn production shock. This is because it may impact how much corn will get planted after the soybean crop is harvested.

As it stands today, you’re likely to see at least another 90 million acres of corn get planted in the U.S. in spring 2018.

Ultimately, we’ll continue to look for pops in corn prices and aim to sell into strength in 10% to 20% blocks.

Post your next block of corn on the FarmLead Marketplace today!

Have a great weekend.

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

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 = $1.2817 CAD, $1 CAD = $0.7802 USD)

Dec Corn: -0.3¢ (-0.05%) to $3.503 USD or $4.489 CAD
Jan Soybeans: -3¢ (-0.3%) to $9.963 USD or $12.769 CAD
Dec Soybean Meal (per short ton): -$1.50 (-0.45%) to $315.90 USD or $404.90 CAD
Dec Soybean Oil (cents per lbs): -0.15¢ (-0.45%) to 34.71¢ USD or 44.49¢ CAD  
Dec Oats: +2.3¢ (+0.85%) to $2.668 USD or $3.419 CAD
Dec Wheat (Chicago): +2¢ (+0.45%) to $4.28 USD or $5.486 CAD
Dec Wheat (Kansas City): +2.3¢ (+0.55%) to $4.28 USD or $5.486 CAD
Dec Wheat (Minneapolis): -0.5¢ (-0.1%) to $6.223 USD or $7.976 CAD
Jan Canola: -2.5¢/bu / -$1.10/MT (-0.2%) to $9.198/bu / $405.55/MT USD or $11.789/bu / $519.80/MT CAD

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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