February 22 – Soybean Production (and Price) Potential

Good morning!

Grain prices are trading mostly sideways as the complex prepares for some US acreage forecasts out from the USDA later today, as well as factoring updated soybean production forecasts from Argentina.

“Fire and swords are slow engines of destruction, compared to the tongue of gossip.” – Winston Churchill (Former British Prime Minister)

soybean-production-marketplace

Grain prices are trading mostly sideways as the complex prepares for some US acreage forecasts out from the USDA later today, as well as factoring updated soybean production forecasts from Argentina.

As Garrett noted in his afternoon recap of Grain Markets Today, soybean prices again led the way in yesterday’s trading activity. This is the sixth time in the last seven trading sessions that soybeans have ended the day higher than where they started.

Canola prices also moved higher with soybeans, whereas wheat prices and corn prices traded sideways to lower. Canola prices were also supported by the Canadian Loonie dropping below 79 cents USD.

With some of the recent grain markets activity, we made an update to our crop sales position in GrainCents (in addition to the email alert sent out mid-day, you can always also read it in the GrainCents dashboard)

Predicting 2018 US Acres

Garrett also reminded us that today, we get the USDA’s first real estimate of potential 2018 American acres. Going into the report from the USDA Outlook Forum (where the 10-year forecasts are released) traders have an average guesstimate for soybean acres of 90.6 million, with a range of 88.5 million to 92 million acres. For comparison, 90.1 million acres of soybeans were planted in the US in spring 2017.

For US corn acres, trade estimates range from 88.8 to 92.5 million, but the average forecast is for 89.9 million acres. That figure is just below the 2017 figure of 90.2 million acres. Analysts are also expecting a downturn in total output compared to last year.

Its arguable with corn continuing to hover close to $4 USD /bushel on the December 2018 contract (and above $4 on the March 2019) that this could ensure a decent supply of corn. However, with new crop soybean prices also drifting above $10 on the November 2018 contract, it’s just as easily argued that the average American farmer is better off planting soybeans, and not corn.

Not to be forgotten, total U.S. wheat acreage estimates going into the Forum suggests 46.1 million acres. This is just a 60,000-acre decline year-over-year.

Soybean Production Musical Chairs

As a side note, the Rosario Grains Exchange slashed their estimate on Argentine soybean production to 46.5 million tonnes, a 5.5 million-tonne drop from their previous number. Agripac put its number at 47 million tonnes while Argentine consultancy Agritrend is expecting somewhere between 47 and 48 million tonnes. [1]

What’s widely known is that Argentina continues to be relatively warm with sporadic showers here and there in the forecast for the next two weeks. This continues to be a bullish headline that the market is feeding on.

With a potentially smaller crop coming out of Argentina, the demand for their raw product, as well as their processed soymeal and soy oil will have to shift elsewhere. Considering that Argentina’s pecking order is #3, #1, and #1 for these three categories, it’s more than likely that Brazil or the U.S. will be making up for the shortfall.

As it relates to Argentine corn production, expectations continue to dip. The Rosario Grain Exchange dropped its estimate by nearly 5 million tonnes to peg things at 35 million tonnes. [2] Comparably Agripac downgraded their estimate to 37 million while Agritrend is fluctuating between 37.5 and 38 million tonnes.

Some Deeper Grain Markets Analysis

Yesterday in GrainCents, we looked into a little more of the spread between malt barley and feed barley sales. We also explored additional winter wheat acreage implications in Russia, where there’s still certainly more than a few pieces of untapped land.  Finally, we took two separate assessments at what Argentina’s soybean production numbers could wind up at. The first accounts for more geopolitical risk in Argentina, whereas the second is more of a mathematical exercise of potential Argentine soybean production. The second analysis also includes updated soybean pricing targets that were initially set in this weekend’s weekly digest email for subscribers.

There is more tit-for-tat foreign trade policy ongoing between the US and China though, which is something that we continue to watch for. In Garrett’s latest GrainCents piece, “soybeans for steel” could be a nightmarish situation for the average American farmer of the oilseed.

Geopolitical risk is just one of the 100 different factors we’re watching across 12 crops covered in GrainCents. Can you put a price on this risk? Not always, but you can certainly account for it when the question is asked, is the price of my grain going up shortly, or is it going down?

To make more sense of the markets affecting your farm or agribusiness, you must weigh the bullish, the bearish, and clear the noise. This market analysis process is defined more clearly here but continues to align with my 93% accuracy on calling the grain markets over the past two years.

To growth,

Brennan Turner
President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

 

At 7:30 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2702 CAD, $1 CAD = $0.7873 USD)

May Corn: -0.3¢ (-0.07%) to $3.678 USD or $4.67 CAD
May Soybeans: -0.35¢ (-0.34%) to $10.175 USD or $12.93 CAD
May Soybean Meal (per short ton): -$0.015 (-0.00%) to $370.80 USD or $470.00 CAD
May Soybean Oil (cents per lbs): -0.01¢ (-0.03%) to 31.80¢ USD or 40.39¢ CAD  
May Oats: +3.8¢ (+1.42%) to $2.673 USD or $3.395 CAD
May Wheat (Chicago): unchanged to $4.568 USD or $5.80 CAD
May Wheat (Kansas City): -0.3¢ (-0.05%) to $4.725 USD or $6.002 CAD
May Wheat (Minneapolis): -0.8¢ (-0.12%) to $6.035 USD or $7.66 CAD
May Canola: +1¢/bu / $0.0/MT (+0.02%) to $11.408/bu / $503/MT CAD or $8.98/bu / $399.99/MT USD

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.

Most Recent Posts
Dec. 12 - Anyone Notice Yesterday’s WASDE Report?
December 12, 2018 Brennan Turner
Grain prices are all in the green this morning as the complex rebounds from a relatively quiet WASDE report, albeit it was viewed as bearish.
October 4: Corn Prices Edge Higher With October WASDE in Focus
October 04, 2018 Garrett Baldwin
Corn prices ticked higher Thursday as traders and analysts began to speculate on next week’s release of the October WASDE report.