FarmLead Breakfast Brief
Friday, February 17th, 2017
“Honesty is the best policy – when there is money in it.”
– Mark Twain (American author)
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 = $1.3074 CAD, $1 CAD = $0.7649 USD)
Mar Corn: -3¢ (-0.8%) to $3.705 USD or $4.844 CAD
Mar Soybeans: -7.3¢ (-0.7%) to $10.365 USD or $13.551 CAD
Mar Soybean Meal (per short ton): -$1.10 (-0.3%) to $340.90 USD or $445.68 CAD
Mar Soybean Oil (cents per lbs): -0.48¢ (-1.45%) to 33.04¢ USD or 43.20¢ CAD
Mar Oats: -2.8¢ (-1.1%) to $2.53 USD or $3.308 CAD
Mar Wheat (Chicago): -3.5¢ (-0.8%) to $4.443 USD or $5.808 CAD
Mar Wheat (Kansas City): -3¢ (-0.65%) to $4.55 USD or $5.948 CAD
Mar Wheat (Minneapolis): +1¢ (+0.2%) to $5.513 USD or $7.207 CAD
Mar Canola: -6.6¢/bu / -$2.20/MT (-0.2%) to $8.993/bu / $396.52/MT USD or $11.757/bu / $518.40/MT CAD
Yesterday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.248 USD or $2.939 CAD
Mar Milling Wheat: -16.3¢ (-2.5%) to $4.913 USD or $6.423 CAD
Grains this morning are mostly in the red as the market pulls back ahead of the impending long weekend (President’s Day on Monday so markets are closed). This week we got N.O.P.A. soybean crush number of 160.6M bushels, topping expectations of analysts’ pre-report expectations of 159.1M, which supported prices on Wednesday but have levelled out a bit since then. Palm oil prices have pulled back to a 3-month low as plantation owner Sipef revealed they are forward-sold almost double what it was a year ago as they anticipate much lower prices with increased production in a few months’ time. Staying in Asia, in an update of their baseline estimates, the U.S.D.A. reiterated its call for increasing Chinese livestock feed demand over the next decade. More of the market was focused on their expectations for 2017/18’s American acreage, which they pegged at 49.5M of wheat (-1.7M from 2016/17), 89.5M acres of corn (-4.5M acres year-over-year), and 85.2M acres of soybeans (+1.8M over last year). While I and many others don’t think the corn number will drop below 90M acres, 85M acres of soybeans likely justifies the U.S.D.A.’s forecasts of high $9 USD / bushel (levels that farmers can likely make some money on, if at trendline yields).
AgResource continues to suggest that the Brazilian crop is bigger than anyone has expected, with yields in Central and Northern regions coming in at record levels. As such, there’s been talk of 107M-109M-tonne from local analysts (U.S.D.A. at 104M tonnes) and with the crop coming off bigger than expected, the Brazilian producer may start to realize that the futures board in Chicago isn’t sustaining any rallies, meaning they could start getting a bit more aggressive on sales. With some helpful rains in areas that needed it, South American production estimates have gotten bigger this week, not smaller. This is helpful to companies like Bunge who are eager to take in more soybeans, who are increasingly looking to these emerging markets to pad their balance sheets. Next door in Argentina, congestion on river pathway are limiting the efficiencies of Argentinian agricultural products getting to market. If Argentina wants to start supplying Mexico with corn like it thinks it can though, it’ll need to solve its logistics issues first (P.S. Bunge doesn’t think Mexico can switch away from U.S. corn and soybean imports and they also had a decent fiscal quarter).
The question that I keep getting asked is “when are we going to see Chinese demand start switching to South American from the U.S.?” It already has. China owned 2M tonnes-worth of soybeans that were loaded in Brazil in the first half of February and are likely to top 5M tonnes for the full month as more deliveries are made to ports and ship-loading accelerates. As mentioned in Wednesday’s Breakfast Brief, China is pretty much booked for March and trying to lock up April movement. That being said, in their long-term forecasts, the U.S.D.A. sees the U.S. losing more export market share over the next decade, not only in soybeans, but also in wheat (a trend that we’ve seen exacerbated over the past couple of years with the rise of the Black Sea). As such, while soybeans currently flirt above $10 USD / bushel on the Chicago Board of Trade, I can’t find legitimate, non-speculative reasons that things should go higher. Sure, the recent $11 USD / bushel call by one analyst is based on hope of a summer rally, but that far from a sure thing. Subtle reminder: you’re making money at today’s levels (and profits can be a bit tougher to find these days).
Have a great weekend!
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.