Feb 6 – Damaging Forecasts?

Good Morning FarmLead User!

At 6:45 AM CDT in the North American Futures Markets (*not local cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3031 CAD, $1 CAD = $0.7674 USD)

Mar Corn: +1.8¢ (+0.5%) to $3.67 USD or $4.782 CAD
Mar Soybeans: +10.5¢ (+1%) to $10.375 USD or $13.52 CAD
Mar Soybean Meal (per short ton): +$2.90 (+0.85%) to $334.50 USD or $435.89 CAD
Mar Soybean Oil (cents per lbs): +0.29¢ (+0.85%) to 34.15¢ USD or 44.50¢ CAD 
Mar Oats: +0.8¢ (+0.3%) to $2.595 USD or $3.382 CAD
Mar Wheat (Chicago): +1¢ (+0.25%) to $4.313 USD or $5.62 CAD
Mar Wheat (Kansas City): +3.3¢ (+0.75%) to $4.438 USD or $5.783 CAD
Mar Wheat (Minneapolis): unchanged at $5.583 USD or $7.275 CAD
Mar Canola: +5.4¢/bu / +$2.40/MT (+0.45%) to $8.975/bu / $395.75/MT USD or $11.696/bu / $515.70/MT CAD

Friday’s Winnipeg ICE Close

Mar Barley: -8.7¢ (-2.9%) to $2.259 USD or $2.939 CAD
Mar Milling Wheat: -5.4¢ (-0.85%) to $4.908 USD or $6.396 CAD

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Damaging Forecasts?

After an extremely entertaining Superbowl 51 (or at least the 2nd half), grains this morning are all in the green as the market is getting a boost from China being back in the market after their week-long New Year celebrations and rains in the forecast for central and southern parts of Argentina. However, the rains are likely to be doubled-edged sword as it’ll support better yields in some areas while exacerbating flooding concerns in other areas, keeping many soybean bulls cautiously long, although they did trim their net long last week while maintaining a net-long position in corn and going less short on wheat. Hedge funds also raised their net long in WTI crude oil to the highest level on record as there’s rumours that the Trump Administration is looking to roll-back the Dodd-Frank Act, which would include scrapping the requirement for energy companies to disclose payments to foreign governments (AKA bribes). Saudi Arabia bought 1.5M tonnes of barley over the weekend, locking up 25 60,000 MT cargoes for movement from March to May while Russia is close to pushing past phytosanitary issues in order to have Brazil start importing more wheat from them. Finally, on Thursday this week we get the U.S.D.A.’s February W.A.S.D.E. numbers, which may start to show if January rains actually damaged Argentina’s crop’s in the agency’s eyes.

As per Statistics Canada’s stocks report out on Friday, February 3rd, there was a heck of a lot more feed grains 1available in Canada as of the end of the December 2016. Per the report, total wheat stocks grew nearly 17% from December 2015 to more than 25M tonnes while canola stocks dipped 9.6% to their lowest in the last 4 years to 12.16M tonnes (Canola numbers were in line with expectations but it was a bearish surprise for wheat stocks). Respectively, these wheat stocks are 6% above the 5-year average while the canola number is in fact 7% above the 5-year average. Some of the other notable numbers included 6.9M tonnes of durum still available (+63% over last year and 60% above the 5-year average), 278,000 tonnes of rye (+93%, +88% above 5-year average), 11.65M tonnes of corn (+3%, +11%), and 6.35M tonnes of barley (+11.7%, +10.7%). Notwithstanding, available lentil stocks gained went back above the norm at 1.76M tonnes (+49%, +9.3% from 5-year avertage), as did peas, up 13% from last year to 2.69M tonnes (+25% from 5-year agerage) whereas soybeans stocks dropped 4.3% from last to 3.4M tonnes (+13% above the 5-year average though) and flax got clipped by 21% from last year, down to 595,000 (but still +10% above 5-year average!).

Dec-2016-statscan-grain-stocks

On that note, we got a lot of questions last week at FarmTech in Edmonton about what’s going in the flax market as not everyone is super stoked about planting more canola and they’re looking at different options. Mike Jubinville of ProFarmer had a timely column on Friday highlighting some of the points I was talking to producers about face-to-face, which were there’s still a good amount of supply available and that China still isn’t buying as aggressively as it has in the past (buys about 60% of Canadian flax exports). New crop levels are similar to where we a year ago, in the $11 CAD / bushel handles, but that’s a significant spread from the old crop price that’s been hovering near the $13 CAD / bushel level (sellable levels in our opinion – post your next block on FarmLead).

Conversely, there’s a lot of buzz from producers about pulling out of fababeans in 2017/18, the 2nd straight year of production decline in Canada. However, as Chuck Penner of Left Commodity Research, increased production in places like Baltic states, France, the UK, and obviously Australia which likely produced 500,000 MT this year! Accordingly, bids have dropped for both the export and feed markets, but ironically feed values are above export competition! (Find your best price and post on FarmLead today!). Switching gears into chickpeas, prices have started to pull back a bit as Indian buyers are starting to relax their bids for Australian product ahead of the coming rabi harvest, which starts in a few weeks. There are some rains in the forecast for the end of February which could help get prices back up but there’s no assurances that the rain falls and/or it impacts quality and yield because it would have to be some seriously damaging rains for that to happen

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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