Feb 15 – Unwanted Harm

FarmLead Breakfast Brief
Wednesday, February 15th, 2017

Good Morning!

At 7:20AM CDT in the North American Futures Markets (*not cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3084 CAD, $1 CAD = $0.7643 USD)

Mar Corn: -1.8¢ (-0.45%) to $3.725 USD or $4.874 CAD
Mar Soybeans: -4.3¢ (-0.4%) to $10.408 USD or $13.617 CAD
Mar Soybean Meal (per short ton): -$2.30 (-0.7%) to $337.20 USD or $441.19 CAD
Mar Soybean Oil (cents per lbs): +0.03¢ (+0.1%) to 34.17¢ USD or 44.71¢ CAD 
Mar Oats: -1.5¢ (-0.6%) to $2.525 USD or $3.304 CAD
Mar Wheat (Chicago): -3¢ (-0.65%) to $4.465 USD or $5.842 CAD
Mar Wheat (Kansas City): -4¢ (-0.85%) to $4.613 USD or $6.035 CAD
Mar Wheat (Minneapolis): -1.3¢ (-0.2%) to $5.67 USD or $7.419 CAD
Mar Canola: +0.5¢/bu / +$0.20/MT (+0.05%) to $9.036/bu / $398.43/MT USD or $11.823/bu / $521.30/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.246 USD or $2.939 CAD
Mar Milling Wheat: unchanged at $5.034 USD or $6.586 CAD

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Unwanted Harm

Grains this morning are mostly staying in the red, keeping with the Valentine’s Day theme from yesterday which saw prices generally pull back. Today we’ll get NOPA’s crush number for January, with the trade estimating 159.1M bushels got used (150.45M bushels were used in January 2016) while tomorrow we can expect an update to the USDA’s baseline acreage report. However, the real acreage numbers the market wants to see is from the USDA’s Ag Forum next week on Feb 23-24 and The Hightower Report suggests that the only thing that will really matter this year is soybean acres. On the weather front, Brazil continues to look good while Argentina likely will get some rains over the weekend that could hurt some central crops. In North America, warm temperatures are being welcomed by the public and those with crops still left to take off work but wheat traders are watching how impactful the warmer weather will be in the Southern Plains and the Midwest which could cause fall-seeded crops to come out of dormancy a bit earlier than usual and create a little bit of unwanted harm on the crop.

Since November, the Russian rouble has appreciated by 12% and is up 6% from the beginning of 2017, suggesting that those sourcing wheat from Russia may look at cheaper alternatives if this trend persists (a similar storyline is being played out in the UK where wheat exports are down significantly thanks to cheaper options elsewhere). While the surge has left Russian farmers less interesting in selling their crops, Tregg Cronin points out that it may also affect spring seeding decisions as spring wheat could fall out of favour with Russian producers at these domestic prices. Where there seems to be more wheat available is in Australia as ABARES increased their 2016/17 production number to 35.1M tonnes (USDA is at 33M tonnes), mainly due to Western Ausralia’s 11.4M-tonne output. The Aussie barley crop also got a big upgrade by 2.77M tonnes for a massive (and record) 13.4M-tonne crop while canola production bumped up to 4.14M tonnes, the 2nd-largest on record, and again, mainly influenced by much bigger-than-expected production out of Western states.

AgResource says that Brazil’s February soybeans exports could come in at nearly 6.9M tonnes, a new record and more than triple the business that was done last February. The main reason for the massive influx is demand is none other than China, who after their New Year’s celebrations put purchasing on hold for a week, are aggressively back in the market. It’s suggested by AgResource that China has covered 85% of is March demand from Brazil and is looking at cheaper Argentine offers from April onward. What we do know for certain is that the production estimates of the Brazilian soybean crop continue to inch up which will certainly put pressure on values on the Chicago futures board, while analysts in Brazil are also increasing their corn production forecasts to 90M tonnes (30M from the first crop, 60M from the 2nd crop). Further, those who dropped their Argentinian soybean production estimates are possibly adding some tonnes back on the balance sheet as decent weather is bringing the crop back as just this week the Rosario Grains Exchange says that 77% of the Argentina crop is actually in good-to-excellent shape!

Speaking of 77%, U.S. corn exports are now up 77% compared to this time a year ago and while it doesn’t make a lot of sense, Todd Hultman from DTN says we should not try to understand why corn prices are still cruising higher, but just ride the trend. The impending negative that could easily bring the corn market back down from its pedestal is Mexico, where a new bill is trying to be introduced by their government that would see Mexico source their corn from Brazil and Argentina instead of America.  While the US Grains Council says the bill is more about politics than actual practice, Mexico bought 13.3M tonnes of U.S. corn in 2015/16, or 28% of total U.S. corn exports. Overall, it seems like Mexico, and not Canada, is at the heart of NAFTA trade issue after this week’s meeting between President Trump and Prime Minister “Joe” Trudeau. However, if U.S. corn demand were to slip, given the expected 2.3 Billion bushel carryout in the U.S. for the 2016/17, any addition to that number does not help anyone’s cash price, including those in Canada. More simply put, agriculture continues to be viewed as the industry that’s likely to hurt the most from any NAFTA renegotiations, regardless if you if you live below, in, or above America.

To growth,

P.S. I’m speaking tomorrow in Lloydminster at the Agri-Visions event so if you’re around, come here me chat about why I think your farm is like a hedge fund.

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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