FarmLead Breakfast Brief
Tuesday, February 7th, 2017
“Life – how curious is that habit that makes us think it is not here, but elsewhere.”
– V.S. Pritchett (British author)
At 7:00 AM CDT in the North American Futures Markets (*not cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.321 CAD, $1 CAD = $0.757 USD)
Mar Corn: -0.3¢ (-0.05%) to $3.635 USD or $4.802 CAD
Mar Soybeans: -0.8¢ (-0.05%) to $10.353 USD or $13.676 CAD
Mar Soybean Meal (per short ton): -$0.20 (-0.05%) to $332.60 USD or $439.37 CAD
Mar Soybean Oil (cents per lbs): -0.12¢ (-0.35%) to 34.32¢ USD or 45.34¢ CAD
Mar Oats: -6.5¢ (-2.5%) to $2.548 USD or $3.365 CAD
Mar Wheat (Chicago): -1¢ (-0.25%) to $4.215 USD or $5.568 CAD
Mar Wheat (Kansas City): -2.3¢ (-0.5%) to $4.335 USD or $5.727 CAD
Mar Wheat (Minneapolis): -1.3¢ (-0.25%) to $5.54 USD or $7.318 CAD
Mar Canola: +5¢/bu / +$2.20/MT (+0.45%) to $8.91/bu / $392.88/MT USD or $11.771/bu / $519/MT CAD
Yesterday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.225 USD or $2.939 CAD
Mar Milling Wheat: +2.7¢ (+0.45%) to $4.862 USD or $6.423 CAD
Grains this morning are mostly in the red this morning with canola the only thing in the green as the Canadian Loonie drops back below 76 cents USD. At the end of the week with the February WASDE report, we’ll get a Malaysian palm oil inventory report, which is expected to show lower stocks as a result of strong imports (significant considering production is low at this time of year). Strategie Grains is calling for a European Union rapeseed harvest of 21.56M tonnes in 2017/18, mainly due to some winterkill issues in places like Bulgaria and Hungary. Conversely, French and German crops (the two-largest-producing countries in the EU) were upgraded, despite some concerns over soil moisture and less acres getting planted in France. While there may be slightly less rapeseed planted in France, there’s certainly a lot of wheat, with winter soft wheat area estimated at 12.8M acres (above 5-year average), which, at trend yields, could likely produce a 38M – 40M tonne crop, the 2nd-largest ever in France. With this sort of rebound in production, you can likely expect international buyers to look towards the EU again as a credible wheat sourcing option.
More angst is building around the temperature in the Black Sea region and the negative effect it could have on winter crops there. However, I take the concerns with the grain of salt as every year we see this same pattern: crop gets planted in the fall, many market participants cry wolf over cold temperatures and inadequate snow cover, and the crop emerges OK, sometimes even in record fashion (case-in-point, last year). More simply put, I’m not going to be easily swayed to the aggressively-bullish camp after one week of colder temperatures or one region out of dozens being impacted. Nevertheless, we have seen some higher prices lately and that’s likely been impacted more by geopolitical risk, a swaying U.S. dollar, & U.S. winter wheat acres down.
With this in mind, Tregg Cronin of Halo Commodities makes a great point that the amount of U.S. hard red spring wheat acres up for grabs continues to be in question, given prices and returns on other options like corn or soybeans What gets grown may depend on American export policies more than anything. The debate continues to rage on whether President Trump’s protectionist policies are going to be good for America (quietly successful hedge fund manager Seth Klarman says markets are being charmed by pro-growth talk right now but protectionist policies are always harmful in the long run). When it comes to agriculture. the most obvious negatives being looked at are less exports of corn and soybeans and impacts on farm labour.
As such, countries like Brazil are eyeing massive opportunities, with the Brazilian Agriculture Minister going so far as saying Trump’s America will create “many opportunities”, including new trade with Mexico! These thoughts though are likely going to be exacerbated at this time of year as buying of corn and soybeans traditionally switches to South America, as was the case yesterday with China back in the market and booking several boats of Brazilian soybeans for March delivery. Mind you, while Brazil is booking and shipping soybeans at a record pace right now, US soybean shipments are also up 18% year-over-year. Alas, with America’s focus on China and NAFTA, there’s one theory that their competitors’ interests are best served going after markets that are falling into the weeds like Japan and South Korea.
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.