Feb 3 – Thinking More Long-Term

FarmLead Breakfast Brief

Friday, February 3rd, 2017

“Management is all about managing in the short term, while developing the plans for the long term.”
– Jack Welch (ex GE CEO)

At 7:10 AM CDT in the North American Futures Markets (*not cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.305 CAD, $1 CAD = $0.7663 USD)

Mar Corn: -2¢ (-0.55%) to $3.655 USD or $4.77 CAD
Mar Soybeans: -0.5¢ (-0.05%) to $10.368 USD or $13.529 CAD
Mar Soybean Meal (per short ton): -$0.30 (-0.1%) to $333.50 USD or $435.21 CAD
Mar Soybean Oil (cents per lbs): -0.03¢ (-0.1%) to 34.56¢ USD or 45.10¢ CAD 
Mar Oats: -1.3¢ (-0.5%) to $2.538 USD or $3.311 CAD
Mar Wheat (Chicago): -3.5¢ (-0.8%) to $4.31 USD or $5.624 CAD
Mar Wheat (Kansas City): -2.3¢ (-0.5%) to $4.413 USD or $5.758 CAD
Mar Wheat (Minneapolis): -1¢ (-0.2%) to $5.60 USD or $7.308 CAD
Mar Canola: +0.2¢/bu / +$0.10/MT (+0.02%) to $8.956/bu / $394.87/MT USD or $11.687/bu / $515.30/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.319 USD or $3.026 CAD
Mar Milling Wheat: +5.4¢ (+0.85%) to $4.943 USD or $6.45 CAD

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Thinking More Long-Term

Grains this morning are in the red again with the U.S. Dollar improving a bit with weather (i.e. El Nino in 2017 and Punxsutawney Phil?) being less of a focus compared to the likes of new policies from the Trump administration. Later this morning we’ll get Statistics Canada February grain production report and the numbers we’ll be watching closest for are around canola and peas, as current fundamentals suggest the market is trading off different numbers than what the last government report suggested. Soybeans harvest in Brazil continues to be slowed by rains but things are still on a good pace and the crop remains quite large per most estimates. China continues to be away from the market as the New Year holiday celebrations continue but there’s a lot of hope that they come back with a flurry of support as the market is likely to finish lower for the week. Thinking more long-term, the United Nations says that global food prices hit a 2-year high in January, with cereals up 3.4% year-over-year.

On the heels of a record 11M tonnes, Australian barley exports are expected to explode this year as the USDA’s attache in the Land Down Undaa expects 7.4M tonnes to be shipped off of Aussie shores, an increase of 37% from last year & the largest in the last 50+ years. Further, it sounds like more of the crop is making malt quality, putting it in direct competition with Canadian and American options, which are seeing prices stagnate in the $4s CAD / bushel and $2s USD / bushel in each respective country. Speaking of North American grain exports, Canadian wheat exports are down roughly 19% compared to this time a year ago, whereas American wheat shipments are up almost 30% year-over-year! Logistics and currency are taking the brunt of the blame for the difference but the delayed harvest in Canada and concerns about quality created room for other countries (i.e. the U.S., Black Sea, and/or E.U. options).

In the political arena, while Donald Trump continues to make headlines, it’s the transition of the new Agricultural Secretary Sonny Perdue that we’re watching closest right now. The former Georgia Governor wants to make American agriculture great again but there’s doubt as to what faction of the industry will thrive the most, corporate ag or individual ag. Apparently, the transition for the ag secretary has been “like drinking through a firehose” as issues like trade and Big Ag mergers (and are they good?) are all being caught up on as quickly as possible.  While there’s hope that Mr. Perdue can be a “moderating influence” on President Trump, the “America First” rhetoric doesn’t seem to be benefiting trade relationships and it wouldn’t be unlike China to unleash a import tariff of some sort on America (if it were to happen on soybeans, expect Chicago prices to fall sharply). Overall, with the Trans-Pacific Partnership off the table, more bilateral trade agreements seem to be the pursuit of many countries, including both the US & Canada.

I spent the week at FarmTech in Edmonton and it was good catching up and having long conversations with great industry people like Brian Voth (marketing consultant), Chuck Penner (market analyst), Kristjan Hebert (entrepreneur & farmer), Gary Stanford (previous Grain Growers of Canada President), Dave Hansen (Canterra President & CEO), and many others. The optimism this time of year was clear as new ideas and a fresh start is on the horizon. One consistent thing is that people need to forget about last year’s weather and using it as a reason to change too much. That being said, the pricing opportunities available right now are clearly there, especially for things like soybeans and canola, as compared to where we were a year ago. Using just last year as a benchmark for pricing is not a solid gameplan because the supply and demand tables have changed for each crop. Accordingly, while new crop prices for things like pulses are down from this time a year ago, these are still more than profitable levels for most people. Take this into consideration as you get into your 2017/18 marketing plan (and start it with making more phonecalls at once by posting that new crop deal on FarmLead)

Have a great weekend!

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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