Feb 24 – Go Your Own Way

FarmLead Breakfast Brief 
Friday, February 24th, 2017

“Do not go where the path may lead, go instead where there is no path and leave a trail.”
– Ralph Waldo Emerson (American poet)

Good Morning!

At 7:05 AM CDT in the North American Futures Markets (*not local cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.311 CAD, $1 CAD = $0.7628 USD)

May Corn: unchanged at $3.725 USD or $4.883 CAD
May Soybeans: +3.8¢ (+3.5%) to $10.263 USD or $13.454 CAD
May Soybean Meal (per short ton): +$1.30 (+0.4%) to $336.50 USD or $441.14 CAD
May Soybean Oil (cents per lbs): +0.19¢ (+0.6%) to 32.78¢ USD or 42.97¢ CAD 
May Oats: -0.3¢ (-0.1%) to $2.525 USD or $3.31 CAD
May Wheat (Chicago): -2.5¢ (-0.55%) to $4.51 USD or $5.912 CAD
May Wheat (Kansas City): -3¢ (-0.65%) to $4.685 USD or $6.142 CAD
May Wheat (Minneapolis): -0.8¢ (-0.15%) to $5.525 USD or $7.243 CAD
May Canola: +2.9¢/bu / +$1.30/MT (+0.25%) to $8.97/bu / $395.51/MT USD or $11.759/bu / $518.50/MT CAD

Yesterday’s Winnipeg ICE Close

May Barley: unchanged at $2.271 USD or $2.983 CAD
May Milling Wheat: +5.4¢ (+0.85%) to $4.899 USD or $6.423 CAD

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Go Your Own Way

Grains this morning are mixed as the market continues to digest new acreage reports from the U.S.D.A., supply and demand updates from the International Grains Council, and updates to global wheat prospects. In France, 83% of the French soft wheat crop is rated in good-to-excellent condition, slightly below the 94% at this time a year ago. In America, the U.S.D.A. is expecting a 50M-tonne wheat crop, which would be the lowest US-wheat production number in 11 years and a 20% drop year-over-year. In Argentina, the Ag Ministry raised their wheat production estimate to 18.4M tonnes, a increase of more than 60% or 7M tonnes compared to last year’s crop and thanks mainly in part to the 15.7M acres that are expected to get harvested, not the 13.2M previously thought! Next door in Brazil though,  the recent rains in Brazil are hurting the pace of combining, which is creating some quality issues for the crop coming off, but also creating logistical nightmares – it’s hard to go whatever way you’re supposed to when the “highways” are literally dirt.

The U.S.D.A. came out yesterday with their estimates for the 2017/18 U.S. acreage at their annual Outlook Forum (see all the slides from their Chief Economist Robert Johansson here) and without disappointment, a lot of soybeans are going in. Last year the American farmer planted 83.6 million acres of soybeans but this coming season, that number is expected to jump 5.5% to 88 million (trade was expecting 88.3 million acres). Where are those acres coming from? Quite simply, corn and wheat. U.S. corn acreage is expected to drop 4.3% from the 94 million last year to 90 million in 2017/18. For wheat, total acreage is expected to drop significantly by 8.3% year-over-year to 46 million, with most of the decline coming in winter wheat acre reductions.  From a price point perspective, the U.S.D.A. is forecasting an average value of $9.60 USD / bushel for soybeans, $3.50 for corn, and $4.30 for wheat.

The International Grains Council also came out with some new forecasts, highlighted by some changes in specific countries but, aggregately, not much difference. Expectations are that you’ll see lower acres in places like Russia and Canada thanks to profitability concerns, but global production is forecasted by the IGC to only fall 2% in 2017/18 from the 2016/17 crop of 735M tonnes. Also of note is that the 2016/17 global wheat carryout was raised to a record 236M tonnes, mainly because of the surprising monster crop that came out of Australia. Global corn ending stocks are also pegged at a record by the IGC at 224M tonnes, which would technically be up 14M tonnes or 6.4% year-over-year, but because acreage is expected to fall by 1% in 2017/18 to 450M acres worldwide, leading to a production of 1.023B tonnes (down 3% from 2016/17). 2017/18 global soybean acreage is forecasted by the IGC at 304M acres globally, while canola/rapeseed acres are expected to climb 4% year-over-year (mainly thanks to Canada and Australia) due to better returns compared to other crops. Finally, global 2017/18 barley acres is set to increase 1% (mainly thanks to more North African acres) but global barley trade this year in 2016/17 is expected to decline 13% from 2015/16 to 26M tonnes, mainly because of less buying by China & Saudia Arabia.

Speaking of buying, Syria bought 200,000 MT of wheat from Russia this week and it comes at a good time as the stronger Rouble has it made it tough for sales. For example, one of the largest corporate farms in the world, Black Earth Farming is holding 18% more grain right now than this time a year ago because it hasn’t made a huge amount of sense to sell. this week while Mexican companies are working together to either A) divert their goods already contracted to America to somewhere else, as well as B) import agricultural goods from somewhere else. India is trying to get towards a world of not importing more when it comes to pulses as under their 5-year plan recently announces, the government is forecasting for local production to reach 24M tonnes by 2020/21. By then, the domestic demand of pulses is likely to come in somewhere between 24 and 27 million tonnes. One can conclude though that with not a whole bunch of positive news on the fumigation exemption front for Canada, India might be more interested in going in its own way.

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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