February 5 – A Feeble Start to February Grain Markets

Good Morning!

Grain prices this morning are mostly in the red as the complex continues to sell off with the broader equity and commodity markets. Only ethanol and livestock prices are in the green!

“There is something feeble and a little contemptible about a man who cannot face the perils of life without the help of comfortable myths.” – Bertrand Russell (British philosopher)

graincents-trial

Grain prices this morning are mostly in the red as the complex continues to sell off with the broader equity and commodity markets. Only ethanol and livestock prices are in the green!

As Garrett described in Friday’s Grain Markets Today column, grain prices ended last week mostly in the red after a stronger performance at the beginning of the week. Traders took profits on the heels of some double-digit moves on the futures boards for most grain and oilseeds earlier in the week.

All crops saw a longer position taken by hedge funds and money managers last week in the futures market. In fact, Kansas City hard red winter wheat nearly pushed into a net long position. [1] For our winter wheat GrainCents subscribers, they were able to take our recommendation and capture the highs by selling both old and new crop before the market pulled back significantly.

In outside markets, some geopolitical risk helped fuel the rally, but a “risk on” attitude hit the market on Wednesday as volatility ensued. Broader equity markets were hit pretty hard, with the Dow Jones in New York losing 1,000 points, or about 4% for the week, including more than 650 points lost on Friday alone.

This week, on Thursday, February 8th, we get the USDA’s monthly WASDE rendition. In the report, corn and wheat numbers in the U.S. are expected to change that much, but the trade is guesstimating nearly 20 million more bushels of soybeans. This means that the 2017/18 American soybean carryout number is creeping closer to 500 million bushels but soybean exports continue to be unimpressive.

In other news, over the weekend we saw India impose a “10% social surcharge levy on duties charged against imports”. Put another way; they decided to put a tax on a tax. What this means is that import taxes for peas going into India are now 55% and 33% for lentils and chickpeas.

Lots of Grain Activity in Argentina

Like clockwork, another strike in Argentina at a Cargill soybean crush plant slowed activity there. [2] As an aside, Fitch Ratings continues to the look at Cargill favorably regarding their financial shape, relative to their rivals. [3]

In South America, Informa cut its Argentine corn production forecast by 5 million tonnes to 37 million. For soybeans, they are currently estimating a 51 million tonne crop in Argentina. For perspective, the USDA is estimating 42 million tonnes of corn and 56 million tonnes of soybeans.

On that note, Argentine farmers practically did their corn and soybean planting. However, the weather looks to be dry through the end of this week. Heading into the weekend, it’s expected that lower temperatures and some rains will start hitting about 60-70% of the main corn and soybean areas.

Agriculture Canada’s 2018/19 Crop Forecast

Later this morning, we’re going to get Statistics Canada’s estimates for available grain stocks in the Great White North as of December 31st. Pre-report guesstimates are for 14.3 million tonnes of canola and 23.9 million tonnes of wheat still available to end of the 2017 calendar year.

More recently though, Agriculture Canada put out its estimates for 2018/19 crops. [4] They are forecasting a record 24 million acres of canola and 23.5 million acres of all wheat, including 5.46 million acres of durum.

After being on the road for the past two weeks, I dug into these numbers over the weekend for our GrainCents subscribers. I walked through various production and demand scenarios that will impact where prices go for many of the crops we’ve seen.

While there’s likely going to be various opportunities to price your grain, oilseeds, or pulses in the next 12-18 months, Agriculture Canada is expecting most grain prices to stay similar to 2017/18.

Login or sign up for GrainCents to review what I’m thinking for your crops.

Feed Grain Prices Riding High (for now)

For our GrainCents subscribers, we’ve been talking a lot about feed barley and the multi-years that we’ve been on. While it was only about $4 or $5 /tonne difference, on January 15th. We made the call in GrainCents to sell a 15% block of feed barley. Two days later we saw feed barley bids start to pull back. Granted, it was only a few bucks per tonne, but those add up. For those GrainCents readers who followed the recommendation, the difference was paying off their cost of a subscription with one deal.

What’s certain is that barley is being easily substituted for corn, be it coming from other parts of Western Canada or America. We’ve previously noted the effect of U.S. corn coming into Canadian feed markets in GrainCents, be it into Lethbridge or Manitoba.

Last year we saw a lot of high-disease/low-quality wheat making it into the feed market last year (see durum chart below). This year, there isn’t as much of that so corn is finding a home in feed rations. Currently, corn continues to trade at levels similar to that of feed barley prices or feed wheat prices of around $215 – $218 CAD /metric tonne delivered into Lethbridge.

We continue to see some impressive opportunities for yellow peas to make it into the feed market with trades happening close to $7 in Alberta. We are also seeing hog prices starting to slip a bit, which could have a negative impact on feed prices. Know that feed prices are unlikely to push too much higher and livestock prices have more downside risk, Allendale Brokers are telling their livestock clients to lock in feed grain prices now to maintain their current high profit-per-animal returns. [5]

To growth,

Brennan Turner
President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

At 8:05 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2311 CAD, $1 CAD = $0.8123 USD)

Mar Corn: -3¢ (-0.85%) to $3.585 USD or $4.448 CAD
Mar Soybeans: -6.5¢ (-0.65%) to $9.723 USD or $12.063 CAD
Mar Soybean Meal (per short ton): +$3.60 (+1.05%) to $339.30 USD or $420.97 CAD
Mar Soybean Oil (cents per lbs): -0.08¢ (-0.25%) to 32.59¢ USD or 40.34¢ CAD  
Mar Oats: +0.8¢ (+0.3%) to $2.683 USD or $3.328 CAD
Mar Wheat (Chicago): -6¢ (-1.35%) to $4.408 USD or $5.468 CAD
Mar Wheat (Kansas City): -6¢ (-1.3%) to $4.573 USD or $5.673 CAD
Mar Wheat (Minneapolis): -0.8¢ (-0.1%) to $6.03 USD or $7.481 CAD
Mar Canola: +0.9¢/bu / +$0.40/MT (+0.1%) to $11.199/bu / $493.80/MT CAD or $9.027/bu / $398.00/MT USD

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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