October 25 – Finding Bulls and Bears in Grain Markets

Do you know what the bulls and bears are pushing for in your crops?

“Every single day, I’m curious about everything. Curiosity is finding answers to things.”
– Mickey Drexler (American businessman)

Good Morning!

At 7:35 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2697 CAD, $1 CAD = $0.78876 USD)

Dec Corn: +0.8¢ (+0.2%) to $3.535 USD or $4.488 CAD
Jan Soybeans: +6.8¢ (+0.7%) to $9.925 USD or $12.602 CAD
Dec Soybean Meal (per short ton): +$2.50 (+0.8%) to $316.70 USD or $402.11 CAD
Dec Soybean Oil (cents per lbs): +0.21¢ (+0.6%) to 34.55¢ USD or 43.87¢ CAD  
Dec Oats: +2¢ (+0.7%) to $2.79 USD or $3.542 CAD
Dec Wheat (Chicago): +0.8¢ (+0.15%) to $4.388 USD or $5.571 CAD
Dec Wheat (Kansas City): +1¢ (+0.25%) to $4.35 USD or $5.523 CAD
Dec Wheat (Minneapolis): -2.8¢ (-0.45%) to $6.17 USD or $7.834 CAD
Jan Canola: +7.3¢/bu / +$3.20/MT (+0.65%) to $9.155/bu / $403.65/MT USD or $11.623/bu / $512.50/MT CAD

Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.538 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $5.959 USD or $7.566 CAD
Dec Milling Wheat: +10.9¢ (+1.7%) to $5.08 USD or $6.45 CAD

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Finding the Bulls and Bears in Grain Markets

Grain markets are back in the green Wednesday as bulls grab the steering wheel.

Delays to the American harvest and Brazilian seeding campaigns are catching the bulls’ attention.

Keep an eye on several technical lines of resistance at the Chicago Board of Trade.

As noted by Allendale [1], these numbers include:

  • $3.54 for December corn,
  • $9.755 for November soybeans, and
  • $4.40 for December Chicago (SRW) wheat

On Chicago wheat, traders are excited about what’s known as a “double bottom” on the charts. [2]

This is usually a bullish sign.

The drawback is that there may not be a lot of money going into commodities to help inflate a rally. Earnings reports have been very positive, and investors may be more inclined to plow into stock markets.

While we continue to see higher highs on the stock market, a pullback is warranted at some point.

China Affecting Soybean Prices

Weakness in the last few days in soybean markets has weighed on canola prices, but both are catching a bid this morning.

As Karen Braun of Reuters recently noted, China imported a record 298 million bushels of soybeans in September 2017. [3] Or 8.11 million tonnes if you were using GrainUnitConverter.com (bookmark it).

The interesting data points though are that:

  • 73% of those imports came from Brazil,
  • Brazil’s soybean exports to China are 58% higher than what they did in September 2016, and
  • The average price was $0.59 USD/bushel (or nearly $22/metric tonne) cheaper than a year ago.

This continues to confirm our assessment from September that Brazil continues to be the most bearish thing about soybeans.

Profiling Soil Moisture

In one of the first Breakfast Briefs of June, I labeled the American growing season, “A Tale of Two Crops.”

It reflected the growing conditions across the US and was a direct reference to Charles Dickens’ novel, “A Tale of Two Cities.”

This storyline continued throughout the growing season. Its reference is now complete with AgWeb recently comparing Harvest 2017 to said Dickens’ novel. [4]

With this in mind, in yesterday’s Breakfast Brief, I discussed crop progress around the world.

Looking deeper, soil moisture profiles across most of America are looking pretty good. This suggests a relatively good start to the 2018 planting season.

However, rains in winter wheat seeding areas is a blessing and a curse. Planting of the fall crop is a bit behind schedule.

Why does this matter?

As noted by Ray Grabanski of Progressive Ag, the best yields of the US winter wheat crop happen when the crop is planted earlier. [5]

Digging into Brazil’s soil situation, rain is falling sporadically across the country, but it’s still below average. And that’s frustrating for farmers, whose soybean planting pace is behind last year’s pace. [6]

Reseeding is happening as seeds are not germinating, thanks to the lack of rain. The long-term effects are that the second-crop safrina corn planting will likely happen later and even unviable in some areas.

Ag Resource notes that across the country, cumulative August to October precipitation is estimated at just 4.6 inches. [7]

Last year it was 7.5 inches. The average is 10 inches.

It’s expected that this moisture deficit will continue into early November. Ultimately, normal to above-normal rainfall is needed through into December to get soil moisture back to adequate levels.

Keep in mind that over the next six weeks, farmers will plant most of the Brazilian crop.

Wind, Grain Moving Well in Western Canada?

Strong winds are expected to blow across Western Canada again today. [8] The positive this go around (versus last week’s scary wildfire situation) is that there will be cold temperatures and likely some blowing snow by Wednesday.

The Western Producer notes that the ship line-up in Vancouver was getting a bit long at the midway point of October. [9]

Twenty-one vessels were sitting in the Port of Vancouver as of Oct. 15, waiting to be loaded with grain.

And there’s lots of grain!

The Canadian federal grain monitoring program says that grain sitting at Canadian port locations is 37% higher than it was a year ago.

There’s more wheat, barley, and canola. But fewer pulses are sitting at the ports with exports much slower than a year ago (as noted two weeks ago).

Canada is still waiting to hear from the India for any updates on pulse trade. [10] Namely, the question being asked is: “What is Canada-India’s long-term pulse trade policy looking like?”

It seems like the trade of pulses is not the only thing the Indian government is stalling on. A genetically-modified mustard crop that was developed in India and approved last year by their environment ministry. [11]

The main reason?

Stiff opposition from lab-altered food from domestic activists and politicians.

It’s a similar dynamic in Europe where EU lawmakers are now asking for glyphosate to be phased out over the next five years. [12]

This comes after the World Health Organization edited the non-carcinogenic findings from its glyphosate report in March 2015. [13]

Final Grain Marketing Thoughts

Just like in some of these reports, it’s important to weigh all the facts.

If you’ve been a reader of the FarmLead Breakfast Brief for some time, then you know that I try to look at both sides of the table.

More specifically, I try to look at what’s bullish, what’s bearish, and what’s just noise.

Further, when it comes to managing risk, it’s important to evaluate the upside potential versus the downside catalysts.

“How many factors are bearish and how many are bullish?”

“Which of these factors have more strength?”

These are just some of the questions that I like to ask as a risk manager.

As we settle into the winter months in the Northern Hemisphere, we’ll be digging deeper into 12 major crops grown in North America.

Ultimately, we want to help you better understand what’s moving the markets of the crops that you’re involved in: what’s bullish, what’s bearish, what’s noise, and why.

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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