August 5 – Finding The Right Price

In today’s Breakfast Brief we look at the pace of Harvest 2016, changes in international trade activity and weather effects on wheat quality. 

“Nature cannot be tricked or cheated. She will give up to you the object of your struggles only after you have paid her price.”

– Napoleon

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Good Morning!

Grains this morning are mostly higher as the markets try to price in the effect of some weather premium, the switch of some international trade activity (some strong US soybean sales this week), and the pace of Harvest 2016 in the northern hemisphere.

Harvest

In the Black Sea, Agritel points out that 88% of the wheat harvest is complete in Ukraine with 22.7 million metric tonnes taken off so far with average yields of 61.8 bu/ac being 11% higher than 2015. In Russia, only 38% of the wheat crop is off, but it’s produced 41.9 million metric tonnes with the average yield of 58.6 bu/ac up 15% year-over-year. Also coming off in Russia right now is a kabuli chickpea crop that’s double last year’s size and being sold right now for half the price of Australian desi chickpeas. This just reconfirms our call that we’re cautious on further decline of peas and chickpeas prices from current levels and that one should manage price risk accordingly (post some of your production on FarmLead today to do so).

Corn Supply and Demand

For the first time in 13 years, it looks like China will be pulling back on their corn production in an attempt to drop their more than 250 million metric tonnes of corn in reserves. Since 2001, Chinese acres planted to corn have increased 61% from 56.8 million to 91.4 million, but are expected to drop this year by 3.3 million acres. The focus in the People’s Republic seems to be all on soybeans as the government is clamping down on DDG imports. While China is trying to work through its own domestic supply gluttony, we know there’s a bunch coming down the pipeline in the US. On that note, there are some small positive indications we’re seeing demand coming around. While US corn export numbers the last 2 weeks have been on the high end of expectations, we mentioned yesterday that Brazil may look to import corn from the US but they’ll have to adjust their regulations on GMO imports to do so. Also, there’s buzz that they’re also looking at bringing in some ethanol as well (for the record, Brazil’s ethanol industry runs off sugar but a smaller harvest and higher sugar prices will force refineries to switch to making sugar instead of ethanol with the sweet stuff).

Speaking of Brazil, tonight we’ll see the opening ceremonies for the 31st Summer Olympics, and while I’m sure it’ll be just as colourful as Carnival, the Games won’t bump up the Brazilian economy. Agriculture continues to be the one bright spot of the country, but there’s concern that some of the current wildfires that have popped up(44% more than last year) will negatively affect the start of soybean planting season on September 15th. For this 2016/17 crop year, consultancy firm Celeres is forecasting 83.5 million acres of soybeans to get seeded (+2.6% year-over-year), producing 103 million metric tonnes of the oilseed (+5.3% YoY). For corn, thanks to high domestic prices, Brazilian farmers are likely to see a much larger area, with total nationwide production pegged at 100 million metric tonnes.

Weather Hitting Wheat Quality

While optimism is high right now in Brazil for a good year, France’s farmers are hurting big time right now as harvest continues to be slowed by unfavourable combine weather. Currently, only 35% of the French wheat is rated good-to-very good with only 62% of the crop taken off so far, a long throw from the 82% combined by this time last year. With the poorer quality coming out of Europe’s largest wheat producer, feed wheat use across the EU Bloc is expected to climb 3.4% year-over-year to 57.9 million metric tonnes, the biggest number since 2007-08 and 15% higher than the 5-year average. Furthermore, while corn feed use in the EU will fall to its lowest in 4 years at 57.6 million metric tonnes as it’s more expensive than wheat options.

Speaking of prices, we’ve seen some good trading on the FarmLead Marketplace this week on fall rye, flax, peas, and mustard as producers taking our recommendation to post a block of 10% or 20% and manage price risk. Post your block in a couple of clicks so any of the nearly 400 verified buyers on FarmLead can deal with you directly.

Have a great weekend & stay safe as Harvest 2016 is nearing for your operation or already underway.

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
1-306-665-8740 (Office)
www.FarmLead.com
@FarmLead (on Twitter)

At 6:25 AM CDT in the North American futures markets:

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3028 CAD, $1 CAD = $0.7678 USD)

Sept Corn: +1.3¢ (+0.4%) to $3.22 USD or $4.195 CAD
Sept Soybeans: +11.5¢ (+1.2%) to $9.85 USD or $12.833 CAD
Sept Soybean Meal (per short ton): +$3.80 (+1.15%) to $331.80 USD or $432.27 CAD 
Sept Soybean Oil (cents per lbs): –0.2¢ (-0.65%) to 30.44¢ USD or 39.66¢ CAD 
Sept
 Oats: +0.8¢ (+0.4%) to $1.858 USD or $2.42 CAD

Sept Wheat (Chicago): +4.5¢ (+1.1%) to $4.078 USD or $5.312 CAD
Sept Wheat (Kansas City): +2.3¢ (+0.55%) to $4.08 USD or $5.315 CAD
Sept Wheat (Minneapolis): unchanged at $4.888 USD or $6.367 CAD
Nov Canola: +9.3¢ / +$4.10/MT (+0.9%) to $7.853/bu / $346.28/MT USD or $10.229/bu / $451/MT CAD

Yesterday’s Winnipeg ICE Close

Oct Barley: unchanged at $2.307 USD or $3.005 CAD
Oct Durum Wheat: unchanged at $5.433 USD or $7.076 CAD
Oct Milling Wheat:  -2.7¢ (-0.5%) to $4.284 USD or $5.579 CAD

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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