January 8 – Grain Markets Trying to Find New Years Legs

Good Morning FarmLead User!

Grain markets aren’t finding its Monday legs after last week’s hot start. A bearish tone going into this Friday’s January WASDE report is mostly to blame. 

“Valor is stability, not of legs and arms, but of courage and the soul.” – Michel de Montaigne (French philosopher)

Grain markets this morning are mostly in the red as the complex is starting to think about more bearish numbers in the US.

Later this week, on Friday, we get the USDA’s first WASDE report of the 2018 calendar year. Between some slower exports and bigger crops abroad, there’s widespread belief that this year’s January WASDE – usually a barnburner – is going to come out bearish.

Last week, grain markets started 2018 off hot – especially wheat – before cooling off by the end of the week.

Like most cereals last week on the futures board, oats are having a decent start to 2018. They’re also the only crop out of the grain markets in the green this morning!

South American Crop Production Update

Thanks to dryness, Argentina’s soybean seeding campaign is moving along at the slowest pace ever. [1] Before the weekend, it was estimated that only 72% of the 44.2 million acres of soybeans to be seeded for their 2017/18 campaign were in the ground.

40% of the remaining 12.8 million acres that still need to get seeded are in the northern regions, which are the driest. As such, it was noted by AgChieve that March 2018 soybean prices pulled a reversal on Friday that could signal some higher values this week (see chart below).

Similarly, corn seeding in Argentina is sitting at just over 6% planted of the expected 13.3 million acres.

Conversely, the Brazilian soybean harvest is starting up already for the earliest-seeded fields.[2[ There is widespread speculation amongst private forecasters that production could reach over 110 million tonnes this year. This would be second to only last year’s record crop of 114.1 million tonnes and above the USDA’s current estimate of 108 million tonnes.

On the flipside, the first corn crop in Brazil saw its acres drop 11% year-over-year to just over 12 milliona acres. With some drier conditions in major first crop corn areas in the south, production is slated to fall 17% from last year to 25.3 million tonnes.

Accordingly, domestic Brazilian corn prices are starting to pick up a bit.


Heavy Vegetable Oil Competition

The global market for vegetable oils is in heated competition these days, thanks to stronger production of palm oil and new government intervention.

For example, more Indonesian palm oil and Argentine soy oil is likely available in 2018, thanks to new biodiesel import taxes levied by the US government.

Global palm oil production is set to hit a record in 2018 (mind you, there is at least one bullish asterisk in the 2018 palm oil outlook).

The tightest vegetable oil market though is definitely in canola and rapeseed oil. Over the weekend in a new GraInCents article, I looked at impact of this “tight” balance sheet on North American canola prices.

Moving over to palm oil, In an effort to work through the greater production in their country and boost prices, Malaysian officials lifted their 5.5% palm oil export tax for the next 3 months. Best estimates are that this could increase exports by 10-15% over this time frame. [3]

More government intervention / policy-making won’t help the world work through its grain stocks – palm oil or otherwise. All it does is create volatility in the marketplace.

But traders do love volatility – its where fortunes can be won and lost! The one trader to watch that matters most to North American oilseed producers is China. With that in mind, I also looked over the weekend at what I call, “The Great Wall of Chinese Canola Demand.”

GrainCents 2018 Grain Market Outlooks

Over the weekend, we started to release our 2018 market outlooks for various crops in GrainCents, FarmLead’s newest product to make you a better grain marketer.

In each GrainCents outlook, we walk through the bearish and bullish factors we’re tracking, and the potential price impacts of each variable. We also walk through our current marketing strategy in terms of, when we expect to make our next sales for both 2017/18 old crop and 2018/19 crop.

We also walk through the “why” we’re making these sales. It’s important to me for any farmer to have context and understand that when they make a grain sale, why it’s a good sale.

Click on any of the links below to view these forward-looking assessments of 2018 grain markets in GrainCents.

2018 Canola Market Outlook

2018 Soybeans Market Outlook

2018 Corn Market Outlook

2018 Winter Wheat Market Outlook

2018 Spring Wheat Market Outlook

2018 Durum Wheat Market Outlook

Over the course of the next few days, we’ll be releasing our 2018 market outlook for pulses, other cereals, and flax.

Sign up for your GrainCents account today, customizable only to the crops you care about, and start your 2018 grain marketing year off right.

To growth,

Brennan Turner
President | CEO
@FarmLead or @GrainCents on Twitter

At 8:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2421 CAD, $1 CAD = $0.8051 USD)

Mar Corn: unchanged at $3.513 USD or $4.363 CAD
Mar Soybeans: -3¢ (-0.3%) to $9.678 USD or $12.02 CAD
Mar Soybean Meal (per short ton): -$1.30 (-0.4%) to $320.60 USD or $398.21 CAD
Mar Soybean Oil (cents per lbs): +0.02¢ (+0.05%) to 33.78¢ USD or 41.96¢ CAD  
Mar Oats: -0.3¢ (-0.1%) to $2.483 USD or $3.083 CAD
Mar Wheat (Chicago): -3.5¢ (-0.8%) to $4.273 USD or $5.307 CAD
Mar Wheat (Kansas City): -4.5¢ (-1.05%) to $4.333 USD or $5.378 CAD
Mar Wheat (Minneapolis): -1.8¢ (-0.3%) to $6.25 USD or $7.763 CAD
Mar Canola: -1.8¢/bu / -$0.80/MT (-0.15%) to $11.281/bu / $497.40/MT CAD or $9.082/bu / $400.46/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.

Most Recent Posts
June 5 – Volatility in U.S. Dollar, Loonie Mixing up Trade Flows
June 05, 2020 Brennan Turner
Grain markets this morning are almost all green as U.S. grain prices are seeing the benefit from a weaker U.S. Dollar, but that’s also pushing other currencies higher, including the Canadian Loonie and Brazilian Real.
October 4: Corn Prices Edge Higher With October WASDE in Focus
October 04, 2018 Garrett Baldwin
Corn prices ticked higher Thursday as traders and analysts began to speculate on next week’s release of the October WASDE report.
Pea Prices in 2020 Diverge as Farmers Look Up and Abroad
January 14, 2020 Brennan Turner
Pea prices are starting 2020 out on a bit of a divergent path, at least within the complex, as yellow pea prices drag lower while green pea prices soar.