July 25 – Are We Seeing Artificial Grain Markets?

Good Morning!

Grain markets are mostly in the green this morning, with only soybean prices and canola prices pulling back after yesterday’s bullish activity.

“Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.” – Albert Einstein (German-born Theorist)

Are We Seeing Artificial Grain Markets?

Grain markets are mostly in the green this morning, with only soybean prices and canola prices pulling back after yesterday’s bullish activity.

Yesterday, canola prices gained $3.70 CAD/metric tonne on the November contract while soybean prices added more than a dime across all contracts. This was because the White House announced $12 Billion would be made available for farmers to lessen the blow of Chinese import tariffs.  [1]

There has been some reporting that the $12 Billion will help American farmers immediately.

Between everything I’ve read, and knowing how government aid programs are executed, I would be surprised if American farmers who apply for this money will see it before the end of next year’s, 2019/20 harvest. This US government operates differently than past administrations and perhaps, this time will be different?

There is a possibility that China could implement even further tariffs on US soybeans, should the White House execute their full-court press on Chinese imports. [2] I posited to CNBC that, if this were to happen, current soybean prices could certainly become the new normal.

US Spring Wheat Crop Worse Than Reality?

This week we saw the hard red spring wheat crop tour, hosted by Wheat Quality Council, start in North Dakota. After Day 1, it looks like the US spring wheat crop (at least in North Dakota) isn’t much better than last year. [3].

Going through a leg of southern North Dakota and northern South Dakota, this year’s yields were calculated at 38.9 bushels per acre. This is just 1 bushel above last year’s first day of the tour through the area, which showed 37.9 bushels per acre (despite a drought!). The five-year average for the first day is 44.7 bushels per acre.

For perspective, the latest estimate from the USDA is estimating North Dakota’s average spring wheat yield at 48 bushels per acre, matching a previous record. The forecast is based on the USDA’s good-to-excellent (G/E) rating of North Dakota spring wheat fields at 88%, up 5 points from the previous week. A year ago at this time, North Dakota’s spring wheat crop rated G/E was just 32%.

Spring Wheat Crop Conditions

There are two days left in the hard red spring wheat crop tour through North Dakota, with final forecasts released on Thursday evening.

As we head more north on the spring wheat crop tour, we might see some better numbers because other parts of North Dakota to the north have received better moisture. However, northern-central  Hard red spring wheat prices in Minneapolis are indeed reacting positively to the news this morning, up nearly 20 cents!

Making Sense of Grain Markets

One of the things we talked about in this past week’s GrainCents Spring Wheat Digest was crop and drought conditions in North Dakota and Montana.

This sort of dryness is something that we’re also uber-cognizant of for our durum readers. More specifically, in the GrainCents Weekly Durum Digest, we did a quantitative analysis of rainfall in Saskatchewan and looked a correlation of durum prices between the US and Canada with production issues.

What we see in grain markets is a lot more risk on the table. Between trade wars, weather challenges, and governments subsidizing their people, the actual price equilibrium between supply and demand doesn’t reflect reality.

Wading through this noise is pretty tough to do. But that’s why we started GrainCents. With ~1,000 subscribers, they’re getting a more in-depth look into what’s moving grain markets. For example, can you describe the seasonality of canola prices over the past few years?

For the GrainCents Weekly Canola Digest, our canola readers got a good look at canola prices on the futures board versus basis levels across Western Canada. This week, we’re taking a different perspective, looking at the seasonality of canola prices over the past five years.

grain-markets-2018-07-27-canola-seasonality

GrainCents Weekly Corn Digest – US exports, global macroeconomic risks, and how volatility can help corn prices.

GrainCents Weekly Soybeans Digest – weather effects on the US soybean crop, price spreads between Brazil and China, and where soybean prices go from here.

GrainCents Weekly Flax Digest – quality and size of flax harvests in Kazakhstan and Russia, as well as some statistically-significant cash trade data points on the FarmLead Marketplace.

GrainCents Weekly Winter Wheat Digest – drier European crop conditions and the residual effects in the Black Sea, as well as weather that we’re watching in the Eastern hemisphere (think China and Australia).

GrainCents Weekly Barley Digest – a global look at this year’s barley harvest, including individual countries like Romania, Australia, Argentina, and France, as well as the North American crop condition and a comparison of feedstuff prices for the perspective of feed barley players.

GrainCents Weekly Oats Digest – a look at oats production in Europe, the US, and Australia, but also tariff possibilities between the US and Canada.

GrainCents Weekly Lentils Digest – India’s seeding progress, Kazakhstan’s production and export potential, and US and Canadian lentil prices.

GrainCents Weekly Peas Digest – who’s buying peas right now, what the Black Sea peas crop is looking like, and Indian seeding progress.

GrainCents Weekly Chickpeas Digest – how many chickpeas India is still sitting on, the potential quality of this year’s North American chickpeas harvest, and how chickpea prices are factoring that in.

Start making more sense of today’s grain markets by signing up to GrainCents here.

To growth,

Brennan Turner

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

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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