February 14 – Grain Bulls Love the Weather
Good Morning!

Grain markets this morning are mostly in the red as the complex pulls back after two bullish days of trading on Monday and Tuesday.

“All you need is love. But a little chocolate now and then doesn’t hurt.”  – Charles Schulz (American cartoonist and creator of “Peanuts”)

graincents-trial

Grain markets this morning are mostly in the red as the complex pulls back after two bullish days of trading on Monday and Tuesday.

US cash corn prices have been pushing higher a bit on some of the bullish news down in South America. It’s been rumored that US corn farmers are looking at $3.70 USD /bushel on the March 2018 contract to make sales off 2017/18 old crop corn. For 2018/19 new crop corn sales, the psychologically-significant $4 handle off the December 2018 contract seems to be the relevant number.

US winter wheat areas are looking fairly dry through the end of February. However, the market continues to be reminded that there’s a record amount of wheat in the world right now and that is stifling any continuous rallies.

On Monday, we made some calls for our GrainCents subscribers about what to do with their grain sales, given the rally we’ve been presented (Note: We make recommendations to sell, but we also make recommendations to hold and wait for better prices).

US Soybeans Say Goodbye to China?

Today marks the start of Chinese New Year celebrations. The holiday historically has slowed down international purchasing activity, and it will remain this way for the next few days.

While this is certainly considered a bearish situation for basically the next week, there’s a larger bearish situation in play: Chinese reviewing US soybean purchasing.

In a related note, the USDA told us about the cancellations of 455,000 tonnes of US soybeans bought by the Chinese for 2017-18 delivery.

The government of the People’s Republic is currently in the process of reviewing what it would mean to restrict their purchasing of US soybeans, or at least tax them. This would be a direct rebuttal to recent taxes put in place by the USA on products like solar panels and washing machines.

However, many believe that curbing US imports would have a very negative impact on pork prices in China. [1]

Is Argentina All That Soybean Prices Have?

Pretty much.

Garrett mentioned in yesterday’s Grain Markets Today that soybean prices are being primarily influenced by Argentina’s weather conditions.

March 2018 soymeal continues to drive the complex, and the crush incentive is now at its best since 2002. We might get an indication of how things are doing from a crush perspective in tomorrow’s crush report for January from the National Oilseed Processors Association.

Dr. Michael Cordonnier of Soybean and Corn Advisor cut his estimate of Argentina’s soybean crop to 50 million tonnes. [2] This would match current estimate from the Buenos Aires Grain Exchange but would be 4 million tonnes below the USDA’s most recent forecast from last week’s WASDE of 54 million tonnes.

Cordonnier admits that things could certainly change if the fields with variable yield potential see some rains in the next few weeks. It’ll mainly come down to temperatures and rainfall. There isn’t much rain in the forecast for Argentina for the next two weeks, with the most precipitation being seen from Friday to Tuesday.

The only relatively bearish thing to come of this is that temperatures aren’t going to be too hot. Cordonnier also cut his expectations for the corn crop in Argentina by 1 million tonnes to 40 million. Last week, the USDA said that Argentina would harvest 39 million tonnes of corn.

In Brazil, Cordonnier cut his estimate of the Brazilian corn crop to 86 million tonnes. This was a 2 million-tonne cut from his previous estimate and is a whopping 9-million-tonne difference from the February estimate from the USDA out in their WASDE report last week.

Ultimately, like we’ve said about a million times, grain markets are looking mostly at South America for rumors to build up a price premium.

To growth,

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

Due to travel this morning, I’m unable to add in the grain markets futures price data but you can review them here.

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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