May 29 – Grain Markets Glowing Green

Good Morning!

Grain markets woke up after the Memorial Day long weekend in the US and are all in the green thanks to ongoing drought concerns!

“Business is about being the best that you can be, and there are always glowing examples of people that we can all learn from.” – John Caudwell (British businessman)

graincents-trial

Grain Markets Glowing Green

Grain markets woke up after the American Memorial Day long weekend and are all in the green! Just like the crops starting to pop out of the ground, grain markets are green as they start to price in the usual weather risk that we see around this time of year.

Dry conditions continue to be observed in Australia, Russia, Brazil, Canada, and the US, which is helping grain markets push higher. As usual, this creates many “what if” discussions, ones that we here at FarmLead are susceptible to getting into as well. For example, we recently looked at where durum prices could go if we see another drought in Western Canada.

Another example of the “what if” analysis examples is the state of global corn reserves. More specifically, INTL FC Stone created some headlines recently about how, if the US and Chinese corn supplies were removed from the equation, there would only be 39 days’ worth of corn left in the world. [1]

Fuhgedaboutit!

The US and China not having any corn?

That’s like talking about how different the NBA would look and feel without tall basketball players. It’s a completely irrelevant and useless mental exercise because it’ll never happen. It certainly gains headlines, but what I will call “noise.” Read more about how “Clearing the Noise” is necessary for a strong grain marketing plan.

Volatile Canadian Grain Movement

Specific to Canadian Agriculture, last week the federal government passed Bill C49 or the updated transport bill. The Transportation Modernization Act will penalize rail companies for their failure to provide promised rail cars for the shipments of grain. It will also increase rules that create a “long-haul intershipping” system that aims to help rail customers who only have access to one line. These are both VERY important pieces to the puzzle that is grain movement.

Following the announcement, Canadian Pacific announced it would invest $500 million to meet expected demand, while CN is going to purchase another 1,000 new hoppers, which is the equivalent of about 100,000 tonnes of new capacity on the rails. Further, CN locomotive engineers just ratified their newest contract, avoiding a strike. [2]

However, it’s widely expected that CP train operators and signaling workers will strike by 10 PM EST tonight (Tuesday, May 29) if a new contract isn’t agreed to. Wade Sobkowich, the executive director of the Western Grain Elevator Association, which represents Canada’s largest grain exporters, said that’s nothing to be done except to tell farmers on CP lines that delivery periods will need to be rescheduled, while overseas customers could receive late shipments. [3]

So, while there seems to be some progress on the policy front, Canadian grain transportation continues to act in the capacity of “two steps forward, one step back.”  This comes as Canada sees some healthy demand from the likes of Africa (read up on why we’re saying that if you’re a subscriber of either durum wheat or spring wheat on GrainCents).

Grain Markets Getting Hot in Here

Coming back to the weather, drought conditions in the Southwestern portion of the United States are currently at their worst levels in 60 to 70 years. Cotton markets are limit up this morning on the forecast of a “heat dome’ over the US Southern Plains.

While we’re nearing the end of May, we’re now hearing comparisons to the 1930s Dust Bowl. It’s worth noting that Moderate Drought conditions have spread into portions of Southern Iowa, while abnormally dry conditions are creeping across western Illinois.

2018-05-24-us-drought-monitor-grain-markets

Moisture continues to be a concern in a few places in Western Canada. At this time a year ago, Alberta’s soil moisture conditions were rated about 7% poor-to-fair. In the most recent crop report, that poor-to-fair percentage is now 27%.

In Saskatchewan right now, soil moisture is considered 53% short or very short. A year ago, only 10% of the province’s fields were rated short or very short when it came to soil moisture. This, on top of the fact that The Weather Network is saying that temperatures are expected to be above-average.

Saskatchewan Soil Moisture Levels

While it’s certainly not Nelly-esque “Hot in Here,” it’s hard to ignore the heat in the forecast. There is some rain that’s supposed to fall in Western Canada towards the end of the week, but we’ve seen that dog and pony show before (AKA last year).

So, are your expectations that grain markets should skyrocket? Do you plan on grain prices doubling in the next two months? One month? Two weeks? What are your expectations?

We are providing clear guidance for our GrainCents readers, and I would invite you to join the other more than 500 other subscribers to understand all the catalysts to the upside (and where the top likely is), but also the downside risks that could impede strong grain prices.

Grain marketing can be tough, but if you have a strong understanding of the different factors pushing and pulling on the grain markets (not just the weather), you’re in a much better position to manage risk.

To growth,

Brennan Turner

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

At 7:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3036 
CAD, $1 CAD = $0.7671 USD)

Jul Corn: 1.5¢ (0.37%) to $4.055 USD or $5.286 CAD
Jul Soybeans: 3.8¢ (0.36%) to $10.453 USD or $13.626 CAD
Jul Soybean Meal (per short ton): $1.30 (0.34%) to $381.60 USD or $497.45 CAD
Jul Soybean Oil (cents per lbs): 0.06¢ (0.02%) at 31.40¢ USD or 40.93¢ CAD  
Jul Oats: $0.04 (1.61%) to $2.528 USD or $3.295 CAD
Jul Wheat (Chicago): 6.8¢ (1.24%) to $5.498 USD or $7.167 CAD
Jul Wheat (Kansas City): 7.8¢ (1.37%) to $5.718 USD or $7.453 CAD
Jul Wheat (Minneapolis): 4.8¢ (0.75%) to $6.490 USD or $8.460 CAD
Jul Canola: $1.00 (0.91%) to $12.183/bu / $537.20/MT CAD or $9.346/bu / $412.09/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.

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