June 4 – Grain Markets Sell Off on Rain, Trade Talk

Good Morning!

Grain markets this morning are all in the red as the complex continues the sell-off that started late last week.

“If you make listening and observation your occupation, you will gain much more than you can by talk.” – General Robert Baden-Powell (British Army officer)

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Grain Markets Sell Off on Rain, Trade Talk

Grain markets this morning are all in the red as the complex continues the sell-off that started late last week. Ahead of a critical meeting between the two countries on trade, the Trump administration elected to slap 25% tariffs on roughly $50 billion in Chinese goods. We know that COFCO, China’s state grain-buying agency, is buying US soybeans, but the recent upsurge in trade war rhetoric is certainly making other buyers nervous. [1]

All things being equal, grain traders continue to take profits off the table as geopolitical uncertainty is rattling markets. We recapped some of this activity on Friday, as we took stock of grain markets and how grain prices performed in May.

Last week we saw managed money increase their long positions in pretty much all crops. In fact, fund positioning in Chicago soft red winter wheat went net long for the first time in almost a year. However, given the sell-off seen late last week and continuing through today, it’s widely expected that the increase in long positions across grain markets have now been erased.

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Grain Markets Discussions in The GrainCents Digests

As we do every early Sunday morning, the GrainCents Weekly Digest hit the inboxes of over 500 subscribers for the 12 different crops that we cover: corn, soybeans, canola, flax, winter wheat, spring wheat, durum, oats, barley, peas, lentils, and chickpeas.

In this week’s GrainCents weekly digest, we looked at the evolving trade war talk between the US and China for corn and soybean readers.

In the spring wheat and oats markets, we looked at recent changes in Ag Canada’s forecast for the 2018/19 crop (and grain prices).

In barley and flax markets, it was important to note some updates to prices in both the US and Canada and if there is a new trend emerging.

For the pulses – chickpeas, lentils, and peas – we did a comparison year-over-year on prices, but also explored some updated political risk in India. The weekly deep dive into the grain markets provides insight and perspective into why things are happening, not just that they’re happening. If you’ve been a reader of the FarmLead Breakfast Brief for the last couple years, my goal has been to help provide perspective and educate, versus just stating the facts. Understanding how those facts came to be is more important so that you can then comprehend future movements, get some context, and act accordingly.

North & South American Weather Update

It’s expected that Brazil will see some rains in the key corn-growing states, but it might be too late to do anything. Paraná and Mato Grosso do Sul, the second and third-largest safrinha-corn-producing states respectively, will see the most precipitation over the next seven days at about 1 inch. Mato Grosso, the largest safrinha corn-producing state, is expected to get some rains as well. All things being equal, the crop is past the pollination phase, and it’s unlikely that the rains will add any credibility to yields improving

In the US, 90-degree (Fahrenheit) temperatures are expected to be seen across the Midwest and Southern Plains. In addition to the heat, forecasts over the next two weeks call for rain showers to hit corn-growing regions across the country. Roughly 90% of the corn crop is expected to receive at least 1.2 inches of rain, according to data from the National Weather Service.

The next 15 days suggest that badly needed rain will hit Colorado and New Mexico. Average precipitation is expected across Iowa, southern Illinois, and southern Indiana. Minnesota, the northern end of North Dakota, and Ohio will see above average precipitation according to forecasts.

This will likely continue to see the US corn and soybean crops pop out of the ground faster. Going into this afternoon’s US crop progress report, the five-year average for corn good-to-excellent ratings is 71%. Last week’s G/E rating for the US corn crop was a more-than-impressive 79%.

Moving south into the Southern Plains, it’s certainly dry, but that’s also where the US winter wheat harvest is starting up. It’s estimated that while the Texas winter wheat harvest is at 29% complete and Oklahoma is at 15%, yields are variable, and a lot of acres are being abandoned. [2] Protein is ranging from 10 to 12%, which is closer to the low end of average.

In Western Canada, rains over the weekend were welcomed by many farms, but for some areas, it was torrential. Southeastern Saskatchewan took the worst of the clouds finally opening up, with as much as 10 inches falling in some areas. [3] The rain is certainly welcome, but the weather has also been quite volatile (this weekend’s rainfall is an indicator of this). [4]

The Weather Network is expecting the next ten days or so to continue to trend wetter, but then after that, it’s going to be hot. [5] The rains now might help the areas of the Canadian Prairies that are not super dry (i.e., north of the Trans-Canada highway) but for those in the southern areas, it might not be enough.

Going into this heat, make sure to read up on our five things to do to front-run the weather and be prepared for what’s to come in the grain markets.

To growth,

Brennan Turner

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

At 7:10 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2921 
CAD, $1 CAD = $0.7740 USD)

Jul Corn: -4.0¢ (-1.02%) to $3.875 USD or $5.007 CAD
Jul Soybeans: -9.5¢ (-0.93%) to $10.118 USD or $13.073 CAD
Jul Soybean Meal (per short ton): -$3.00 (-0.80%) to $371.20 USD or $479.62 CAD
Jul Soybean Oil (cents per lbs): -0.04¢ (-0.01%) at 31.50¢ USD or 40.25¢ CAD  
Jul Oats: $0.01 (0.41%) to $2.470 USD or $3.191 CAD
Jul Wheat (Chicago): -8.0¢ (-1.53%) to $5.153 USD or $6.658 CAD
Jul Wheat (Kansas City): -9.5¢ (-1.76%) to $5.313 USD or $6.864 CAD
Jul Wheat (Minneapolis): -2.8¢ (-0.46%) to $6.013 USD or $7.769 CAD
Jul Canola: -$1.40 (-0.26%) to $12.921/bu / $528.90/MT CAD or $9.284/bu / $409.34/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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