November 22 – Grain Markets Finding A Turkey Rally?

Good Morning!

Today’s Breakfast Brief looks at whether grain markets can rally through the US Thanksgiving holiday, why wheat had a pretty good day yesterday, and what our expectations should be for corn prices.

“One of the frustrating things for people who miss the first rally in a bull market is that they wait for the big correction, and it never comes.” – Martin Zweig (American investor)

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Selling it for a bigger profit.
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Grain markets this morning are mostly in the green as the market positions ahead of the US Thanksgiving holiday.

Things are certainly slowing down but since we’ve been trading sideways for what seems like forever, maybe the base is set?

The market continues to look to South American weather as the only real opportunity to rally off.

Gauging Expectations for Grain Markets, Corn Prices

Corn had a trading range of one whole cent yesterday. One cent.

Moving past that, there’s more announcements coming from major hog farming operations in China that they’re building more barns in the major corn-producing regions in the northeast provinces.[1]

A wild statistic is that in the next few years, about 20% of China’s pig production will move into these areas which is where the majority of corn is grown. That number is about 120 million pigs, or almost all the animals processed in the US annually!

Generally speaking, this herd expansion in China is seen as a positive for grain prices, namely soybean prices (didn’t you know China imports nearly 100 million tonnes of soybeans a year?)

There is some concern that the drier weather in Argentina could negatively impact the recently-planted corn crop there.

Some rain is in 10-14 day forecast and so the rumor-mill is buzzing that the moisture may be too late. Could it be the production shock that grain markets need?

The better question to ask is, “is this production shock possible?” The Australia Bureau of Meteorology said yesterday that they expect La Nina’s threshold to be reached in December.[2] It would then linger around until February.

Basically, we should not expect this winter’s La Nina to be compared to that seen in 2010-2012. That go-around saw floods in Australia, drought conditions in Argentina and the US, and grain prices spike to record highs.

To reiterate though, that strong and long of a La Nina even isn’t expected in 2017/18. Accordingly, we need to play the game in front of us, not the one we’re hoping for.

Gauge your expectations for grain prices over the next 6-9 months accordingly.

Radioactive Russian Wheat?

What the heck is ruthenium?

It’s a radioactive type of metal.

Why should you care?

It’s been found by Russia’s meteorological service in the Ural Mountains at nearly 1,000 times the normal level. The cause is speculated to be a “nuclear incident” in September.

What does this have to do with grain markets?

Russia is the largest wheat exporter in the world. It’s likely they’ll have exported 15 million tonnes of wheat for the 2017/18 marketing year by the end of this month.

However, when it’s suggested that the wheat might be radioactive, international customers might look elsewhere. Those who are a student of the history of grain markets know that the Chernobyl incident impacted wheat prices and other crops.

Ultimately though, we’re in sort of that lull of “let’s search for a headline”.  Garrett noted in Grain Markets Today that this rumor created some short-covering that help push wheat prices higher yesterday. I would argue that it was definitely a factor but the one variable I’m started to watch more is some drier conditions in the major US winter wheat growing regions.

Just one last note on the wheat markets: Egypt continues to confuse traders on their standard for wheat imports.[3] With lack of clarity on whether or not the standard is 0.05% for ergot or not, some grain traders are refusing to offer up anything.

More simply, they don’t want to sell something on one standard but then get judged on another when it’s delivered.

While there’s a lot of talk of a “new era of transparency, the Egyptian government has been toying with this ergot issue for the last few years. Put another way, their confusing wheat standards is rather radioactive.

To growth,

P.S. Happy Thanksgiving to our American friends!

P.P.S. because of the holiday, grain futures markets will be closed in the US and, so I won’t be writing a Breakfast Brief. I’ll be back on Friday though when markets have a shortened trading day!

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

At 7:25 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2788 CAD, $1 CAD = $0.782 USD)

Mar Corn: unchanged at $3.563 USD or $4.535 CAD
Jan Soybeans: +5.3¢ (+0.55%) to $9.943USD or $12.658 CAD
Jan Soybean Meal (per short ton): +$1.50 (+0.45%) to $321.90 USD or $409.80 CAD
Jan Soybean Oil (cents per lbs): +0.25¢ (+0.75%) to 34.57¢ USD or 44.01¢ CAD  
Mar Oats: +2.5¢ (+0.9%) to $2.74 USD or $3.488 CAD
Mar Wheat (Chicago): +0.3¢ (+0.05%) to $4.415 USD or $5.615 CAD
Mar Wheat (Kansas City): +0.5¢ (+0.1%) to $4.383 USD or $5.579 CAD
Mar Wheat (Minneapolis): +1.3¢ (+0.2%) to $6.425 USD or $8.18 CAD
Jan Canola: +3.4¢/bu / +$1.50/MT (+0.3%) to $11.716/bu / $516.60/MT CAD or $9.203/bu / $405.79/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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