January 4 – Grain Markets Turnaround Thursday?

Good Morning!

Grain markets are pulling back from the positive days seen yesterday and Monday, albeit the weather forecast has not really changed. Thus, does the Turnaround Tuesday adage apply to Thursday?

“It’s a tough marketplace right now… It is very compressed… A turnaround is likely to happen quicker than before.” – Peter Chernin (American investor)

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Grain markets are starting a little lower this morning after starting a nice start to 2018 with two days of gains.

Kansas City hard red winter wheat hit a six-week high after marking its fifth straight day of gains.

Ahead of next Friday’s USDA report, there are some bearish concerns for soybeans as exports aren’t doing so hot and this year’s US crop was large. Simply put, the competition from Brazil is real, especially now, at a time when the soybean supply pipeline there is supposed to be relatively dry!

In December, the South American country exported 2.36 million tonnes of soybeans. They did just 650,000 tonnes in December 2016. That’s a jump of nearly 265% year-over-year.

That being said, there’s some buzz that China is getting more aggressive with its bids for February /March 2018 movement. This will be at a time when the Brazilian soybean harvest is hitting full tilt, whereas China is putting a noose on US soybeans via tighter dockage rules.

Wheat Export Opportunities

Everyone in the grain markets know about how winter wheat is being winterkilled. Yesterday in GrainCents, we dug into what the impact may be on spring wheat prices, as well as any benefit for durum prices.

While most eyes are on temperature gauges, wheat traders are looking at Japan as they switch away from rice production.

Yesterday, Garrett looked a little into Japanese wheat (and noodle) demand as the Land of the Rising Sun turns off its state-run rice industry in March. Demand for noodles is growing! However, there’s more mixing and blending going on between Australian noodle wheat, US Dark Northern spring wheat, and Canadian hard red spring wheat and durum.

There’s some obvious competition from the Black Sea as well. It doesn’t seem to be slowing down as Russia’s government just upped their estimates of this past year’s grain crop. This includes wheat yields jumping 16% year-over-year.

Yesterday Garrett looked at how Ukraine’s grain production growth is also growing but is being stymied by farmland ownership rules.

Coarse Grain Demand Volatility

One good thing for corn prices might be livestock demand – by way of humans that is.

In 2018, the USDA is expecting the average American to eat 222.2 pounds of red meat and poultry. This is mainly thanks to the cheap corn that’s available to produce the meat, albeit some consumer habits are also worth nothing. Regardless, there more animals in North America and they still need to be fed! There has been some strong livestock demand in Canada too, but there’s a lot of corn in America looking for a home.

Ultimately, feed barley prices have continued their strong trend and we feel like we’re in pretty healthy sales position today. This is especially true, considering that while the malt barley crop in Canada wasn’t as big in 2017/18, its quality was higher. As such, malt barley prices continue to trade sideways domestically.

There may be some further negative impacts to beer (and malt barley) prices though if NAFTA isn’t realized.

Corn prices are in a similar boat as Mexico is looking to diversify its corn procurement plans. [1] This is especially the case if one considers the geopolitical risk that US President Trump is bringing to NAFTA trade talks.

Simply put though, there’s just not a lot of optimism for corn at this moment.

“Soybeans are a business” compared to corn, which saw farmers producer a near-record crop and not make any money. [2] Could this be the contrarian indicator that we’re waiting for? That things get so bearish that they can only get bullish from here on out?

We’ve seen corn trade sideways as supply continues to outweigh demand. As such, trying to maximize demand opportunities – both domestically and abroad – is critical for corn prices. So far this year, we know there’s more US corn feed demand, but exports are waning.

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2018 Grain Markets Outlook in GrainCents

Starting tomorrow, we’ll be releasing our outlooks for the 2018 grain markets for all 12 of the crops that we cover in GrainCents.

Start 2018 right by making sense of grain markets right away. Sign up for the crops that only matter to your operation here.

To growth,

Brennan Turner
President | CEO
FarmLead
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

Due to travel, there is no grain futures price data available, but you can look here at current values.

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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