Lots of noisy grain markets headlines right now. With the US Dollar at a 3-month-high, it’s time to clear the air.
“Noise proves nothing. Often a hen who has merely laid an egg cackles as if she laid an asteroid.”
– Mark Twain (American author)
At 7:40 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2897 CAD, $1 CAD = $0.77546 USD)
Dec Corn: -1¢ (-0.3%) to $3.495 USD or $4.507 CAD
Nov Soybeans: +1.5¢ (+0.15%) to $9.84 USD or $12.69 CAD
Dec Soybean Meal (per short ton): +$0.80 (+0.25%) to $312.90 USD or $403.53 CAD
Dec Soybean Oil (cents per lbs): -0.04¢ (-0.1%) to 34.46¢ USD or 44.44¢ CAD
Dec Oats: +1¢ (+0.4%) to $2.635 USD or $3.398 CAD
Dec Wheat (Chicago): -1.5¢ (-0.35%) to $4.303 USD or $5.549 CAD
Dec Wheat (Kansas City): -1.3¢ (-0.3%) to $4.27 USD or $5.507 CAD
Dec Wheat (Minneapolis): -1.8¢ (-0.3%) to $6.188 USD or $7.98 CAD
Dec Canola: +4.5¢/bu / +$2/MT (+0.4%) to $9.115/bu / $401.89/MT USD or $11.755/bu / $518.30/MT CAD
As of October 26, 2017, Winnipeg ICE futures for barley, durum wheat, and milling wheat have been delisted.
Grain Prices Fall After US Dollar Hits Three-Month High
Grain prices are mostly in the red Friday morning thanks to a strengthening US Dollar.
The US Dollar climbed to a 3-month high yesterday thanks to optimism over tax reform and weakness in the Eurodollar. Yesterday, the European Central Bank took a “dovish” (AKA lackluster) approach to extending its bond purchases. 
The ECB also reduced the likelihood that it would hike interest rates in 2018.
Simple math: The market interprets this as bearish. The Euro drops, and the US dollar gains.
If the U.S. dollar continues to rise, it might put some pressure on the US export program. Conversely, a stronger dollar weakens other currencies (i.e., the Canadian Loonie) and makes international buyers more interested in sourcing from those countries.
The Canadian Loonie dipped below 78 cents USD, a factor that continues to support canola prices.
This quick action in the FX exchange is supporting Canadian cash grain prices and should not be ignored.
We’ve seen some sizeable gains in flax, canola, and wheat prices.
Reward the price rally and post a block of your grain on FarmLead now.
More or Less Grain Out There?
In yesterday’s Breakfast Brief I discussed how, with the US corn harvest behind schedule, we might see smaller final yields.
Today we see a lot of “noisy” headlines on the subject like “Hidden Story in the Market” and “Fall Weather Leaving Yield in the Field.”
Here’s what is certain this time of year: If there is crop left in the field, it’s susceptible to more yield loss. . What’s uncertain is how much yield will be lost.
Mark Gold from Top Third Ag Marketing makes a solid point to be careful storing corn and hoping for higher prices. He says there is the problem of a 2.3 billion bushel carryout in the U.S. 
One of the more bullish headlines is “70% of Chinese corn stocks can’t be used.” 
But this headline is just a rumor. And I’ve been hearing it for three years.
What is not a rumor in China is that its government is cutting the minimum purchase price for wheat by 2.5% to $345 USD/metric tonne (or $9.40 USD and $12 CAD per bushel). 
The more important story is that the International Grains Council says that global corn stocks will fall to a four-year low in 2017/18.  Technically, the IGC raised their harvest expectations by five million tonnes to 1.034 Billion tonnes, but they also dropped their stocks forecast by five million to 203 million tonnes.
This reason for the difference is that the IGC raised its global corn consumption forecast to a record 1.067 billion tonnes.
Could the bearish grain supply swing of the last few years be over?
Or are these headlines more noise?
For those answers, be sure to read our multiple insights pieces at FarmLead Insights. We cover a dozen crop categories and dig deep into the major factors impacting your crop.
More important, we explain very bluntly what is bullish, what is bearish, and what is just noise.
What to Watch for in your Grain Marketing
That being said, it’s easy to get emotional when reacting to the headlines.
But they are just that: headlines.
Right now, clearing away the noise, we think it’s a healthy time to look at posting a block of corn, canola, flax, soybeans, and/or feed or winter cereals.
You’re maybe asking, “why now, Brennan?”
Let’s look at the underlying components of the question.
Why do grain prices go up?
Usually, there is a supply shock, a fresh wave of demand, or there are concerns about weather forecasts.
Sometimes geopolitical risk can play a role, but these three reasons are the cornerstone of any bullish ideas.
Further, in any market, when you see a bit of strength, it tends to get pretty heavy regarding the money flow. This suggests that a herd-like mentality where everyone crowds on to something, and it artificially pushes prices up compared to where the market should be.
As Morgan Stanley notes, when there’s momentum in the commodity market, it tends to be overshot.  It also means that commodity swings tend to go to the very extreme.
One such example of this would be the creep up in grain prices in June and July 2017 (namely wheat), before prices collapsed in late July and August.
Now, in that example, we saw prices climb from May into mid-summer. You saw money pile into the market but the higher it got, the more top-heavy it felt. I noted this several times in this month, including on July 10 and then again on July 17th, I explicitly stated it’s “Time to Sell Your Grain.”
I’ve heard it time and time again from farmers saying, “I’m waiting for $XX per bushel before I sell.”
Right now, in canola, corn, or soybeans, that price is available just for deferred delivery a couple of months down the road.
The usual retort is, “well what if the price goes up?”
You’ll still have more grain to sell at that higher level!
The better question to ask is, “what if the price goes down?!”
If you’re having this debate yourself, it’s worthwhile reading my 3-part blog post on how your farm is like a hedge fund from back in February.
A lot of this game that is called grain marketing is based on clearing out the noise and managing risk.
Given today’s tight-margin environment, it’s more important than ever to clear the noise and be disciplined in your grain marketing approach (namely managing price risk).
Have a great weekend!
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.