October 18 – Grain Prices Backing Off Again?

Grain prices, farmers’ sales continue to pull back from Friday’s highs.

“The people themselves, and not their servants, can safely reverse their own deliberate decisions.”
– Abraham Lincoln (16th US President)

Good Morning!

At 7:20 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2519 CAD, $1 CAD = $0.7988 USD)

Dec Corn: -0.8¢ (-0.2%) to $3.493 USD or $4.372 CAD
Jan Soybeans: -1.3¢ (-0.15%) to $9.94 USD or $12.444 CAD
Dec Soybean Meal (per short ton): -0.30 (-0.1%) to $321.30 USD or $402.23 CAD
Dec Soybean Oil (cents per lbs): -0.07¢ (-0.2%) to 33.52¢ USD or 41.96¢ CAD  
Dec Oats: +1¢ (+0.4%) to $2.658 USD or $3.327 CAD
Dec Wheat (Chicago): -2.5¢ (-0.6%) to $4.323 USD or $5.411 CAD
Dec Wheat (Kansas City): -2.8¢ (-0.65%) to $4.305 USD or $5.389 CAD
Dec Wheat (Minneapolis): unchanged at $6.11 USD or $7.649 CAD
Jan Canola: +0.7¢/bu / +$0.30/MT (+0.05%) to $9.174/bu / $404.51/MT USD or $11.485/bu / $506.40/MT CAD

Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.574 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $6.109 USD or $7.648 CAD
Dec Milling Wheat: +2.7¢ (+0.45%) to $5.022 USD or $6.287 CAD

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Grain Prices Backing Off Again?

Harvest pressures and improved weather in South America are pushing grain prices lower Wednesday.

These two factors are limiting any bullish influences at the Chicago Board of Trade. Upside factors include a report from FocusEconomics, which is tracking analysts’ global expectations for primary agricultural commodities.

Analysts have shown an increase in bullish sentiment for corn. [1] For futures values, 4Q2018 corn prices are pegged at an average of $4.25 USD/bushel, according to their insight.

Currently, the December 2018 corn contract sits around $3.93 per bushel. This means analysts anticipate corn prices to increase by a little more than 8%.

For soybean prices, average forecasts come in at $10.00 for late 2018 contracts. This is in line with the current value for November 2018 soybeans futures contracts.

For Chicago soft red winter wheat prices, the average analysts’ guesstimate is for $4.80 per bushel. That’s about 35 cents/bushel lower than the current value of the SRW December 2018 contract at CBOT.

Many, including yours truly, wish that these prices were available for nearby delivery. They’re not, but they are available for future delivery. You can post forward contracts on FarmLead to go ahead and start managing risk on your 2018/19 grain marketing plan.


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We argue that knowing your grain quality is the second most important factor when it comes to selling it (the first being your cost of production). The GrainTests.com ordering process is effortless and 24-7.

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China More Interested in Soybeans, But Not Its Farmers

China’s top corn-producing state, Heilongjiang, has slashed corn subsidies by 13% this year. [2] It’s a big deal give that farmers received the equivalent of about USD $20.30 for every 1/6th of an acre that they plant to corn.

That figure though is about 30% less than what they’d get to plant soybeans on the same area.

It is, however, the first time that Beijing is offering the area subsidy. Previously, the government tried to provide target prices that were linked to the broader market.

This decision is in line with other policies of the People’s Government to whittle down their massive corn inventories. A few weeks ago, we discussed similar goals of China’s ethanol mandate.

Between new ethanol demand and stocks decreasing, corn prices on the Dalian Commodity Exchange (basically China’s Chicago Board of Trade) are 13% higher year-over-year.

Even with a lower subsidy, farmers still may make more money growing corn instead of soybeans.

Ironically, in China, corn is cheaper and less labor-intensive to grow than soybeans are.

Thus, China continues to purchase Brazilian soybeans for November and December delivery, which means continued challenge to the U.S. soybeans export program until the end of the 2017 calendar year.

Brazil’s October Soybean Exports Push Higher

AgResource notes that with the current vessel lineup at Brazilian ports, it looks like close to 3 million tonnes of soybeans will get shipped out in October. [3]

Last October, Brazil’s soybeans exports were 1.6 million tonnes.

While we’ve talked extensively about the planting concerns in Brazil, the crop that’s getting planted in now won’t come off for another 3 months at minimum. That means that the American soybean export window of opportunity to move some product has to be between December, January, and February.

This isn’t exactly surprising news. I just want to remind readers when demand picks up and when it slows.

Further, these months are when the grain would sail, but they’ll be contracted a few weeks if not months before.

NAFTA Can Kicked into 2018

NAFTA negotiators are stuck in neutral again. [4]

Well, if we’re being honest, Mexico and Canada are rejecting what they see as hardline American demands. [5] These include changes to the auto sector and supply management, and a sunset clause to renegotiate the deal every 5 years.

Thus, it looks like NAFTA talks will get kicked into 2018.

Accordingly, the market is starting to price in a great chance that a new NAFTA deal doesn’t get done.

RealAgriculture.com has pointed four possible scenarios if US President Donald Trump tries to pull out of NAFTA. [6] They are:

1. Trump says no to NAFTA but Congress disagrees. This would be a “gong show” according to Carlo Dade, a trade & investment policy expert in Ottawa.

2. Trump and Congress agree to withdraw from NAFTA, which would only leave it as a bilateral deal between Canada and Mexico.

3. America withdraws from both NAFTA and the Canada-US trade deal (CUSFTA). This would also keep NAFTA between Mexico and Canada but would increase tariffs for products going into the U.S. from its southern and northern neighbors.

4. An extension of #3, but with higher tariffs than the 3.5% for countries with “most favored nation” status to America.

As suggested by the President of Dairy Farmers of Canada, Pierre Lampron, NAFTA isn’t the “Art of the Deal” or the “Apprentice”, even If President Trump is likely looking at it through those lenses. [7]

On a separate note, Pro Farmer Washington, D.C. analyst Jim Wiesemeyer says that he is expecting President Trump to tell the EPA to back off on the proposed changes to the Renewable Fuels Standard (AKA the ethanol mandate). [8]

Nitrogen Prices Hit Multi-Year Lows Across North America

Fertilizer prices are looking very attractive right now.

Usually, at this time of year, we see the lows of the season as demand isn’t that high. In parts of Western Canada, nitrogen prices are the lowest they’ve seen in 15 years. [9]

For the American farmers, prices are around five-year lows. [10]

What’s driving the downturn? An argument exists that producers in drier areas won’t need as much fertilizer this year. Without moisture, adding more fertilizer may be a wasted cost of production.

Speaking of dry, the drier areas in Western Canada experienced some ridiculous winds yesterday.

Unfortunately, with gusts nearly above 100 km/hour (62/mph), wildfires were able to pick up steam. This fueled evacuations across farming communities in Saskatchewan and other parts of Alberta. [11]

We hope everyone is making it out safe and big props to the volunteer firefighters (AKA a lot of farmers) who aren’t backing down from getting these fires under control.

To growth,

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

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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