December 20 – New Bearish Pressures for Grain Prices

Good Morning!

With grain markets slowing down ahead of the holiday season, grain prices are also feeling the pressure of smaller volume/trading activity and less bullish headlines out of South America.

“To be a champion, you have to learn to handle stress and pressure. But if you’ve prepared mentally and physically, you don’t have to worry.” – Harvey Mackay (American businessman)

grain-prices-markets-insights-graincents

Grain prices this morning on the futures board are mixed as the complex jockeys for position with only today and tomorrow left for full trading action (Friday is a shortened trading day ahead of the Christmas holidays).

As Garrett mentioned in his Grain Markets Today yesterday, grain markets languished on bearish Argentine weather. Meanwhile, the broader US stock market rejoiced on a $1.5 trillion tax cut by the Trump administration and the largest tax overhaul in the last 30 years. There is some concern on both sides of the aisle in Congress though as for how it will support spenders and impact savers. [1]

Last week, Tunisia bought 100,000 tonnes of milling wheat at a delivered price of nearly $207 USD per metric tonne (or $5.65 USD and $7.25 CAD per bushel at today’s exchange rates). They also bought 50,000 tonnes of durum wheat at a delivered price of almost $297 USD per metric tonne (or $8.05 USD and $10.40 CAD per bushel).

The Australian wheat and canola harvests are hitting full stride, and that’s putting pressure on prices in the Land Down Undaa. It’s also being pushed over into other markets like here in North America as we see canola prices remaining under pressure.

Cognizant of the last two weeks of trading, canola prices rose for just the second time yesterday, thanks to some technical action and bottom-buying. The technicals suggest that canola prices face some resistance to regain lost ground and get back up above CAD 500 per metric tonne on the Winnipeg ICE futures board. [2]

Conversely, soybean prices on the Chicago Board of Trade were down for the ninth time in the last ten trading days. As noted by one analyst, soybean prices have hit November lows after touching November highs just a few weeks ago in early December. [3]

Ahead of the holiday, traders are looking to square up their soybean positions, which can put pressure soybean prices.

Bearish Brazilian Agricultural Superpower

Brazil has been producing more and more ethanol. In November, Brazilian ethanol output was 7.14 billion gallons. Comparably, just two months previous, in September, they produced 6.89 billion gallons!

Safras & Mercado dropped their estimate for the Brazilian soybean crop by 130,000 tonnes to now sit at 114.57 million tonnes. If realized, this would be a new record soybean crop for Brazil, beating out the current record – set last year – of 114.1 million tonnes. Comparably, the USDA is still sitting at 108 million tonnes for the 2017/18 Brazilian soybean crop.

Safras & Mercado says that their lower forecast is because of them dropping their seeded area number to 87.7 million acres.

For comparison – and as mentioned in yesterday’s Breakfast Brief – Informa recently raised its estimate for US soybean area in 2018 to 91.4 million acres.

The weather in Brazil continues to be relatively benign. Combined with some rains falling in Argentina this week, the bears are in the driver’s seat. However, we know that it’s still expected to be dry moving into January. Thus, the potential for more South American weather premium remains.

Making Sense with GrainCents

There’s a lot of more in-depth pieces going up in GrainCents these days. We continue to break down what’s bearish, what’s bullish, and what’s just noisy for 12 different crops. This is part of my risk management process for cash grain marketing that I’ve been building up over the past few years.

It’s also part of the reason why, over the past 2 years, 93% of my calls to sell grain or hold grain (and wait for a better price) have been correct.

Throughout today, we’ll be posting new content in GrainCents for:

Dry conditions in spring wheat and durum wheat areas in North America;
• Updates to the Indian Rabi-planted pulse crop (and impact on prices for lentils, peas, and chickpeas);
• How the Australian lentils harvest is faring;
• Understanding the European 2017/18 balance sheets for wheat, corn, barley, and oats; and,
• How we disagree with AAFC downgrading pulse crop and wheat prices but upgrading canola prices.
• Corn making inroads against barley in the feedstuff markets

To give you some perspective, across all the 12 crops that GrainCents provides coverage on, we are tracking nearly 100 different factors that are influencing grain prices.

Within all these factors, we have put our two cents on almost 400 different headlines or updated trade and production reports. For reference:

Corn: 3 bullish factors, 3 bearish factors, and 7 headlines we continue to see that are just noise;
Soybeans: 3 bullish factors, 2 bearish, and 2 that are noise;
Canola: 4 bullish factors, 6 bearish factors;
Flax: 1 bullish factor and 2 bearish factors, and 1 noise;
Winter Wheat: 7 bullish factors, 2 bearish factors, and 2 that are noise;
Spring Wheat: 2 bullish factors, 1 bearish factor, and 2 that are noise;
Durum Wheat: 3 bullish factors, 2 bearish factors, and 1 that is noise;
• Barley (includes both malt and feed): 3 bullish factors, 3 bearish factors, and 1 that’s noisy;
Oats: 1 bearish factor and 3 very noisy ones;
Peas: 5 bearish factors and 1 that’s noise;
Lentils: 3 bearish factors and 2 that’s noise; and,
Chickpeas: 5 bearish factors and 1 that’s noisy.

Join GrainCents today and start making more sense of the markets that are affecting your farm’s crops.

To growth,

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

At 7:30 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2829 CAD, $1 CAD = $0.7795 USD)

Mar Corn: +0.5¢ (+0.15%) to $3.48 USD or $4.464 CAD
Mar Soybeans: +3¢ (+0.3%) to $9.698 USD or $12.441 CAD
Mar Soybean Meal (per short ton): +$0.30 (+0.1%) to $319.40 USD or $409.75 CAD
Mar Soybean Oil (cents per lbs): +0.20¢ (+0.6%) to 33.59¢ USD or 43.09¢ CAD  
Mar Oats: -0.3¢ (-0.1%) to $2.458 USD or $3.153 CAD
Mar Wheat (Chicago): -1.3¢ (-0.3%) to $4.183 USD or $5.366 CAD
Mar Wheat (Kansas City): -1.5¢ (-0.35%) to $4.185 USD or $5.369 CAD
Mar Wheat (Minneapolis): -1.8¢ (-0.3%) to $6.165 USD or $7.909 CAD
Mar Canola: -0.2¢/bu / -$0.10/MT (-0.02%) to $11.362/bu / $501/MT CAD or $8.857/bu / $390.53/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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