February 21 – Grain Prices Rally Starting to Slow Down?

“Fire and swords are slow engines of destruction, compared to the tongue of gossip.” – Richard Steele (Irish Author)

find-better-grain-prices

Grain prices this morning are mostly quiet as fresh bullish news is and money managers (read: speculators) have covered their short positions. Thus, the market is looking for the next headline or catalyst to propel grain prices higher.

In yesterday afternoon’s Grain Markets Today, Garrett walked through how technical selling pushed winter wheat prices lower, albeit spring wheat was able to make some gains. Of note is how Russia wheat prices have increased, thanks to the Ruble appreciating.

Side note: The strength of the Russian Ruble and its impact on wheat exports (and international wheat trade in general) was something we explored over a month ago for our GrainCents winter wheat readers.

Yesterday, being cognizant of some of the changing international trade winds, Garrett also looked at the most important thing you can do before the 2018 planting season starts up.

Later today in the outside markets, the US Federal Reserve will release its minutes from its last meeting in January. These Fed meeting minutes tend to move the market a bit, and this one could be no different, especially if they shed light on thoughts around inflation and interest rates. [1] History tells us that when both of these two important economic factors are increasing, a recession isn’t far off.

For the record, right now, there is a stronger likelihood of higher inflation and higher interest rates in the U.S.

Any Other Grain Prices Rallying?

While corn, soybeans, canola, and winter wheat prices have all seen decent rallies over the past few weeks, spring wheat has been the Debbie Downer. Minneapolis-traded spring wheat prices have been trading sideways, but this, among other factors, could suggest that we’re near a bottom.

In yesterday’s Breakfast Brief, I discussed wheat prices and the impact of the NOAA’s long-term forecast of decent moisture events for hard red spring wheat areas. In the near-term though, below-average precipitation is expected through the end of February for these areas.

Many people (including yours truly) are doubtful that Canadian Prime Minister’s trip to India won’t move the prices for pulses whatsoever. [2] In fact, over the weekend, I shared a photo of Trudeau arriving in India. Instead of being received by an equivalent or high-level dignitary, the Canadian Prime Minister was welcomed on the red carpet by a state-level agriculture minister.

While the Canadian-Indian grain trade relationship is looking more bearish as time goes on, there are other factors that we’re watching in GrainCents for peas, lentils, and chickpeas that could bring about some stronger prices.

What’s certain though is that there is no guarantee that stronger pulse prices could happen, but we discuss the different scenarios for our GrainCents readers.

The other thing that seems to be certain as we talk to hundreds of farmers every day here at FarmLead is that the past few years of pulse prices might’ve spoiled a lot of people and now prices expectations for their peas and lentils are unrealistic.

While some may say that the market is non-existent right now for the trade of pulses, I can tell you that this just isn’t true. We’ve literally seen 100s of deals in the past few weeks. The big, obvious difference is that traded values are not last year’s prices.

Put another way, many farmers’ price expectations are the big difference year-over-year. Yes, you might say “No, India’s the difference” and I would agree with you. However, what’s done is done. Expecting $16 wheat every year because you got it in 2008 is not a good grain marketing plan. Play the game in front of you, not last year’s.

Thinking About Soybean Prices at $12?

South American weather is all the rage when it comes to soybean prices the last few weeks (and arguably, has supported other grain prices). Is there more fuel left in this rally’s tank?

In Brazil, above-average rainfall is expected in the Goias and Minas Gerais states – 3 – 6 inches are expected over the next week in some places! These rains, combined with below-average temperatures over the next two weeks means some sloppy fields, and intuitively, a soybean harvest put on pause (or maybe slow motion). Despite the rains, Safras e Mercado just raised its estimate for the 2017/18 soybean crop of 115.6 million tonnes. That beat’s last year’s record of 114.2 million tonnes.

While it will also slow the planting of the second/safrinha corn crop, the flipside of the rains is that it could help the soil moisture profile of these double-cropped fields.

Current forecasts for Argentina are calling for average to below-average precipitation over the next two weeks, with the first significant rainfall expected to fall in the first full week of March (again, two full weeks away). Combined with seasonal temperatures of the mid-80s to low-90s (Fahrenheit), there is some obvious concern. In fact, comparisons to the 2008/2009 Argentine growing season are starting to be made.

The media in Argentina is jumping on the historical drought bandwagon, calling for $11 and $12 soybeans on the Chicago Board of Trade. There have been some North American players who are calling for $12 USD /bushel soybeans at the Chicago Board of Trade! [3]

Something to consider though is the 2 million tonnes of canola carryout in Canada and the 530 million bushels of soybean carryout in the U.S. Year-over-year, these ending stocks are 48% and 76% higher respectively. Yet, canola prices and soybean prices are actually performing better than they were a year ago!

In our Sunday morning weekly digest, we gave specific targets to our GrainCents soybean subscribers as to the next levels that we’re looking for. We also made similar recommendations for in our weekly corn GrainCents digest, as well as similar suggestions in the weekly canola GrainCents summary email.

Grain prices, if anything, are likely to get more volatile, and so having a plan is crucial.

To growth,

Brennan Turner
President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

 

At 7:45 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2676 CAD, $1 CAD = $0.7889 USD)

May Corn: +0.15¢ (+0.41%) to $3.678 USD or $4.66 CAD
May Soybeans: +0.25¢ (+0.25%) to $10.175 USD or $12.90 CAD
May Soybean Meal (per short ton): +$0.021 (+0.01%) to $370.80 USD or $470.02 CAD
May Soybean Oil (cents per lbs): +.003¢ (+0.01%) at 31.80¢ USD or 40.31¢ CAD  
May Oats: -2.8¢ (-0.74%) to $2.673 USD or $3.388 CAD
May Wheat (Chicago): unchanged to $4.568 USD or $5.752 CAD
May Wheat (Kansas City): -2.8¢ (-0.58%) to $4.725 USD or $5.989 CAD
May Wheat (Minneapolis): +2.5¢ (+0.42%) to $6.035 USD or $7.65 CAD
May Canola: -1¢/bu / $0.0/MT (-0.91%) to $11.408/bu / $503/MT CAD or $9.00/bu / $399.81/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.

Most Recent Posts
Dec. 10 - Grain Markets Reverse Ahead of WASDE
December 10, 2018 Brennan Turner
Grain markets this morning are mostly lower ahead of tomorrow’s December WASDE report, with wheat prices the most notable, pulling back from its significant gains on Friday.
October 4: Corn Prices Edge Higher With October WASDE in Focus
October 04, 2018 Garrett Baldwin
Corn prices ticked higher Thursday as traders and analysts began to speculate on next week’s release of the October WASDE report.