January 10 – Grain Prices Weigh WASDE, Market Outlooks

Good Morning!

Grain markets this morning are mixed as the complex continues to weigh pre-WASDE report guesstimates, namely those in the exports and ending stocks columns for US corn and soybeans.

“I’m very realistic in my outlook on everything in life. When I look ahead in my mind to see what’s going to happen next, I see the good and I see the bad.” – Tom Scholz (American musician…in the rock band Boston)

GrainCents

 

Grain markets this morning are mixed as the complex continues to weigh pre-WASDE report guesstimates.

As noted in Grain Markets Today, wheat prices climbed yesterday on lower 2018 acreage estimates and Japan looking for some wheat from Canada and the United States.  Earlier this week, Garret noted the impact of US protectionist policies on wheat exports, and who’s likely to benefit.

We’ll see in Friday’s WASDE report if said policies have had any impact on US exports. In tomorrow’s Breakfast Brief, I’ll dig into said pre-WASDE report guesstimates.

Another component impacting grain markets are the long-term market outlooks: namely acres, insurance prices, and demand factors (or in some cases, lack thereof).

Sidenote: we recently updated the FarmLead mobile app and website. Among the updates is a new feature that shows you matching bids from verified buyers when you post your own grain. Click here to get started on that new offer!

More Palm Oil in Malaysia

A slew of bearish data out of Malaysia isn’t helping canola prices this morning.

Data out from Malaysia shows that available palm oil stocks in December hit 2.73 million tonnes. [1] This is a 7% jump from the month prior, the sixth consecutive month of gains, and the highest since November 2015. Production of palm oil in Malaysia in December also dropped 6% from November to 1.83 million tonnes, but that’s more than what the market was expecting.

Exports of Malaysian palm oil in December touched 1.42 million tonnes. That’s still a 5% jump from November, but less than the 9% the market was anticipating.

We have extensively covered the impact of vegetable oil substitution effects on canola prices. While it seems quite bearish for palm oil (and in turn, to a certain extent, canola), we have previously noted one bullish asterisk for the 2018 palm oil outlook.

Updated 2018 Grain Market Outlook

Yesterday in GrainCents, we posted our expectations for oats prices and where lentil prices could go in 2018, as well as when we expect to make our next sales.

In each, we walk through specific factors impacting prices, including acreage estimates for 2018/19, and if there is any hope for lentils prices, namely green lentil prices, as discussed here (a few weeks ago, red lentil prices were discussed). This brings our total 2018 market outlooks to eight. They include:

Canola

Spring Wheat

Durum Wheat

Lentils

Oats

Soybeans

Corn

Winter Wheat

Today and tomorrow, we’ll be publishing 2018 market outlooks for the other four crops that we cover in GrainCents: barley, flax, peas, and chickpeas.

Challenging Ag Trade

NAFTA talks are set to resume in two weeks in Montreal, Canada, the sixth round of renegotiations. One economist suggests that, for US farmers, “without NAFTA, we’re looking at the 1980s.” [2] This would suggest fewer ag exports, which means less demand.

US President Trump spoke at the American Farm Bureau Federation convention this week in Nashville. [3] In his 35-minute speech, only about 90 seconds was attributed to talking about trade, and making NAFTA “fair” again.

Canadian Ag Minister, Lawrence MacAulay was also at the AFBF convention in Nashville speaking to the delegation. [4] He was quick to point out to his American audience that, “U.S. trade to Canada and Mexico has quadrupled and with the three countries combined it has tripled.”

At today’s very large production levels – be it in corn, soybeans, corn, or even hogs – even a tiny bit less in demand on the balance sheet does not help prices. And prices are already barely hovering above break-even (except for maybe hogs).

Specifically, Virginia Tech ag economist Dave Kohl notes that exports are about 20% of ag income in the United States. These exports easily can be dependent on currency factors. But right now, by raising interest rates, the US Federal Reserve is strengthening the US Dollar. This decreases the purchasing power of those aboard who must buy products in US Dollars but sell in their domestic currencies.

There’s certainly optimism though in the form of emerging markets needing more agricultural supplies. And right now, emerging markets are growing together, but Kohl does mention that “they need to grow at a 7% – 9% annual pace to life US commodity prices.” They’re running close to those levels today.

US 2018 Acreate Debate

Acreage talks continue, with a lot more of the buzz leaning towards soybeans. The USDA’s Office of the Chief Economist said a few months ago that they were expecting 91 million acres of soybeans planted in the US in 2018. [5]

If insurance guarantees get above USD 10 /bushel for soybeans, then this number could potentially be even higher. While winter wheat acres are obviously set (you can’t plant winter wheat in the spring, eh), some of their lost acres could be going into corn and soybeans, especially in the south.

Specifically, most recent estimates for 2018/19 American winter wheat acres are for just over 31.3 million acres. If realized, this would about 1.5 million acres less than last year.

Per type, this includes 22.33 million acres of hard red winter wheat, 5.55 million acres of soft red winter wheat, and 3.43 million acres of white wheat.

There continue to be ideas that there will be more spring wheat acres in the Northern Plains in 2018/19, with corn and soybeans potentially falling out favor with farmers in the region (especially corn).

To growth,

Brennan Turner
President | CEO
FarmLead
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 = $1.2456 CAD, $1 CAD = $0.8028 USD)

Mar Corn: +0.5¢ (+0.15%) to $3.495 USD or $4.354 CAD
Mar Soybeans: -2.5¢ (-0.25%) to $9.61 USD or $11.971 CAD
Mar Soybean Meal (per short ton): -$1.50 (-0.45%) to $316.70 USD or $394.49 CAD
Mar Soybean Oil (cents per lbs): +0.11¢ (+0.35%) to 33.81¢ USD or 42.12¢ CAD  
Mar Oats: +1¢ (+0.4%) to $2.50 USD or $3.114 CAD
Mar Wheat (Chicago): +1.3¢ (+0.3%) to $4.335 USD or $5.40 CAD
Mar Wheat (Kansas City): +1.3¢ (+0.3%) to $4.403 USD or $5.484 CAD
Mar Wheat (Minneapolis): -0.3¢ (-0.05%) to $6.305 USD or $7.854 CAD
Mar Canola: -0.7¢/bu / -$0.30/MT (-0.05%) to $11.251/bu / $496.10/MT CAD or $9.033/bu / $398.27/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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