Today’s Breakfast Brief looks at grain markets (and hedge fund managers) reacting to new South American weather forecasts and stronger US grain exports. We also showcase some updated GrainCents content and sales recommendations.
“The time when there is no one there to feel sorry for you or to cheer for you is when a player is made.” – Tim Duncan (NBA professional basketball player)
Grain markets this morning are in the green as the trade is likely to slow down ahead of the Christmas and New Year holidays over the next two weeks.
Wetter weather in the forecast for Argentina put a damper on the grain markets going into the weekend.  More specifically, it’s expected this week that 80-85% of Argentina’s grain-producing regions will see 1 – 3 inches of rain. However, drier conditions are expected to return after Christmas Day / December 25th.
The rains will support the crops that are already in the ground, as well as those that still need to get seeded. It’s estimated that more than 16 million acres of soybeans and 7 million acres of corn need to get planted in the next couple weeks. Next door in Brazil, growing conditions are supported by recent rain and gentle temperatures.
After a two-week reversal materialized on December 8th and January soybean prices pushed past 10 USD /bushel on the Chicago Board of Trade, David Drozd of AgChieve notes that soybean prices could easily challenge the $9.60 area.
Record Sell-Off in Grain Markets
While the rains still must fall, the better growing conditions that were expected led to a sell-off last week in the grains complex.
Hedge funds took the grains complex net short to a six-month high over nearly 286,000 lots (both futures and options). 
Managed money position in soybeans saw its biggest sell-off in nine months to now sit at a net long of just over 33,000 positions.
Fund managers are holding a record short position in Kansas City hard red winter wheat of just over 31,000 lots.
Last week, fund managers initiated a record one-week sell-off in Chicago soft red winter wheat to now sit at 157,652 net short positions. This isn’t far from the record net-short position of just over 162,000 contracts set in April of this year.
If you’re doing any futures hedging, it’s hard to ignore the opportunity of re-owning the paper in corn and wheat markets. They’ve been tracking at multi-month lows, and we have seen some decent demand activity as of late, especially for wheat exports.
Strong Winter Wheat Competition
Strategie Grains recently dropped its forecast for 2017/18 EU soft wheat exports to 22.3 million tonnes, down 600,000 tonnes from their previous estimate.  Lower French wheat exports accounted for the majority of the decline. 
For all wheat, Strategie Grains estimates EU exports at 27 million tonnes in 2017/18, including 1.4 million tonnes of durum. Comparably, the International Grains Council is at 27 million tonnes for total wheat and 2.5 million tonnes of durum. In last week’s WASDE, the USDA upgraded its estimate of EU total wheat exports in 2017/18 to 28.5 million tonnes.
Ultimately, we continue to see lower estimates for European wheat exports as competition from the Black Sea, and now Argentina is making it tough to earn business. All of Russia’s wheat crop is less than 12% protein wheat. This intuitively had us ask the question of how aggressively it can compete with better quality wheat coming out of the Western Hemisphere.
We also looked into the spring wheat protein premiums that are available out there.
As Chicago soft red winter wheat prices on the futures market last week, US wheat export sales turned out to be pretty strong.  Nearly 600,000 tonnes were sold, which was well above the top end of expectations held by the market.
More specifically, a little more than 208,000 tonnes of hard red spring wheat was sold. Side note: that’s only the fourth time in the 2017 calendar year that HRS wheat exports sales have topped 200,000 tonnes.
US hard red winter wheat exports were pegged at just over 256,000 tonnes, while soft red winter wheat wasn’t in as high demand with under 28,000 tonnes sold.
Corn and soybean export sales both came within expectations of 867,000 and 1.45 million tonnes respectively.
Updated GrainCents Content and Calls
We know there isn’t a lot of price optimism in red lentils but another GrainCents piece to a look at the short- and long-term possibilities.
Planting of the Indian rabi crop continues to progress and so we look at the possibility of yellow peas substitution effects in 2017/18.
There is a dizzying amount of data out there in the vegetable oil markets that can have somewhat confusing effects on markets. We make it a bit easier though and break down vegetable oils substitution effects for canola here and soybeans here.
Also, over the weekend, we made some new sales recommendations in GrainCents.
Login or sign up to GrainCents to view the updated content and sales recommendations for your farm’s crops.
At 7:25 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2862 CAD, $1 CAD = $0.7775 USD)
Mar Corn: +0.8¢ (+0.2%) to $3.483 USD or $4.479 CAD
Mar Soybeans: +3¢ (+0.3%) to $9.81 USD or $12.617 CAD
Mar Soybean Meal (per short ton): +$1.20 (+0.35%) to $325.70 USD or $418.91 CAD
Mar Soybean Oil (cents per lbs): +0.07¢ (+0.2%) to 33.41¢ USD or 42.97¢ CAD
Mar Oats: +1.3¢ (+0.5%) to $2.555 USD or $3.286 CAD
Mar Wheat (Chicago): +4¢ (+0.95%) to $4.223 USD or $5.431 CAD
Mar Wheat (Kansas City): +4¢ (+0.95%) to $4.215 USD or $5.421 CAD
Mar Wheat (Minneapolis): +4.5¢ (+0.75%) to $6.245 USD or $8.032 CAD
Mar Canola: -0.9¢/bu / -$0.40/MT (-0.1%) to $11.392/bu / $502.30/MT CAD or $8.857/bu / $390.54/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.