June 3 – Higher Opportunities!

In Today’s Breakfast Brief, we cover global weather concerns, the outlook on oilseed and changing trade levels for corn and wheat.

 

“Opportunities are like sunrises. If you wait too long, you miss them.”

– William Arthur Ward (US author)

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Good Morning!

Grains are in the green again today with soybeans climbing to new highs of $11.60/bushel in the overnight trade. Commercial and fund buying continues to be aggressive and is supporting the market at levels that seem, for lack of new fundamentals, a bit ridiculous.Rains continue to be a concern for Texas wheat harvest crews but the rest of the major North American growing regions, things are looking pretty good. As Marlene Boersch of Mercantile Ventures says, going into the June-September monsoon season, moisture is in short supply so the rains would be welcome.

For the end of May, Indian water reserves are at just 17% of their capacity, versus the 79% average. With this in mind, the Indian government set their domestic pulse production for 2016/17 at a new record – most likely because of the increased acres going in with the opportunity of higher domestic prices available to Indian growers.

Optimistic on Oilseed

The UN’s FAO is optimistic that oilseed prices will stay higher this year as strong demand will continue to offset the slight improvement in production from 2015/16. Societe Generale is also optimistic on soybean prices, calling for an average of $10.59 on the Chicago board for the last 3 months of 2016 and $11.09/bushel for the first 3 months of 2017. The French bank is also thinking that wheat prices could improve as it becomes more competitive with corn for feed. From a data perspective, Chicago wheat’s premium to corn has dropped to 15% versus the long-term average of 37%. That being said, a decent American wheat harvest is likely going to put a lot of grain on the ground as storage is in short supply. US wheat inventories are expected to be up 30%, there’s still a fair amount of grain available for sale in North America.

While yesterday we talked about upgrades to the Australian wheat crop expectations, the Australian Oilseeds Federation says that the rains will also help canola production, with their first estimate coming in at 3.4 million metric tonnes (roughly +10% from last year). This is a little bit more than the ABARES (3.27 million metric tonnes) or the USDA (3.3 million) was forecasting, but the interesting thing is that the Federation is also calling for a drop in acres to 5.34 million acres whereas ABARES and the USDA are calling for more area, forecasting 6.3 million and 6.4 million acres respectively.

Overall, the Federation’s call may be a bit early to give a full acknowledgment to. In the meantime, we can look to the IGC’s call for global rapeseed inventories to fall to a 13-year low of 3.7 million metric tonnes. While this is likely positive for canola/rapeseed prices in the long-term, substitution effects (by soybean, palm oil, etc.) have been known to make the game a bit tougher.

Changing Trade

Allendale Brokers pointed out this morning that China has reportedly increased the amount of corn it will auction by 1 million metric tonnes to 3.42 million metric tonnes while Black Sea wheat exports are likely to fall 10% year-over-year to 42.7 million metric tonnes in 2016/17.

Speaking of corn and wheat, Asian feed mills are buying more wheat than corn for a 2nd straight year due to more readily available supplies, intuitively narrowing the spread between feed and milling wheat prices. For example, in Ukraine, feed wheat prices of $170/MT USD are only about $8 below 12.5% milling wheat prices. Looking closer to home, Western Canadian milling wheat prices are only about 10% higher than feed right now, with the later getting priced in high $5 CAD/bushel to low $6s.

That being said, even with the rains lately, there are some good opportunities available – post your remaining bins on FarmLead today and ensure you have bin space ahead of Harvest 2016

Have a good weekend!

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
1-306-665-8740 (Office)
www.FarmLead.com
@FarmLead (on Twitter)

At 7:05 AM CDT in the North American futures markets:

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3086 CAD, $1 CAD = $0.7641 USD)

July Corn: +2.3¢ (+0.55%) to $4.175 USD or $5.463 CAD
July Soybeans: +16.5¢ (+1.45%) to $11.608 USD or $15.19 CAD
July Soybean Meal (per short ton): +$11.20 (+2.7%) to $429.50 USD or $562.04 CAD 
July Soybean Oil (cents per lbs): +0.24¢ (+0.75%) to 32.50¢ USD or 42.53¢ CAD 
July Oats: +0.5¢ (+0.25%) to $1.913 USD or $2.503 CAD
July Wheat (Chicago): +2¢ (+0.4%) to $4.875 USD or $6.379 CAD
July Wheat (Kansas City): +1.3¢ (+0.25%) to $4.658 USD or $6.095 CAD
July Wheat (Minneapolis): +4.8¢ (+0.9%) to $5.37 USD or $7.027 CAD
July Canola: +6.1¢ / $2.70/MT (+0.5%) to $9.069/bu / $399.85/MT USD or $11.868/bu / $523.30/MT CAD

Yesterday’s Winnipeg ICE Close

July Barley: +1.1¢ (+0.3%) to $2.853 USD or $3.734 CAD
July Durum Wheat: unchanged at $6.272 USD or $8.219 CAD
July Milling Wheat: +5.4¢ (+0.85%) to $4.991 USD or $6.532 CAD

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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