December 22 – Getting Thin at Christmas?

Good Morning!

Grain prices are trading quite thin as we head into the lull of Christmas markets. Today though we go through another pulse import tax from India, what we’re watching in canola, and more rains in South America. 

“In skating over thin ice our safety is in our speed.” – Ralph Waldo Emerson (American author)

Grain markets this morning are quiet but mostly in the green as the complex tries to keep its head in the green despite oil selling off a bit ahead of the Christmas holidays. [1] One could argue that the next week of trading could be very thin as the focus will be on rum and eggnog and not lines of resistance or support.

One thing we’re hoping you focus on is spreading some of the buzz about our new partnership with APAS, and how FarmLead is helping fund their Youth Leadership and Mentorship program. Please share on social media so we can help develop the ag leaders of tomorrow.

A month ago we told Breakfast Brief readers that the USDA said that US spring wheat area harvested this year was 9.7 million acres, with 8% being abandoned. While that’s up from the 2.6% abandonment percentage in 2016/17, this year’s number is driven mainly by South Dakota’s 31% abandonment number. For North Dakota, it’s only pegged at 5%, in Minnesota at 2.5%, and in Montana, at 8%.

We thought that this month that USDA would give us some sort indication that this abandonment was higher, but alas, the numbers stayed unchanged at 8% for hard red spring wheat and 7.4% for durum wheat.

Looking forward, there appears to some colder weather on the horizon for most winter wheat producing areas. [2] While there are many thoughts that the snow cover is currently thin – and that’s added some premium to wheat prices this week – it is winter time after all. We literally see these stories every December.

What’s maybe not thin by the end of December is our waistline – easy on the cookies that are meant to be for Santa!

Corn vs. Soybean vs. Canola

Argentina’s northwest and central regions are looking a bit wetter over the Christmas holidays. Southern Brazil is also going to be a bit wetter over the next two weeks, and we’ve mentioned in the past as to how the area stacks up regarding soybean production against the rest of the country.

Sidenote: DDG prices have jumped 35% in the past seven months to sit near USD 200 /metric at US export positions. [3] The ethanol by-product has made nearly a full recovery from China slowing its imports of the feedstuff. The most recent high of $242 was achieved when soymeal was trading above USD 400 /short tonne (which was when Argentinian harvest rains were spooking the soybean market).

This week we saw European rapeseed prices on the Paris futures board hit a 16-month low. In fact, since early November, EU rapeseed values have dropped about 10%. We know that some banks are optimistic rapeseed prices will rebound, but yesterday I explore a little more what this means for canola prices.

Canola prices were weighed down yesterday by a stronger Canadian Loonie. Two factors that we’re also watching for canola prices include India’s rabi rapeseed crop and Chinese canola imports.

New Pulses Import Tax From India

Yesterday morning, pulse markets got another back-handed slap as India announced they were re-instating their statutory import taxes on lentils and chickpeas of 30%. [4] This includes those shipments that are already en route.

Since we’ve seen lentils prices pull back in recent months, one could argue that the market had already priced in some government intervention like this.

We also have spoken at length in GrainCents articles of the effect that the peas 50% import tax has had on lentils, as well as unintended consequences of the peas tax in chickpeas. More specifically, do you know what percentage of India’s lentils and chickpeas imports came from Canada or the US? Conversely, do you know what percentage of Canadian and American lentils and chickpeas exports went to India? Knowing these numbers, how might the market price manage a 30% import tax, or has it already?

Log in to your GrainCents account to find out.

Thankfully, as per our GrainCents sales recommendations, we’re sitting in a pretty comfortable sales position today across all three pulse crops.

We do know that we have seen yellow peas prices rebound a bit since the import tax announcement six weeks ago. Given the progress of the Indian rabi crop – something we discuss in these links above – one has to consider the likelihood of further decline.


Goldman Sachs or Goldman Sucks?

Corn prices saw a nice little bump yesterday, but we had to ask the question of how far can the rally go?

Yesterday, Garrett also dug into who is thinking corn prices could top $4 and those who think it stays where it is.

Goldman Sachs is expecting corn prices on the Chicago Board of Trade to be at the same price they are today: around $3.50 /bushel. [5] In fact, Goldman thinks that $3.50 is going to be average all year long in 2018! Similarly, the Wall Street titan thinks that over the course of the next year, soybeans will be sticking around $9.80 on the futures board. Great effort team! I guess that the Goldman agricultural crew has checked out for Christmas already.

On the wheat prices side of things, we know that there are a few players out there who are forecasting values to stay below $5 / bushel on the Chicago and Kansas City futures boards.

What we know to be true is that the futures prices are not the cash prices. Given the so-called shortage of high-protein wheat, no one is still paying protein premiums for quality above 13%. I would beg to differ as those protein premiums are noted here.

We also know this by just looking at activity on the FarmLead Marketplace. Those that have the spec sheets backing up the quality that they say is in the bins gives them a leg up to attract more credit-verified wheat buyers on the FarmLead Marketplace.

If you don’t have those, please know your grain by getting it tested through today.

Christmas Break

Next week, there will be no Breakfast Brief getting sent out, but we will continue to be adding to the expanding GrainCents tool (both by the amount of content and the number of subscribers)

Further, the FarmLead Marketplace is open 24/7/365. Over the holidays, you’re easily able to post your grain and negotiate directly with any of the more than 550 credit-approved buyers on FarmLead.

Merry Christmas, have a safe, enjoyable holiday season, and we’ll see you in 2018! (unless you’re a GrainCents reader)

To growth,

Brennan Turner
President | CEO
@FarmLead or @GrainCents on Twitter

See cash grain prices around you!

At 7:40 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2781 CAD, $1 CAD = $0.7824 USD)

Mar Corn: unchanged at $3.513 USD or $4.489 CAD
Mar Soybeans: +3¢ (+0.3%) to $9.62 USD or $12.296 CAD
Mar Soybean Meal (per short ton): +$1.20 (+0.35%) to $319.20 USD or $407.98 CAD
Mar Soybean Oil (cents per lbs): +0.01¢ (+0.05%) to 32.84¢ USD or 41.97¢ CAD  
Mar Oats: -0.3¢ (-0.05%) to $2.438 USD or $3.115 CAD
Mar Wheat (Chicago): +0.3¢ (+0.05%) to $4.273 USD or $5.461 CAD
Mar Wheat (Kansas City): +0.3¢ (+0.05%) to $4.245 USD or $5.426 CAD
Mar Wheat (Minneapolis): +2.5¢ (+0.4%) to $6.195 USD or $7.918 CAD
Mar Canola: +0.5¢/bu / +$0.20/MT (+0.05%) to $11.294/bu / $498/MT CAD or $8.837/bu / $389.64/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.

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