FarmLead Breakfast Brief
Thursday, January 12th, 2017
“Discipline is the soul of an army. It makes small numbers formidable; procures success to the weak, and esteem to all.”
– George Washington
(1st US President)
At 8:05 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3082 CAD, $1 CAD = $0.7644 USD)
Mar Corn: -2.3¢ (-0.65%) to $3.55 USD or $4.644 CAD
Mar Soybeans: +0.8¢ (+0.05%) to $10.123 USD or $13.242 CAD
Mar Soybean Meal (per short ton): +$0.60 (+0.2%) to $315.50 USD or $412.74 CAD
Mar Soybean Oil (cents per lbs): -0.12¢ (-0.35%) to 35.88¢ USD or 46.94¢ CAD
Mar Oats: +2.5¢ (+1.1%) to $2.343 USD or $3.064 CAD
Mar Wheat (Chicago): -0.8¢ (-0.2%) to $4.18 USD or $5.468 CAD
Mar Wheat (Kansas City): -3.3¢ (-0.75%) to $4.285 USD or $5.606 CAD
Mar Wheat (Minneapolis): +3.3¢ (+0.6%) to $5.648 USD or $7.388 CAD
Mar Canola: -0.5¢ or -$0.90/MT (-0.05%) to $8.623/bu / $380.21/MT USD or $11.281/bu / $497.40/MT CAD
Yesterday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.363 USD or $3.092 CAD
Mar Milling Wheat: -5.4¢ (-0.85%) to $4.93 USD or $6.45 CAD
Watch Your Numbers
In yesterday’s Breakfast Brief we had a typo suggesting looking for new crop yellow peas contracts in the mid-$6/bushel range, when we meant mid-$7/bushel. Apologies for the confusion. To the Brief we go….
Grains this morning are mixed as oil is up (supportive of the Canadian Loonie) and we see some positioning ahead of today’s U.S.D.A. W.A.S.D.E. report at 12 noon ET, which we expect to see slightly lower U.S. production numbers due to less acres harvested for corn and soybeans. Eyes continue to be on South American weather, with Argentina guiding the bulk of any weather premium, as some people are estimating as much as 10% of the soybean crop there has been damaged or lost. This comes as we’ve seen Chinese crush margins come crashing down from the more than $40/MT back in early December to the $6/MT today. This doesn’t mean that China is going to slow its bean import program, but it may wait for the South American supply to become more available and numbers to head lower before binging again.
Expectations today are that we’ll see U.S. corn and soybeans ending stocks come in at 2.4 Billion and 468M bushels respectively, both down slightly from their December estimate, soybeans moreso than corn. This is based off of a 15.2 Billion-bushel corn crop and a 4.38 Billion bushel soybean crop. While domestic use has been strong in the U.S., we’re more likely to see changes to the exports column of these 2 crops today, which will most likely drive where ending stocks end up. From a total world perspective, any reductions in numbers in Argentina are likely to guide global ending stocks lower (the Argentine Ag Ministry just dropped their soybeans to 56M tonnes, while the likes of Rosario Grains Exchange and Informa are at 52.5M and 55M respectively). Going into the report, the average estimate for total world corn inventories by the end of the 2016/17 marketing year is 221.9M tonnes (2015/16 ended at 209M tonnes so a 6.2% increase year-over-year), soybeans at 82.5M tonnes (+6.9% from last year’s 77.2M tonnes carryout), and 251.9M tonnes of wheat (a 4.7% increase from the 240.7M tonnes that 15/16 ended with).
Also with today’s WASDE report, we’ll get U.S. winter wheat acres, with the average pre-report guesstimate thinking that we’ll see a 34.2M-acre number, down about 2M acres year-over-year. The bulk of the decline is likely to come from hard red winter wheat (down about 1.5M acres from last year) with soft red winter wheat making up most of the rest of the pullback. While there are less winter wheat acres in the U.S., but acres are expected to be relatively the same in Europe, down a bit in Ukraine, up a bit in Russia, and down a bit in Canada (but not by much albeit definitely less durum acres). As such, a Bloomberg survey suggests that the market is expecting wheat prices to rise in 2017, something I tend to agree with, but I’m not expecting a 20-30% jump, but something closer to the 10% higher level from today’s values.
Also pulling the trade a bit this morning is some negative trade news out yesterday from China, who announced they are increasing their import taxes on American DDGs as the US-China trade war eebie-geebies start to build. This follows just days after China raised import tariffs on U.S. ethanol, as it’s becoming clear that the People’s Republic is trying to cater to more domestic growth (i.e. the build-up of their ethanol industry) versus the reliance on other countries (which, for the record, will never be entirely possible from a food perspective because the Chinese need to import foodstuffs to feed its massive population). This inward-looking focus that is coming from Beijing is possibly no more evident than COFCO, who just lost its #1 and #2 people. COFCO, the Chinese state grain buying agency had bought a bunch of other trading names like Nidera and Noble but their ability to go head-to-head with the likes of Cargill and ADM as global traders has been stalled. As such, the new COFCO CEO is likely more focused on just buying grain for China than trying to trade and play with numbers they haven’t had much success with yet.
P.S. Catch us today in Saskatoon at the Crop Production Show in Hall B or next week in the Westoba Concourse at Manitoba Ag Days in Brandon!
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