FarmLead Breakfast Brief
Tuesday, January 17th, 2017
“My greatest strength as a consultant is to be ignorant and ask a few questions.” – Peter Drucker (US corporate consultant)
At 7:00 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3053 CAD, $1 CAD = $0.7661 USD)
Mar Corn: +4¢ (+1.1%) to $3.625 USD or $4.732 CAD
Mar Soybeans: +16¢ (+1.55%) to $10.623 USD or $13.866 CAD
Mar Soybean Meal (per short ton): +$8 (+2.4%) to $341.90 USD or $446.29 CAD
Mar Soybean Oil (cents per lbs): +0.34¢ (+0.95%) to 35.48¢ USD or 46.91¢ CAD
Mar Oats: +6.8¢ (+2.8%) to $2.493 USD or $3.253 CAD
Mar Wheat (Chicago): +3¢ (+0.7%) to $4.29 USD or $5.60 CAD
Mar Wheat (Kansas City): +0.5¢ (+0.1%) to $4.495 USD or $5.867 CAD
Mar Wheat (Minneapolis): -0.8¢ (-0.15%) to $5.82 USD or $7.597 CAD
Mar Canola: +10.7¢ or +$4.70/MT (+0.95%) to $8.84/bu / $389.79/MT USD or $11.539/bu / $508.80/MT CAD
Friday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.302 USD or $3.005 CAD
Mar Milling Wheat: -2.7¢ (-0.4%) to $5.046 USD or $6.586 CAD
New Ignorant Questions
Grain markets are mostly higher this morning, following oil, as the U.S. Dollar is weighed down a bit. Following markets being closed in observance of Martin Luther King Day yesterday, soybeans roared out of the gate again on Argentinian wetness concerns (helping canola back above $500 CAD / MT), while geopolitical risk is nearing a high with Donald Trump set to take over the Oval Office in a few days and British Prime Minister Theresa May outlining the U.K.’s break from the European Union. The market is pricing in this sort of geopolitical risk but there are more questions than answer as to what the future holds in the new global political paradigm. Given the significant change in leadership style from the past decade or so, many questions are fueled by emotion, rather than logic, and perhaps the market will ignore them in the long term (as has been the case in the past).
The U.S. Dollar has lost some of its strength in the first 2 weeks of 2017 as Donald Trump has indicated that he’d prefer a weaker Greenback for U.S. companies to better compete with Chinese counterparts (albeit there’s lots of economic indicators suggesting China needs trade with the U.S. more than U.S. needs China!). As such, the Canadian Dollar has appreciated 3.1% thus far in the new year, but did fall back yesterday after nearly touching 77 cents USD, mainly due to new market data telling us investors more than doubled their bearish bets on the Loonie last week. Also on the data front was the market getting longer on wheat as managed money readjusted their positions after the smaller than expected winter wheat number came out in last Thursday’s WASDE report from the USDA. However, U.S. hard red winter wheat areas got anywhere from 2-4 inches of precipitation over the weekend, and while it wreaked havoc on travel plans, it’s been generally welcomed by farmers.
While weather and lower U.S. winter wheat acres try to be the catalysts to get wheat off 4-year lows, Egypt’s state-buying agency, the G.A.S.C. bought another 235,000 MT over the weekend, at an average price of nearly $200 USD / MT (or about $7.15 CAD / bushel), and mainly from Russia. Thus far, Egypt has now bought 3.41M tonnes of wheat in 2016/17, up 14.5% from the 2.95M tonnes bought by this time a year ago as a slow start to the buying year because of the ergot issues has been erased with more aggressive pricing. Switching gears to South America, while the focus may be on Argentina right now, neighbouring Parguay and Uruguay appear to be heading for their own record crops! In the latter, Dr. Cordonnier of Soybean & Corn Advisors is calling for a record 3.2M tonnes off of about 3M acres, while Paraguay is likely to bring in more than 9M tonnes off of the 8.2M acres planted there.
While those numbers are impressive, all the market seems to be caring about is Argentinian rains where “a bombshell of rain” fell over the weekend, with some areas getting 4-5 inches in 1 day. While drier conditions are expected throughout the week, the market continues to watch only those areas most affected, which the Rosario Grains Exchange pegs about 30% of the 48.4M acres of soybeans to be planted in Argentina this year. As Argentina is the world’s largest exporter of soyoil and soybeans, any reduction in soybean output would impact processing of those byproducts, and accordingly, the available supply that can head out into the global market. Ultimately, this comes down to the market pricing in how many soybeans Argentinian producers are likely to harvested. Much like last spring’s rally, the worst tends to get priced in first, creating opportunities to sell into strength. Although there are a lot of questions still regarding production, locking in a sale (or sales) in the next couple days (or weeks) shouldn’t be ignored.
Today’s the first day of the 2017 Manitoba Ag Days! Stop by our booth in the Westoba Concourse (same place as last year) to check out the brand new mobile app and chat 2017 grain markets.
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.