FarmLead Breakfast Brief
Monday, January 23rd, 2016
“People deal too much with the negative, with what is wrong. Why not try and see positive things, to just touch those things and make them bloom?”
– Nhat Hanh (Vietnemese monk)
At 6:10 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3277 CAD, $1 CAD = $0.7532 USD)
Mar Corn: -0.8¢ (-0.2%) to $3.69 USD or $4.899 CAD
Mar Soybeans: -7.8¢ (-0.75%) to $10.598 USD or $14.07 CAD
Mar Soybean Meal (per short ton): -$3.60 (-1.05%) to $345.10 USD or $458.18 CAD
Mar Soybean Oil (cents per lbs): -0.015 (-0.05%) to 35.14¢ USD or 46.65¢ CAD
Mar Oats: -0.3¢ (-0.1%) to $2.625 USD or $3.485 CAD
Mar Wheat (Chicago): -0.3¢ (-0.05%) to $4.28 USD or $5.682 CAD
Mar Wheat (Kansas City): -2.5¢ (-0.55%) to $4.405 USD or $5.848 CAD
Mar Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.69 USD or $7.554 CAD
Mar Canola: -2¢/bu OR -$0.90/MT (-0.15%) to $8.861/bu / $390.69/MT USD or $11.764/bu / $518.70/MT CAD
Friday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.263 USD or $3.005 CAD
Mar Milling Wheat: -10.9¢ (-1.65%) to $4.858 USD or $6.45 CAD
Grains this morning are all lower as the market pulls back from their highest levels in the past few months due mainly due to less bullish sentiment in soybeans with some drier weather in Argentina. Late last week, the International Grains Council (I.G.C.) came out with their out supply and demand tables for the global grain and oilseed industry, and while they didn’t differ too much from the U.S.D.A., there were some notable highlights (will review below). However, all eyes were on the new Trump administration taking office on Friday and the subsequent action (and reaction) that ensued. Namely, the “America First” and protectionist trade angle that President Trump is taking certainly doesn’t bode well for Mexico (and likely Canada as least as it relates to beef trade), and the likelihood that the new leader of the free world tries to change NAFTA is pretty high, according to the Economist. If the new Trump administration starts a trade war though, legendary investor Jim Rogers says equity markets are likely to pull back, citing historical evidence of a trade wars’ negative effects.
The I.G.C. is expecting Chinese barley imports to drop by almost one-third year-over-year in 2016/17 to 4.9 million tonnes as corn is pricing out as the better feedstuff. On the malt side, the I.G.C. is expecting global trade to decline 2% from 2015/16 due to less South American demand. While Brazil may not be importing as much barley sandwiches, the I.G.C. do expect them to export a record 57.3 million tonnes (+11% from last year and 12 million tonnes more than the 5-year average!). On the global wheat front, the I.G.C. is forecasting a slight dip in world wheat production in 2017/18, but because of the competition in the feed markets with the record amount of corn available, global carryout by the end of 2017/18 is likely to remain near what we see by the end of 2016/17. Separately, over the weekend, Egypt bought another 60,000 MT of wheat, this time from Ukraine, at a delivered price of $201 USD / MT (or $7.30 CAD / bushel).
Switching over in canola, the I.G.C. expects global inventories to fall year-over-year by about 25%, including the carryout of major exporters falling by 14% from last year to a little over 2 million tonnes. This is because global 2016/17 canola/rapeseed production was at a 4-year low, and demand slightly outpacing production. Looking forward, the I.G.C. is expecting Ukraine production to jump 50% to nearly 5 million acres this year as farmers pull back on wheat acreage. We here at FarmLead continue to expect near or new record canola acres in Western Canada for the 2017/18 crop, in addition to similar numbers as last year in Europe and Australia. The bullish news is Canadian canola demand continues to chug along at good pace, with marketing-year exports now at 4.7M tonnes and domestic crush at 4.33M tonnes, up 3.5% and 13.5% respectively year-over-year.
Another headline we continue to watch is a Brazilian trucker strike, but that’s par for the course at this time of year and it’s a bit early to speculating how disruptive that will be to Brazil’s soybean harvest, which is pegged now at 15% complete in largest-producing province, Mato Grosso (well above the 5% harvested at this time a year ago). With the economy lagging a bit in Brazil, there’s a plethora of truckers available and so as goes supply and demand, the price of trucking has gone down so truckers are looking for better terms as it relates to tolls and other levies associated with moving grain hundreds and thousands of miles. While the market is confident the trucker strike will be resolved (because it literally always is), the I.G.C. expects Brazilian soybeans exports to hit a record of 57.3M tonnes, which would be an 11% increase year-over-year and 12M tonnes above the 5-year average. While pipeline capacity is certainly there, the negative for the likes of Brazil will always getting the grain from farm to port.
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.