Jan 27 – Questionable Antics

FarmLead Breakfast Brief

Friday, January 27th, 2016

“Without economic development, any potential for political openness and freedom will be questionable.”
– Jose Maria Aznar
(former Spanish Prime Minister)

Good Morning!
At 6:35 AM CDT in the North American futures markets (*not cash prices*):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3104 CAD, $1 CAD = $0.7631 USD)

Mar Corn: -0.5`¢ (-0.15%) to $3.633 USD or $4.76 CAD
Mar Soybeans: -2.3¢ (-0.2%) to $10.473 USD or $13.724 CAD
Mar Soybean Meal (per short ton): -$0.20 (-0.05%) to $342.20 USD or $448.43 CAD 
Mar Soybean Oil (cents per lbs): -0.21¢ (-0.6%) to 34.26¢ USD or 44.90¢ CAD 
Mar
 Oats: +0.5¢ (+0.2%) to $2.558 USD or $3.351 CAD
Mar Wheat (Chicago): -1¢ (-0.25%) to $4.26 USD or $5.582 CAD
Mar Wheat (Kansas City): -0.5¢ (-0.1%) to $4.398 USD or $5.763 CAD
Mar Wheat (Minneapolis): +2¢ (+0.35%) to $5.688 USD or $7.453 CAD
Mar Canola: -0.9¢/bu OR -$0.40/MT (-0.1%) to  $8.998/bu / $396.74/MT USD or $11.791/bu / $519.90/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.309 USD or $3.026 CAD
Mar Milling Wheat: +2.7¢ (+0.4%) to $4.922 USD or $6.45 CAD

New crop AND old crop trading lately at strong levels…

Perhaps it’s time to post your next block of grain on FarmLead?

Questionable Antics

Grains this morning are again lower on some benign South American weather and continued question marks around U.S. trade policy of restructuring and/or adding more bilateral agreements. Technically, things are OK today as U.S. export sales released yesterday morning were generally viewed as bullish, showing that exports continue to track ahead of last year, namely corn whose exports are 68% higher than a year ago. However, with NAFTA clearly back on the table and Mexico squarely in President Trump’s eyes, it could be tough to concede to any demands Trump eventually puts on Canada, given the pace that he’s running at. Overall, the talk has been tough and Trump has been walking the talk, but from an agricultural standpoint, especially with TPP dead, there’s a lot more questions than answers right now.

Chinese New Year is this weekend and with it enters the Year of the Rooster. The week-long celebration kicks off fresh optimism for vegetable oil demand in the People’s Republic as, in 2016, their palm oil imports dropped 24% from 2015 to 4.5M tonnes (the lowest since 2005) as prices jumped 25% thanks to the drop in production from El Nino effects. Add in that Beijing government was consistently holding auctions of state rapeseed / canola oil reserves, the price-sensitive vegetable industry pulled back on its palm oil demand. However, it’s expected that palm oil production will start climbing in the second half of 2017, with analysts expecting double-digit production growth each month (yes, that means palm output is being forecasted to grow by 10% or more EACH month). With more supply available, prices intuitively will pull back, likely making China (and others like India) buyers again, opting in for Southeast Asian supplies of palm oil instead other veggie oils like rapeseed or soyoil.

India is likely also to be more price-sensitive and so accordingly, should get into the mix for buying a little more palm oil if the supply is there (sidenote: Canadian canola crush margins have dropped about $30/MT in the last 2 weeks to roughly $100/MT). Where the Indian government might be struggling a bit though is on pulse crop procurement as, given the record and production between both the kharif and rabi crops has led to retail pulse prices falling below minimum support price levels. Switching continents and as per Ag Resource and CME Group South American Soy Report, Argentinian producers are likely to get some more showers in the next 2 weeks, but depending on the forecasting model, the volume of precipitation widely varies. Nonetheless, the Buenos Aires Grains Exchange dropped by their estimate of the 2016/17 Argentinian soybean crop to 53.5M tonnes, more in line with a lot of other private estimates compared to the U.S.D.A.’s 57M-tonne forecast). The Exchange estimates that nearly 1M acres have been lost to flooding with almost another million still at risk.

Finally, we head back to the political arena where’s been made abundantly clear that President Donald Trump will in fact build a wall on the U.S. Mexican border and is curtailing immigration from specific terror prone countries. In order to pay for the wall, it’s been rumoured that a 20% tariff would be put on any good coming across that border from Mexico (there are reports that a 16% tax is placed on all US goods going into Mexico, but that’s in correct because ALL goods are taxed w/ a 16% VAT). From an agricultural standpoint, farm groups are trying to navigate the waters but it continues to be clear that there is a significant difference between what Donald Trump is doing for the rural vote, not just the farm vote. Mexico is massive buyer of American meat, meaning the demand of feed grains for those animals could fall. Looking further than just that, with President Trump trumpeting “America first”, John Harrington points out that the U.S. needs international markets for its agricultural industry to survive, considering 10% of beef, 15% of chicken, 21% of corn, 15% of corn, 48% of soybeans, and 42% of wheat is exported to customers outside of the U.S.A.. Net-net, while I agree with Mr. Harrington that it’s rare to find a politician who actually follows through with their election promises, the very questionable tactics now are likely to have some troubling results.

Have a great weekend!

To growth,

Brennan Turner

President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

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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