July 10 – Driving Decisions

fl_hubspot_logo_456x57.pngFarmLead Breakfast Brief
Monday, July 10th, 2017

“Concern should drive us into action and not into a depression. No man is free who cannot control himself.”
– Pythagoras (ancient Greek poet)

Good Morning!

At 7:30 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2903 CAD, $1 CAD = $0.775 USD)

Sept Corn: +6.3¢ (+1.6%) to $3.988 USD or $5.145 CAD
Aug Soybeans: +17.3¢ (+1.7%) to $10.183 USD or $13.139 CAD
Aug Soybean Meal (per short ton): +$7.10 (+2.15%) to $337.80 USD or $435.87 CAD
Aug Soybean Oil (cents per lbs): +0.33¢ (+1%) to 33.18¢ USD or 42.81¢ CAD  
Sept Oats: +6.5¢ (+2.3%) to $2.893 USD or $3.732 CAD
Sept Wheat (Chicago): +11.5¢ (+2.15%) to $5.465 USD or $7.052 CAD
Sept Wheat (Kansas City): +10¢ (+1.85%) to $5.53 USD or $7.135 CAD
Sept Wheat (Minneapolis): +29.3¢ (+3.8%) to $7.96 USD or $10.271 CAD
Nov Canola: +17.7¢/bu / +$7.80/MT (+1.5%) to $9.23/bu / $406.95/MT USD or $11.909/bu / $525.10/MT CAD

Friday’s Winnipeg ICE Close
Sept Barley: unchanged at $2.309 USD or $3.048 CAD
Oct Milling Wheat: -8.2¢ (-1%) to $6.264 USD or $8.083 CAD

How much of a rally is enough for the next sale?
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Driving Decisions

The heat in North America over the first 10 days of July has certainly got the market building in another weather premium. Areas that got hit with the most hit include southern regions in Western Canada and the US Northern Plains. Temperatures in the 90s Fahrenheit hit most of the cornbelt and are expected to continue this week, especially in the western half of the region. Without enough moisture to compliment the heat, this is what’s helping drive corn and soybean prices this morning.

On Wednesday we’ll get the USDA’s July installment of their world agricultural supply and demand estimates. Heading into the report, the market is expecting production downgrades for the US crop compared to a year ago and last month. While the USDA will use the planted acreage numbers from their June 30th report, we’re more interested to see if they’ll update harvested acreage. A more interesting question to ponder is if soybean harvested acreage will end up larger than harvested corn acreage. We are seemingly in the decade of the bean.[1] More on this tomorrow.

Despite the bullish demeanor across the board, managed money continues to sit in a net short position of nearly 50,000 soybean contracts and 60,000 lots short of corn. The former cruised up above $10 USD / bushel and is sitting at its best levels since December as mentioned by our Garrett Baldwin in his Friday afternoon recap. Canola contracts are following their oilseed kinship, with all 2018 contracts now trading above $530 CAD / MT this morning.

If more wet weather returns towards the second-half of July, then we should start to expect a correction. Until then though, it seems that the complex wants to drive another weather market. Jerry Gulke notes that “a weather market can take 4-6 weeks before the market predicts the worst-case possibilities.[2] (But) when a weather market turns, it turns fast.” Selling into strength is never a bad idea.

The USDA’s crop progress report is expected to show all lower crop ratings when it comes out later this afternoon. The good-to-excellent (G/E) ratings of spring wheat, corn, and soybeans are all expected to drop by at least 2 points. Other than spring wheat, this would still put the ratings close to their 5-year average of 70% for corn and 66% for soybeans. However, the trend seems to be suggesting worse-off crop health, especially with all this heat.

Wheat is still flirting with $8 USD / bushel and will need some further buying to get back above last week’s 4-year high of $8.68. We don’t say short-covering because hedge funds are no sitting at a net-long of 18,000 contracts in the cereal. For corn, new crop contracts are up above $4 USD / bushel and many analysts are now looking for $4.25 to $4.50 as the next range to price in some of this year’s production.[3].

Looking at it from an old crop perspective, Joe Vaclavik of Standard Grain that corn and soybean price points are close to touching 1-year highs (technically corn did just that this morning)[4]. As such, you should consider that you’ve been given another opportunity to sell at those levels (and a profit)[5]

Covering your bases and your bills should never be considered a bad thing. Driving your operation towards profitability remains incredibility important. Think about making sales when you can, and not when you have to.

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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