July 17 – Time To Sell Your Grain (Agree to Disagree?)

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FarmLead Breakfast Brief
Monday, July 17th, 2017

“If two men on a job agree all the time, then one is useless. If they disagree all the time, then both are useless.”
– Darryl Zanuck (US film producer)

Good Morning!

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 = $1.2659 CAD, $1 CAD = $0.79 USD)

Sept Corn: -1¢ (-0.25%) to $3.753 USD or $4.75 CAD
Sept Soybeans: +1.8¢ (+0.2%) to $9.945 USD or $12.589 CAD
Sept Soybean Meal (per short ton): -$0.10 (-0.05%) to $325.60 USD or $412.15 CAD
Sept Soybean Oil (cents per lbs): +10¢ (+0.3%) to 33.46¢ USD or 42.35¢ CAD  
Sept Oats: -0.3¢ (-0.1%) to $2.868 USD or $3.63 CAD
Sept Wheat (Chicago): -0.8¢ (-0.15%) to $5.10 USD or $6.456 CAD
Sept Wheat (Kansas City): -4.3¢ (-0.85%) to $5.093 USD or $6.446 CAD
Sept Wheat (Minneapolis): +4¢ (+0.55%) to $7.62 USD or $9.646 CAD
Nov Canola: -1.8¢/bu / -$-0.80/MT (-0.15%) to $9.075/bu / $400.14/MT USD or $11.487/bu / $506.50/MT CAD

Friday’s Winnipeg ICE Close
Oct Barley: unchanged at $2.408 USD or $3.048 CAD
Oct Milling Wheat: -2.7¢ (-0.35%) to $6.257 USD or $7.92 CAD

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Time to Sell Your Grain (Agree to Disagree?)

Grain prices are trading mostly lower to start the third week of July.

Neutral weather forecasts are keeping traders uncertain of the next direction the markets should go. As Louise Gartner from Agriculture.com puts it, the different weather models are having trouble agreeing with one another. [1] Canola is being pressured by the Canadian Loonie hitting 79 cents USD. Here’s what else you need to know about today’s market.

Winter Wheat Crop Progress Report

Plains Grains is continuing its annual review of the U.S. winter wheat crop. [2] They mention that Nebraska & Colorado are 3/4s finished harvest, while combine action in Kansas is nearly done. From a production standpoint, it’s worth mentioning that the average Kansas wheat yield is 47 bushels per acre off of 6.9 million acres. [3]

The Kansas winter wheat yield number is much better than previously expected. Although the 324 million bushels of wheat the state will take off this year is still 31% lower than last year’s big crop, it’s surprising given disease and Mother Nature pressures.

We’ll know more about the winter wheat harvest in this afternoon’s crop progress report, out weekly from the USDA. Heading into the Northern Plains, both spring and winter wheat harvests are now rolling in tandem.

One South Dakota farmer told me last week, “You gotta cut it while you still can… before it turns to dust.”

We know farmers in southern Saskatchewan who will also start their Harvest 2017 campaign this week.

PGI’s analysis of the grain is showing that the crop’s quality continues to improve as you head north.

Average quality analysis shows 11.3% protein (11.2% final last year), 11.5% moisture (11%), test weight of 60 lbs even (60.7), and Falling Number at an adequate 367 seconds (392).

Money Managers Turned Bullish on Corn Prices

Managed money last week got caught a little heavy-handed in their buying, ahead of some of the more bearish weather reports. Hedge funds swung net bullish by 150,000 contracts last week in the corn market alone. [4] The net long in Kansas City HRW wheat futures also showed to be the largest in more than a decade. That said, many of those bullish bets have seen their profits taken, considering some of the sell-down that Garrett Baldwin mentioned on Friday afternoon in Grain Markets Today.

How the Weather Affects Grain Prices Next

As we mentioned in our recap of the USDA’s WASDE report last week, the next 4 weeks will be all about the weather.

Jerry Gullke tries to two-week-up us and say that it’s all about the next 6 weeks of weather. [5].

(Okay, Jerry.)

Focusing more short-term, this week is showing more hot temperatures across the Midwest with the dial expected to top 100 Fahrenheit in parts of South Dakota, Nebraska, and Kansas. [6] On the flipside, the Minnesota-Iowa border areas are expected to get hit with a lot of rain (up to 5 or 6 inches).

Other lake states like Wisconsin, Illinois, Indiana, and Ohio should also get at least half an inch of rain. [7] Thinks don’t look too great though if you’re not by a large body of water. Commodity Weather Group says areas around central Iowa, central Missouri, and southern Illinois seem at risk for heavy heat and little rain this week as well. [8]

We’ll definitely be watching how much crop will be able to come out of the Northern Plains.

Last week’s US Drought Monitor map shows that practically all of the western half of North Dakota is either in severe or extreme drought, with the rest of the state categorized as either abnormally dry or in moderate drought. [9] Also, as Garrett mentioned in Friday’s “Grain Markets Today”, 1/8 of Iowa is now considered to be in a drought phase.

How Low Could Yields Go?

Coming back to the next couple weeks, we’re heading into the apex of summer weather (and the volatility that can come with it). It’s corn pollination and soybeans pod-setting season.

Brian Doherty of ultra-bullish Stewart-Peterson notes that if rain doesn’t fall in a few places, crop yield potential starts to wane significantly. [10]

On the flipside, if those areas do earn some much-needed shots of precipitation, market “prices are vulnerable to a significant sell-off.” Probably the most astute observation Brian makes is in the form of behavioral economics 101: “Misery loves company, so if you didn’t sell and neither did your neighbor, then both of you are in the same boat.”

The thinking here is that if you are going with the rest of the herd, you’ll miss out on opportunities.

It’s Time to Post on FarmLead

To expand on this, there are 2 factors that we consider here at FarmLead crucial to any grain marketing plan.

The first is that, the higher the futures board goes, the harder it is to make incrementally similar moves.

You’ll hear things like “the trend is your friend” but everyone knows that trends don’t last forever (for example, look at tie-dye t-shirts).

The second factor is that if you do sell into strength, you shouldn’t be selling everything but a small block of production (i.e. 10% of production). That way, if the market does go higher, you have something else to sell.

If the market moves lower, you might be kicking yourself that you didn’t sell more but at least you sold something! This is the definition of loss aversion and key, in our opinion, to sound, disciplined grain marketing plan (I talked more about this and put up a 5-point challenge to farmers back in March).

To this point, Joe Vaclavik of Standard Grain mentions that there’s been plenty of opportunities to sell old crop corn. [11] For more than a few, it hasn’t been worth the cost of storage to continue to “lock the bins” as hope for higher prices became a risk management plan.

Is there more upside? Is the weather rally over? [12]

I don’t necessarily think that’s the case for wheat, but maybe for corn and even more so for soybeans.

The further along in the calendar we get, the more along the market will be able to accurately price in the crop. This makes it intuitively harder to sell old-crop bushels still left in said locked bins.

We’re seeing some healthy coverage by buyers through the FarmLead Marketplace the last few weeks.

The demand for old crop, immediate movement is omni-present at this time of year so there are some decent sales that farmers have been making. If there’s some cereals, oilseeds, or pulses still left in your bins, it’s certainly worth posting a target for all of our 450+ verified grain buyers.

It’s hard to debate that with more buyers to compete with your grain, the better likelihood you’ll find a better price than what’s being bid locally.

Ag in Motion 2017

Finally, if you’re around Saskatoon this week from Tuesday, July 18 to Thursday, July 20 for the 2017 Ag In Motion show, stop by the FarmLead booth in the FCC Ag Paviliion (click here for map).

We’ll be chatting with farmers about the impact of drought in the Northern US states on Canadian grain prices. We’re also handing out a bunch of grain bags as, apart from knowing your cost of production, one of the most important steps in grain marketing is knowing what quality of grain you have.

Hope to see you there.

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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