July 20 – Hot Grain Markets

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FarmLead Breakfast Brief
Thursday, July 20th, 2017

“Be still when you have nothing to say; when genuine passion moves you, say what you’ve got to say, and say it hot.”
– D.H. Lawrence (British author)

Good Morning!

At 7:10 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2615 CAD, $1 CAD = $0.7927 USD)

Sept Corn: +2.8¢ (+0.7%) to $3.853 USD or $4.86 CAD
Sept Soybeans: +5.8¢ (+0.55%) to $10.098 USD or $12.738 CAD
Sept Soybean Meal (per short ton): +$1.60 (+0.5%) to $330.30 USD or $416.68 CAD
Sept Soybean Oil (cents per lbs): +0.25¢ (+0.75%) to 33.83¢ USD or 42.68¢ CAD  
Sept Oats: -0.5¢ (-0.15%) to $2.925 USD or $3.69 CAD
Sept Wheat (Chicago): -2.8¢ (-0.55%) to $5.003 USD or $6.311 CAD
Sept Wheat (Kansas City): -2.8¢ (-0.55%) to $4.975 USD or $6.276 CAD
Sept Wheat (Minneapolis): -4.5¢ (-0.6%) to $7.71 USD or $9.726 CAD
Nov Canola: +3.9¢/bu / +$1.70/MT (+0.3%) to $9.154/bu / $403.64/MT USD or $11.548/bu / $509.20/MT CAD

Yesterday’s Winnipeg ICE Close
Sept Barley: unchanged at $2.423 USD or $3.048 CAD
Oct Milling Wheat: -5.4¢ (-0.7%) to $6.321 USD or $7.974 CAD

How much of a rally is enough for the next sale?
How many buyers do you call to stay on top of prices?
Let buyers come to you. Post your grain on FarmLead!

Hot Grain Markets

Here in Saskatchewan at the Ag In Motion, we continue to catch hot weather.

However, some smoky air from the terrible fires to the west in British Columbia are reminding us of the 2015 crop when smoke saved the crop. Before we get to grain prices this morning, we want to express our support and sympathy for everyone affected by the wildfires.


Corn and Soy Prices Push Higher

Corn and soybeans are catching a bid this morning on continued hot temperatures and an uptick in managed money buying. The threat of 100-degree Fahrenheit weather on pollination and pod-setting crop development is helping more speculative money join the grains complex’s party.

This weather speculation was a key theme in Garrett’s coverage in Wednesday’s issue of Grain Market’s Today.

As the U.S. winter wheat harvest nears the finish lines, grain buyers seem to be finding supplies and sellers as prices are pulling back. Notably Kansas City hard red spring futures are below $5 USD / bushel this morning. We haven’t been this low since the end of June when temperatures started heating up.

Despite widespread drought across the northern part of the United States and lower Canada, some voices are arguing it could be worse. Ray Grabanski of Progressive Ag Marketing reminds us that “this is not a major drought year like 2012.”[1]

According to Grabanski, crops have started out a bit tough, but yield models are still holding near trend line. He says that the clock is running out for the bulls who are expecting the weather to hurt corn and soybean crops significantly. His team is still seeing average yields at 168 bushels per acre for corn and 46.8 bu/ac for soybeans based off crop ratings and other factors.

On the more bearish side of things, the Argentinian Ag Minister very frankly stated on Twitter, “I want to announce that we are going to have the largest corn harvest in history, 49 million tonnes.” [2]

This figure is for the 2016/17 crop.

As usual, the Argentinian government tends to overstate production potential relative to what everyone else thinks, namely the USDA. Currently the USDA is forecasting 41 million tonnes, and it’s likely that they’ll settle at that number.

Putting some pressure on the vegetable oils is Malaysian palm oil production. [3] While it’s not going to top 2015’s record of nearly 20 million tonnes, a recent Reuters poll puts it around 19.1 million. This figure is also about 10% above the average of the past few years. Labor shortages are threatening final output but delayed normal weather patterns are pushing back peak production, giving a longer timeline to produce. Palm oil prices have fallen nearly 20% this year, which intuitively puts negative price pressure on its substitutes like soy oil and canola oil.


49th Parallel Wheat Games

Agriculture Canada recently updated its production forecasts amidst some of the drier weather. [4]

They dropped their production and ending stocks estimates for 2017/18 to put them lower than where they were in 2016/17 by a little bit. The lower carryout is mainly due to higher exports of durum and other wheat, corn, and soybeans than what was done in 2016/17.

Except for durum and soybeans, ending stocks for most crops will be below their 5-year average. The most significant change to ending stocks is likely in canola, as Ag Canada thinks ending stocks to could fall to extremely tight 300,000 MT (the USDA’s estimate is almost double this).

Canadian wheat exports are certainly going to rise in 2017/18, especially across the 49thparallel into America. US spring wheat producers have been hit with one of the tougher growing seasons they’ve ever faced, which is forcing many in the Dakotas and Montana to bale up their crops. To simplify this matter, Bloomberg writes, “their wheat would be more valuable as cattle feed than baker’s flour.” [5]

In southwestern North Dakota, it is estimated that 7 out of 10 farmers will bale at least some of their spring wheat fields. Across the entire state, it’s estimated by the agriculture commissioner that as much as 10% of wheat, barley, and oats fields will get baled up instead of combined. Next week we’re going to know more as the Wheat Quality Council starts its annual spring wheat 3-day crop tour across North Dakota.


The Heat

Coming back into Canada, we hear similar sentiments in a few areas.

More conversations with farmers at the Ag In Motion show at the FarmLead booth suggest that crops are holding on because of 2 reasons.

First, and as discussed in yesterday’s Breakfast Brief, soil moisture carryover from last year has been extremely helpful.

Second, temperatures have been swinging to the cool side at nighttime, giving crops a chance to recover from the day-time heat.

For canola traders, the big concern is how the heat over the past few weeks will affect the oilseed crop during the ultra-important flowering period. Considering that a fair amount of acres were seeded late, the heat challenge gets compounded. Some scattered showers are in the forecast for the Canadian Prairies over the weekend but to be determined if the clouds do open up. We’ve missed them before.

More helpful will likely be the cooler temperatures into the weekend and next week.

Overall, the volatility that these weather markets are having on the grain complex can create great opportunities. There are a few signs that we’re getting a little top-heavy again, suggesting further pull-back is on the horizon. Given that grain prices in most areas have barely been break-even, considering a sale in the next week is warranted.

Post that target on FarmLead for 100s of buyers to deal with you, instead of just 1 or 2.

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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