July 21 – Another Weather Weekend

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FarmLead Breakfast Brief

Friday, July 21st, 2017

“I’m not an economist and we all know economists were created to make weather forecasters look good.”
– Rupert Murdoch (Australian media mogul)

Good Morning!

At 7:50 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2552 CAD, $1 CAD = $0.7967 USD)

Sept Corn: -6.5¢ (-1.65%) to $3.845 USD or $4.826 CAD
Sept Soybeans: -7.8¢ (-0.75%) to $10.105 USD or $12.684 CAD
Sept Soybean Meal (per short ton): -$2.30 (-0.7%) to $330.20 USD or $414.46 CAD
Sept Soybean Oil (cents per lbs): -0.15¢ (-0.45%) to 33.96¢ USD or 42.63¢ CAD  
Sept Oats: -0.5¢ (-0.15%) to $2.953 USD or $3.706 CAD
Sept Wheat (Chicago): -0.8¢ (-0.15%) to $5.05 USD or $6.339 CAD
Sept Wheat (Kansas City): -1¢ (-0.2%) to $5.028 USD or $6.31 CAD
Sept Wheat (Minneapolis): -0.8¢ (-0.1%) to $7.773 USD or $9.756 CAD
Nov Canola: -1.8¢/bu / -$-0.80/MT (-0.15%) to $9.208/bu / $406/MT USD or $11.558/bu / $509.60/MT CAD

Yesterday’s Winnipeg ICE Close
Oct Milling Wheat: +2.7¢ (+0.35%) to $6.375 USD or $8.001 CAD

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Another Weather Weekend

Hot temperatures continued to be the mot du jour (“word of the day”) Thursday.

Add in some decent U.S. grain export numbers, and we had a narrative that helped pushed up wheat prices. The third factor is the U.S. Dollar, which continues to drift lower.

As Garrett mentioned in his regular afternoon recap, Grain Markets Today, the U.S. Federal Reserve is unlikely to raise U.S. interest rates next week. The U.S. Dollar is also being pressured by the Trump administration’s ability to enact pro-economic growth policies and ongoing investigations regarding Russia.

Translation: investors don’t want to pump money into an asset that is not going to provide any return or has no growth prospects.

Secondary translation: If Trump can’t move forward on legislation, how much can the economy possibly grow?


Morning Farmer Weather Update

Grain markets this morning are most lower on some profit-taking and the outlook of rain over the weekend.

Accuweather is calling for some pretty solid rains through Saturday for Illinois, Iowa, Wisconsin, Minnesota, and the eastern Dakotas.[1]

The northwestern Plains, however, won’t see much precipitation.

Looking toward the month of August, Accuweather expects northern Great Lake states like Minnesota, Wisconsin, and Ohio to receive average rainfall. Further south into places like Missouri and the southwestern part of the Corn Belt, rainfall is expected to be below-average.

Traders will continue to monitor precipitation over the weekend and Sunday night’s forecasts.

Export Figures Outpace Expectations

Japan continues to outrank Mexico as the top purchaser of US corn. Total US export sales last week came in at nearly 678,600 MT, within pre-report expectations.

Digging into that number though reveals a surprise. As Allendale explains, new crop corn sales were the lowest they’ve been in seven years. [2]

But corn had a better week to soybeans.

The new crop soybean sales were the lowest they’ve been in 10 years.

Total US soybean export sales also came inside expectations but towards the top-end, at 1.93 million tonnes. Wheat was the big winner though, selling nearly 670,000 MT, well above pre-report estimates.

Is It Time to Sell Soybeans?

On the soybeans front, if you haven’t taken advantage of some of the recent price points, we would ask you to consider that the upside potential from current levels aren’t massive.

Global supplies and competition from South America have been consistently pulling the reins on any rallies. This week’s soybean sales could easily be viewed as an indication of the competition coming from abroad.

Think about it. We just saw the lowest amount of new crop sales in 10 years?

Wow.

Any managed-money-driven volatility to the upside should not be ignored.

The size of potential price shifts in the soybean market is bigger than anywhere else (except for canola or spring wheat right now).

Am I expecting 40 cents USD / bushel moves? Not necessarily that large.

But I won’t ignore the impact of speculative money. When speculators enter the market, price can heat up.  Still, it’s important that you don’t just think about massive moves higher – large profit-taking events by hedge funds can just as easily clear that hot room so just tumbleweeds remain.

A Farmer’s Market in Wheat

Soybeans aren’t as much of a seller’s market like wheat. The advantage to the farmer for selling wheat is something that Garrett wrote about extensively yesterday, and the importance of shopping product around (Hint: when you post it on FarmLead, your “shopping” basically goes on autopilot. Why not post your next block now?)

Digging deeper, the protein premiums for every 1/5 percentage point (or 0.2%) will vary by buyer.

We’re seeing it right now!

Understanding these premium schedules is important because between just a few options, the same protein could be worth 30 cents / bushel (or more if you’re truly shopping around). [3]

Looking outside of North America, Nidera has gotten uber-bullish in the Land Down Undaa.[4]

The grain trading giant bought earlier this year by COFCO thinks that the Australian 2017/18 wheat crop could settle somewhere between 19 and 20 million tonnes! This is due to the lack of rain they’ve received (although both coasts of the continent-country received a bit of a drink here recently.)

With less supply in the Southeast Asian shipping corridor, new opportunities to compete are emerging in places like Indonesia and South Korea.

The way I see it though, the big winner will likely be producers near the Black Sea.

Is Corn Going to Rally?

Right now, corn rated good-to-excellent across the U.S. is sitting at its lowest July levels since 2013. [5] There isn’t a corn trader on the continent who isn’t thinking about Monday’s Crop Progress report.

Informa Economics just moved their corn yield lower, which is sparking a flurry of bullish conversation.

Informa’s previous estimate was 169.7 bushels per acre but they dropped that by 3.5 bushels to 166.2 bu/ac.

This is 8.4 bushels per acre below last year’s record average yield.

Top Third Ag Marketing thinks that the national average yield could end up coming in at 162 or 163 bushels per acre. [6] They’re targeting $4.70 USD / bushel on the Chicago futures board.

When I hear some of these loft price points that are pretty far off, I take them with a grain of salt, usually somewhere around 75%.

Why?

While rooted in good analysis, a price target can never fully account for the market behaving one way or another. Basically, that price target of $4.70 a bushel won’t be able to account for the farmer selling pressure at $4.25.

Or even at $4.50!

The last 10 days of July will likely have the biggest say on where corn yields ultimately end up.

While it’s always nice to see a rally, nothing will guarantee that said price target will be touched. Getting 75% of the way there should never be considered a bad thing (in this scenario, that would mean selling corn when the futures board is above $4.50 USD / bushel!).

Have a great weekend and hopefully you’ll see some rain during it.

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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