FarmLead Breakfast Brief
Friday, July 28th, 2017
“To emphasize only the beautiful seems to me to be like a mathematical system that only concerns itself with positive numbers.”
– Paul Klee (Swiss-German artist)
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 = $1.2558 CAD, $1 CAD = $0.7963 USD)
Sept Corn: -0.3¢ (-0.05%) to $3.74 USD or $4.697 CAD
Sept Soybeans: -1¢ (-0.1%) to $9.99 USD or $12.546 CAD
Sept Soybean Meal (per short ton): unchanged at $324.40 USD or $407.38 CAD
Sept Soybean Oil (cents per lbs): -0.12¢ (-0.35%) to 33.85¢ USD or 42.51¢ CAD
Sept Oats: +1¢ (+0.35%) to $2.928 USD or $3.676 CAD
Sept Wheat (Chicago): +3.5¢ (+0.75%) to $4.833 USD or $6.069 CAD
Sept Wheat (Kansas City): +4.8¢ (+1%) to $4.858 USD or $6.10 CAD
Sept Wheat (Minneapolis): +2.5¢ (+0.35%) to $7.39 USD or $9.28 CAD
Nov Canola: -0.2¢/bu / -$0.10/MT (-0.02%) to $9.097/bu / $401.10/MT USD or $11.424/bu / $503.70/MT CAD
Yesterday’s Winnipeg ICE Close
Sept Barley: unchanged at $2.427 USD or $3.048 CAD
Oct Durum Wheat: unchanged at $6.675 USD or $8.382 CAD
Oct Milling Wheat: unchanged at $5.851 USD or $7.348 CAD
Limited Grain Market Concerns?
This morning, grain markets are quietly mixed as the market continues to digest rainfall and yield estimates. Precipitation in the Corn Belt didn’t exactly meet expectations, but slightly cooler temperatures have limited gains.
There hasn’t been a lot of bullish headlines for the market to get a higher trend going on. Accordingly, as the Commonwealth Bank of Australia points out, “the lack of worries about US crops is a drag on the market.”
Let’s jump into the big stories impacting grain markets today.
Where is the Drought?
The weekly US Drought Monitor released yesterday showed that drought conditions intensified across the central U.S last week.  Garrett noted in Grains Markets Today that North Dakota has only seen about 45% of their average rainfall year-to-date.
More than 79% of the state is experiencing moderate, severe, extreme, or exceptional levels of drought.
More specifically, nearly 46% of the state is in extreme or exceptional drought.
That’s technically worse than South Dakota. Only 15% of the state is rated in extreme or exceptional drought condition. However, there is another 65% is ranked in the moderate and severe drought columns.
In Montana, nearly 24% of the state is rated in extreme or exceptional drought. About 33% of Iowa is ranked in a moderate drought.
Across the border into Saskatchewan, the most recent crop report said that the dry weather has “deleted topsoil moisture and damaged crops.”  The provincial government suggested the just 40% of fields have a surplus or adequate supply of soil moisture. 38% of fields are short while 22% are very short.
This trend surely corresponds to how the crop is faring. Good-to-excellent (G/E) ratings for the Saskatchewan spring wheat crop is just 58%.  The 5-year average for this time of year is 80%.
For durum wheat, it’s even worse with only 21% considered to be in G/E health across Saskatchewan. Other notables that are down significantly from the 5-year average is mustard at 21% G/E (74% is the 5-year average), flax at 32% (74%), soybeans at 40% (71%), and chickpeas at 71% (73%).
Wheat Quality Council Tour – Day 3
The U.S. Wheat Quality Council’s spring wheat crop tour wrapped up yesterday, showing us what we already know: lower yields.
Their final estimate pegged the HRS wheat yield at an average of 38.1 bushels per acre. This figure would be the lowest yield since 2008.
Compare it to the following:
- Last year’s tour forecast of 45.7 bushels per acre
- The 5-year average of 46.8 bushels per acre
- The 10-year average of 43.9 bushels per acre.
- The USDA’s July estimate of 40.3 bushels per acre.
Durum wheat prospects also came in low at 39.7 bushels per acre. During last year’s tour, that number was 45.4 bushels per acre.
There are certainly many farmers out there who think the final number is lower for both HRS and durum wheat than what this crop tour is suggesting. Many are pointing to abandonment and the fact that the tour didn’t check into arid areas in western North Dakota and Montana.
Right now the buzz is that somewhere between 10-13% of spring wheat acres won’t be harvested.
International Grains Council Updates
The IGC came out their updated production and demand estimates yesterday.  The theme was certainly under dry conditions (as mentioned) challenging production in places like the U.S., Canada, France, & Australia.
According to the IGC, the world will produce 2.04 Billion tonnes of grain, pulses, and oilseeds in 2017/18. This figure is 11 million tonnes lower than their last estimate and 88 million than last year’s monster crop. This number is the largest year-over-year decline since the American drought that impacted 2012/13 production numbers.
The IGC dropped their corn production estimate by 5 million tonnes to 1.02 Billion tonnes. It might’ve been a larger downgrade if not for the bigger crops in Brazil & Argentina. A record crop in South Africa of nearly 16 million tonnes also limited the decline.  The other bullish story is that global corn feed use is expected to be a record of 617 million tonnes this year. 
For wheat, global production was dropped to a 4-year low of 732 million tonnes.  This is down 3% from last year and mainly due to production declines in North America, the EU, and Australia.
On canola/rapeseed, the IGC expects worldwide production to be up 2% from last year to a 3-year high of 71 million tonnes.  They also noted that Australian canola exports to the European Union are on the rise. 
The IGC said that they’re expecting a moderate rebound in malt barley demand.  This comes as global barley production is expected to drop 8% year-over-year to 138.1 million tonnes.  Moreover, global barley stocks are set to drop from last year, especially in major exporting-regions like the EU, USA, Canada, and Australia. 
Looking Ahead in Grain Markets
Overall, grain markets are moving sideways without one or two main things driving the next direction. The focus heading into the weekend will be on Sunday’s weather reports.
Next week, the FarmLead team will be out near Redwood Falls, MN for the Minnesota Farmfest show. Stop by our booth (#3603) to chat grain markets and how you can find the best price for your grain on FarmLead.com.
If you’re not headed to Minnesota like us next week, check out all the events we’ll be at in the coming months.
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