July 31 – Competing Grain Trades

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FarmLead Breakfast Brief
Monday, July 31st 2017

“Facts do not speak for themselves. They speak for or against competing theories. Facts divorced from theories or visions are mere isolated curiosities.”
– Thomas Sowell (US economist & philosopher)

Good Morning!

At 5:50 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2464 CAD, $1 CAD = $0.8023 USD)

Sept Corn: -5.3¢ (-1.4%) to $3.69 USD or $4.599 CAD
Sept Soybeans: -12.5¢ (-1.25%) to $9.935 USD or $12.383 CAD
Sept Soybean Meal (per short ton): -$4.10 (-1.25%) to $319.20 USD or $397.86 CAD
Sept Soybean Oil (cents per lbs): -0.23¢ (-0.65%) to 34.48¢ USD or 42.98¢ CAD  
Sept Oats: -5.5¢ (-0.1.9%) to $2.848 USD or $3.549 CAD
Sept Wheat (Chicago): -4¢ (-0.85%) to $4.77 USD or $5.945 CAD
Sept Wheat (Kansas City): -4¢ (-0.85%) to $4.77 USD or $5.945 CAD
Sept Wheat (Minneapolis): -8.5¢ (-1.15%) to $7.32 USD or $9.124 CAD
Nov Canola: -8.6¢/bu / -$3.80/MT (-0.75%) to $9.216/bu / $406.37/MT USD or $11.487/bu / $506.50/MT CAD

Friday’s Winnipeg ICE Close
Sept Barley: unchanged at $2.446 USD or $3.048 CAD
Oct Durum Wheat: +2.7¢ (+0.3%) to $6.747 USD or $8.41 CAD
Oct Milling Wheat: +35.4¢ (+4.8%) to $6.179 USD or $7.702 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!

Competitive Grain Trades

I’m in the Detroit airport about to board a flight to head to the Minnesota Farmfest this week (stop by our booth or check other events we’ll be at in the next few weeks). I’m spent the weekend in southwestern Ontario where crops are looking pretty good. However, the temperatures have been nothing short of hot and so there’s intuitively questions about how much this will affect crops in the Eastern Corn Belt in America.

Today is last day of July and it was a month that can be categorized as one thing: hot. As Garrett and I discussed in our July grains markets recap over the weekend, the temperature dial has increased the drought ratings in the western Corn Belt and Northern Plains. WxRisk.com is expecting below-average temperatures for the first half of August in the US before warmer and wetter conditions return in the second half.[1]

This morning, grain markets are pricing in some wetter weather for the western corn belt. With many areas competing for rains, it’s likely too little too late for more than a few areas.

July Grain Prices

We also discussed prices for the month in our recap.

For the wheat complex, we know things have been volatile, and prices have dropped since its highs on July 5th. The best Minneapolis hard red spring wheat price on the December contract this month hit $8.43 / bushel. The high of the same contract on the Kansas City hard red winter wheat price board hit $6.02 / bushel. Finally, the heavily-traded Chicago soft red spring wheat market topped $5.745 for the December contract.

Oats have been a strong performer this month. The December contract is still sitting near its high price of $3.028 seen on July 18th on the Chicago Board of Trade. Mike Jubinville from Pro Farmer says that the oats market continues to be stable and supported at this prices.[2]

The highs for December corn and November soybeans were both seen on July 11th at $4.173 and $10.47 per bushel respectively. The best canola price for the November contract was above $530 CAD / metric tonne.

However, the oilseed, which is traded on the Winnipeg ICE futures exchange has technically fallen 7.65% since the end of June. This drop is mainly due to a stronger Canadian Dollar. With an interest rate increase by the Bank of Canada, this month has helped the Loonie gain 4.2% against the US Dollar.

Grain Markets in August

Heading into the month of August, grain markets are going to impacted by three things other than weather (it always counts, doesn’t it.

First, harvest will be starting up for most crops. This will tend to put some pressure on cash grain prices as more supply becomes available.

For spring wheat crops, we’ll start to get some yield monitor photos that will show exactly how low yields are. Let’s remember to take these screenshots with a grain of salt (pun intended) as no one will usually share big yield numbers in a year like this one.

Further, this is when quality premium / discount schedules will start to become clearer. This intuitively means that you need to get that wheat tested, especially if you’re looking to sell into the milling market. You’ll need to know protein, moisture, falling number, HVK, disease (i.e. vomitoxin), and bushel weight.

Corn and soybean harvest will also be starting up in the earliest seeded areas in the American south.

Second, we get the August WASDE report from the USDA on Thursday, August 10th. We’re sure to see yield downgrades for corn, soybeans, and wheat. Keep in mind though that the market is already pricing in this yield loss. Next Wednesday before the report, I’ll touch on some of the pre-report expectations held by the grains market.

Third, the NAFTA negotiations are expected to start back up in the middle of the month. This could impact demand factors on grain markets, especially as it relates to US corn trade with Mexico. From a Canadian perspective, there might be some issues around wheat classification, but that’s yet to be seen.

With these three factors helping (four if you include weather), August shouldn’t be too much different from July regarding volatile grain prices.

Domestic Grain Markets Action

From a domestic standpoint, we know that the western Corn Belt is looking a bit drier. The Northern Plains are even drier (Garrett and I discuss this in detail in our July grain markets recap posted this weekend).

Across the border into Canada, we already discussed the lower crop ratings in Saskatchewan. From Friday’s Alberta crop report, crop ratings are also dropping pretty fast.[3] Average good-to-excellent (G/E) ratings across the Wildrose province for all crops fell 4.5 points from last week to 60%. The five-year average is 73.5% G/E.

Digging in, Alberta’s spring wheat G/E ratings were counted as 63% this week. Last week it was 66%.{4] Last month’s G/E rating was 80%.[5] It’s a similar dynamic in durum wheat as the end of June, the Alberta crop was rated 81% G/E, last week it was 62%, and this most recent crop report it was 40%.

As a side note, the International Grains Council flagged US durum export prices as high as $329 USD / MT ($8.95 USD / bushel, $11.25 CAD / bushel).[6] 14% protein US dark northern spring wheat prices were trading out of Pacific northwest ports at $345 USD / MT ($9.40 USD / bushel, $11.80 CAD / bushel).

These values are supported by the cash trades on the FarmLead Marketplace for country origination trades. This means that you should not expect these port, export-ready prices at your local grain elevator. However, you should be posting a block of your old or even new crop production on FarmLead to help you find the best price.

Coming back to crop conditions, Alberta barley crop G/E ratings have also dropped to 55%. Last week, barley crops there were rated 62.4% G/E, while a month ago it was 78% G/E. The percentage of canola crops rated G/E a month ago was 74% and last week it was 64%. This week, Alberta canola crops rated G/E fell another 2.5 points to 61.6%.

Later today, the USDA will come out with their weekly crop progress report. Expectations are that crop ratings will fall again.

Looking Internationally

The European Commission cut its forecast for the EU 2017/18 corn crop to a five-year low of 58.4 million tonnes.[7] Last month, the EU corn crop was estimated by the Commission at 61.1 million tonnes. As such, they increased their expectations for EU corn imports by 3 million tonnes to a new record of 15.3 million. Last year they imported 12.9 million tonnes.

For wheat, the European Commission dropped 300,000 MT to 138.9 million tonnes. This is a good jump from last year’s 134 million-tonne EU wheat crop but still a little bit below the 5-year average. Keep in mind that this average also includes the record crop from 2 years ago.

EU barley production this year was raised by 500,000 MT to 57.5 million tonnes. Conversely, the EU rapeseed output was lowered by 100,000 to 21.6 million tonnes. Comparably, Strategie Grains is currently pegging the EU rapeseed crop at 21.9 million tonnes.

With the European harvest starting to ramp up, you can expect some more competition in the export markets as well.

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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