June 1 – Gaining Perspective

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FarmLead Breakfast Brief
Thursday, June 1st, 2017

“Distance not only gives nostalgia, but perspective, and maybe objectivity.”
– Robert Morgan (US poet)

Good Morning!

At 7:15 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3508 CAD, $1 CAD = $0.7403 USD)

July Corn: +0.8¢ (+0.2%) to $3.72 USD or $5.035 CAD
July Soybeans: +2.3¢ (+0.25%) to $9.183 USD or $12.404 CAD
July Soybean Meal (per short ton): +$0.70 (+0.25%) to $298.80 USD or $403.62 CAD
July Soybean Oil (cents per lbs): +0.13¢ (+0.4%) to 31.47¢ USD or 42.51¢ CAD  
July Oats: -0.3¢ (-0.1%) to $2.473 USD or $3.34 CAD
July Wheat (Chicago): -0.3¢ (-0.05%) to $4.29 USD or $5.795 CAD
July Wheat (Kansas City): +0.8¢ (+0.15%) to $4.325 USD or $5.842 CAD
July Wheat (Minneapolis): +2¢ (+0.35%) to $5.74 USD or $7.754 CAD
July Canola: +3.2¢/bu / +$1.40/MT (+0.3%) to $8.43/bu / $371.71/MT USD or $11.387/bu / $502.10/MT CAD

Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.224 USD or $3.005 CAD
July Milling Wheat: -5.4¢ (-0.8%) to $4.976 USD or $6.722 CAD

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Gaining Perspective

Grain markets started the month of June in the green as the debate rages between old crop demand and weather premiums thanks to seeding and crop condition concerns. Seeding progress continues to be made in Western Canada but things will likely get slowed down by some rains heading into the weekend. Saskatchewan farmers have planted over 25M acres in just the last 3 weeks, putting total acreage seeded at 60%, a bit behind the 5- and 10-year averages of 65% and 66% respectively. Arguably, this has been one of the wettest springs in a lot of places, but the market hasn’t been able to price this in. Ted Seifried of Zaner Ag Hedge Group thinks that market participants refuse to be fooled like they were last year when we saw premium get built up and then washed away in the 2nd half of June. Conversely, one could argue that the market is believing the old adage that “rain makes grain” just a little too strongly. It’s always important to keep things in perspective though as what you see through your front window or on a video of someone wakeboarding in a field shouldn’t be construed as consistent across all acres. Newsworthy stories tend to be more fiction than fact these days, so don’t let the headlines sway your perspective to just what you’re hoping to hear.

Concerns continue to be raised for the quality of the U.S winter wheat crop with intermittent recent rains not likely helping what will be combined in the next 6-8 weeks. Lower-than-average protein is what most grain buyers are worried about as some of the first harvest samples coming into Plains Grains Inc, an industry group that tests grain, showed an average of 10.6%, below last year’s already-historically low final average of 11.2%! On the other side of the pond, Egypt’s GASC bought 120,000 tonnes of Russian wheat and 60,000 tonnes of Romanian yesterday for an delivered price of about $202.60 USD /MT (or $7.40 CAD / bushel). In Spain, some drier conditions this growing season will mean that the country will likely import over 5.5M tonnes of soft wheat in 2017/18 (+31% year-over-year) which will be mainly used to feed a growing livestock industry. On the production side, Agroinfomarket is forecasting wheat output in Spain to fall 25% YoY to 4.95M tonnes, nearly matching Coceral’s 4.83M-tonne forecast but still sitting below the International Grain Council’s 5.5M tonnes estimate from last month. Barley production in Spain has also be reduced to 6.15M tonnes by both Cocereal and Agroinformarket, a drop of 35% YoY!

AgResource says that the 2nd corn crop in Brazil, known as the safrinha crop, has enjoyed almost perfect growing conditions this year and there are some big yield expectations. With harvest of the crop starting for the earliest planted stuff, and no threats to weather, the usual harvest price pressure is happening and it’s likely to continue as Mato Grosso, the largest grain-growing state, is expected to combine almost 30M tonnes. One of Brazil’s competitors in global corn trade is Ukraine, which according to its Ag Ministry, has now shipped out 18.6M tonnes of the coarse grain thus far in the 2016/17 marketing season (+12.5% YoY). Total grain exports out of Ukraine thus far, according to the Ag Ministry there, has hit 40.7M tonnes but many argue it could be more if the country invested more in its infrastructure. Specifically, Mike Lee of @AgronomyUkraine Twitter fame points out that the country used to have 12,000 government-owned grain railcars, but that number has since dropped to 3,000, without any being bought since 1986! To put it in perspective, the Canadian government owns about 8,400 hopper cars (albeit the state of their quality is much to be debated).

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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