June 19 – Gaining Perspective

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FarmLead Breakfast Brief

Monday, June 19th, 2017

“The only thing you sometimes have control over is perspective. You don’t have control over your situation. But you have a choice about how you view it.”
– Chris Pine (U.S. actor)

Good Morning!

At 6:55 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3215 CAD, $1 CAD = $0.7567 USD)

Sept Corn: -5¢ (-1.3%) to $3.87 USD or $5.114 CAD
Aug Soybeans: +3.3¢ (+0.35%) to $9.465 USD or $12.509 CAD
Aug Soybean Meal (per short ton): +$1.20 (+0.4%) to $303.90 USD or $401.61 CAD
Aug Soybean Oil (cents per lbs): +0.09¢ (+0.25%) to 33.33¢ USD or 44.05¢ CAD  
Sept Oats: +0.5¢ (+0.2%) to $2.653 USD or $3.505 CAD
Sept Wheat (Chicago): +0.5¢ (+0.1%) to $4.82 USD or $6.37 CAD
Sept Wheat (Kansas City): +1¢ (+0.2%) to $4.925 USD or $6.509 CAD
Sept Wheat (Minneapolis): +3¢ (+0.45%) to $6.50 USD or $8.59 CAD
Nov Canola: +0.2¢/bu / +$0.10/MT (+0.02%) to $8.418/bu / $371.16/MT USD or $11.124/bu / $490.50/MT CAD

Friday’s Winnipeg ICE Close
Sept Barley: unchanged at $2.307 USD or $3.048 CAD
Oct Milling Wheat: +10.9¢ (+1.5%) to $5.602 USD or $7.403 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!

Gaining Perspective

Grain markets are mostly in the green to start the 3rd week of June as the market continues to price in a premium for current crop conditions, future forecasted weather (which appear a bit better for wheat and corn), and demand factors (mostly related to oilseeds). However, it’s worth noting that the market is expecting improvements to the U.S.D.A.’s crop progress good-to-excellent rating for all 3 major row crops (corn, soybeans, and wheat) this afternoon. The Indian government recently increased its minimum support price (MSP) for pulses, oilseeds, and cotton for the 2017/18 crop year.[1] It comes as values for these crops are under pressure due to a large amount of supply in the market. The increase was really the recommendation of the Reserve Bank of India as they try help prop up a fledgling agricultural industry which employs over 300M people in the country. Coming back to North America, more comparisons are being made to the start of the 2015 crop year when wet conditions added a bit of premium to the market.[2] Notably, spring wheat saw a 26% gain over the month of June that year, before dropping 20% over the subsequent 2 remaining months of the growing season to lows not seen since 2010 (and roughly, trading around those same levels for the past 2 years except for the past month). Needless to say, every year is not exactly like another one that we’ve seen before – there are just too many factors to consider. However, trying to gain perspective from a couple of relatable or similar variables is worth the exercise in the long-term.

Hedge funds / managed money are trying to figure this perspective thing out as they cut their net short and options position by more than 120,000 contracts last week, the largest one-week bullish swing in over a decade. Hedge funds dropped 15,000 short positions of soybeans last week, with the large old crop supplies in the U.S. and Brazil weighing on the mind of many bulls. However, strong demand factors continue to help pull up soybean and other oilseeds’ socks. While the weather and demand are 2 important factors to consider, acreage continues to set the foundation for any expected production, meaning that the June 30th stocks and acreage report is setting up to be pretty important. David Widmar from Ag Economics Insights points out that prevented planting impacts tend to be more impactful on corn acres than soybeans.[3] More specifically, in the past few years, PP area has average 1.7M acres for corn, 1M acres for soybeans, and 2.1M for other crops. Overall, the total acreage not only has an impact on production, but also the corresponding carryout of specific crops, and therefore prices. An example would be if we see below-average PP numbers this year, this would suggest a higher output number &, accordingly more carryout, which means lower prices. Of course, PP numbers are only 1 variable in a long line of many to determine where prices are going.

Agriculture Canada (A.A.F.C.) is expecting feed barley prices in the Great White North and the rest of the world to soften as new crop supplies come online in August and thereafter.[4] This comes as feed barley demand in Canada has been persistently strong compared to usual for this time of year, with most of the strength due to higher livestock prices.[5] While there is expected to be a smaller global harvest in 2017/18 compared to last year (mainly thanks to Australia’s huge crop), A.A.F.C. sees barley prices swinging between $160 – $190 CAD / MT for the next year ($3.50 CAD / bushel or $2.65 USD / bushel up to $4.15 CAD / bu or $3.15 USD / bu). A.A.F.C. also notes that oats prices may have some more upside yet, despite futures values hitting a 2-year high recently, as U.S. buyers start to try and lock up new crop supplies. Notably, as per Tregg Cronin of Halo Commodities[6], global oats supply and demand tables are looking to be the tightest on record while worldwide barley S&D tables are the firmest since 1983/84.

The oats market though is seems to be trying to follow the spring wheat market and while conditions remain troublesome in major U.S. producing states, Canadian crops are faring much better comparably.[7] That being said, compared to a year ago and the 5-year average, good-to-excellent (G/E) ratings are down across the board, notably in Saskatchewan.[8] For example, with 75% of the Sask spring wheat crop rated G/E, this is actually down 17 points year-over-year and 6 points from the 5-year average of 81% for this time of year. The Saskatchewan durum crop is rated 59% G/E (-33 YoY, -19 points from 5-year average), 73% of the barley crop is considered in G/E health (92% a year ago, 83% is the 5-year average), and oilseeds are all lagging behind with flax at 48% G/E (91% last year, 75% 5-year average), canola at 66% G/E (86% a year ago, 74% 5-year average), and soybeans at 60% (93% a year ago, 83% 5-year average). Overall, in the past 5 years, only 2015 had a more worse start to the growing season, or at least in Saskatchewan at least – can you remember what happened in your growing season 2 years ago? Further, what did your grain marketing plan start out and finish like then? They say hindsight is 20/20 so trying to gain perspective ahead of critical moments of needed action is inherently valuable. It’s worth a shot at least.

P.S. This week we’re in Regina, SK at the 40th Canadian Farm Progress Show! Come visit us at our booth in the Agribition Building to talk grain markets, your marketing plan this year, and why you should be listing some grain on FarmLead.

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.

[1] “Government Increases MSP of Pulses, Oilseeds, and Cotton to Support Farmers Amid Price Fall.” – The Economic Times. June 17, 2017
[2] “AM Markets: How Will Wheat Futures Answer Key Question?” – Agrimoney.com. June 19, 2017
[3] “Will Prevented Planting Acres Add Up Enough To Matter in 2017?” – David Widmar via Agriculture.com. June 12, 2017
[4] “World Barley Prices To Soften, But Oats Could Rally Yet.” – Agrimoney.com. June 16, 2017
[5] “Strong Demand Supports Feed Barley Price.” – Western Producer. June 15, 2017
[6] @5thWave_tcronin Tweet – June 18, 2017
[7] “Canadian Spring Wheat In Much Better Health Than U.S. Crop.” – Agrimoney.com. June 16, 2017
[8] “Saskatchewan Crop Report for the Period June 6 to 12, 2017>” – Saskatchewan Ministry of Agriculture. June 15, 2017

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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