FarmLead Breakfast Brief
Friday, June 2nd, 2017
“Life is as tedious as twice-told tale, vexing the dull ear of a drowsy man.”
– William Shakespeare (British poet)
At 6:15 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3526 CAD, $1 CAD = $0.7393 USD)
July Corn: +0.5¢ (+0.15%) to $3.71 USD or $5.018 CAD
July Soybeans: +1.8¢ (+0.2%) to $9.14 USD or $12.363 CAD
July Soybean Meal (per short ton): +$1.10 (+0.35%) to $298.60 USD or $403.90 CAD
July Soybean Oil (cents per lbs): -0.15¢ (-0.5%) to 31.10¢ USD or 42.07¢ CAD
July Oats: +1¢ (+0.4%) to $2.56 USD or $3.463 CAD
July Wheat (Chicago): unchanged at $4.29 USD or $5.803 CAD
July Wheat (Kansas City): +0.8¢ (+0.15%) to $4.315 USD or $5.837 CAD
July Wheat (Minneapolis): unchanged at $5.788 USD or $7.828 CAD
July Canola: -1.8¢/bu / -$0.80/MT (-0.15%) to $8.28/bu / $365.07/MT USD or $11.199/bu / $493.80/MT CAD
Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.221 USD or $3.005 CAD
July Milling Wheat: +10.9¢ (+1.6%) to $5.05 USD or $6.831 CAD
A Tale of 2 Crops?
Grains this morning are trading mostly sideways but in the green as weather differences in various parts of major grain-producing regions continue to sway bulls and bears. As the U.S. winter wheat harvest is starting up, there are the usual price pressures being seen and Chicago wheat is set for its worst week since late March as a result. Soybeans are likely to close out the week with their 4th-stratight week of declines as China’s soybean crush margins are the worst since September 2014, losing almost $52 USD / MT!. Some rain is expected to hit the eastern Cornbelt again this weekend with some cooler temperatures next week whereas the western half will get some hot temperatures through next weekend. Given the extreme divide that we’re starting to see between east and west, 2017 corn and soybean production in America might be the tale of 2 crops.
The European Commission is starting to admit some drier conditions in the E.U., dropping their total grain production forecast by 7M tonnes for a 304.8M-tonne haul for 2017/18, +3.4% year-over-year but still well below the 328M-tonne record set 3 years ago. Comparably, Coceral’s forecast for total E.U. grain production is 297.6M tonnes. Digging into specific crops, the Commission’s forecast for their barley crop is 59.5M tonnes, pretty much unchanged from last year but 2.87M tonnes lower than their previous estimate of this year’s production. For wheat, the Commission is estimating 141.3M tonnes, a 666,000 drop from the last estimate but a 5.2% jump over last year’s output. On corn, the Commission is forecasting a 64.2M-tonne crop, which is 2.34M tonnes below the last forecast but still 5.9% better than last year. According to AgriTel, spring corn and soybean planting is nearing a close in the Black Sea as in Ukraine, nearly all of the forecasted 11M acres of corn and 4.6M acres of soybeans are seeded. Next door in Russia, things are a little bit more behind with 93% of corn acres (7.17M acres) and 89% of soybean acres (4.94M) have been seeded as of June 2nd.
It’s been diverging games being played in the canola and the spring wheat markets as the former has pulled back significantly in the past couple of weeks whereas spring wheat prices have ticked up nicely. Canola has pulled back significantly on the futures market with a strong pace of seeding in the Canadian Prairies but basis has strengthened a bit. For wheat, we’re also cognizant of quality and yield potential for the U.S. winter wheat crop, as well in Ukraine where dry weather hasn’t helped. Benson Quinn Commodities also makes the point the Northern Chinese Plains have been dry, which is notable considering how much wheat they account for every year on the global balance sheet (about half of global carryout stocks today…). There are obvious planting concerns in Western Canada of the spring crop but there is a stretch of land reaching from NW Saskatchewan down to northern Iowa where things are getting fairly dry and if it wasn’t for some abundant moisture in the fall, we’d be in a much worse-off spot for crop development. Net-net, the tick-up of spring wheat prices in the last little while here should be considered a good opportunity to lock in some additional sales (we’ve seen strong activity on both old and new crop wheat on FarmLead the past week – post your old or crop deal today to get in the mix.).
The Ag Ministry in Brazil says that soybeans area in Brazil will likely grow between 2-3% for next year’s crop, mainly because of more acres opening up frontier regions. Also being announced was that agricultural GDP in Brazil in the first quarter rose 13.4% year-over-year vs expectations of 9.4%, which would be the best result since 1996. Moreover, Brazil’s exports increased by 4.8% YoY in Q1 but with sales now pretty solid, there are the seasonal expectations that exports will slow in the 2ndquarter, and with it the GDP. Switching back to North America, Arlan Suderman of FC Stone dug into the history of U.S. corn crop ratings and found that there are 9 times in the last 20 years that the first corn rating came in below 70% good-to-excellent and 5 of those 9 years produced above-trend yields. More acutely, the data tell us that there’s one story showing a strong chance of a good crop, but the bullish camp continues to trumpet a tale that the market isn’t pricing things in properly. If history is any indicator, when it comes to managing price risk when it comes to grain marketing, play the game in front of you, not the one you’re hoping for.
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.