June 20 – Being Surprised Again?

Good Morning !

Unfortunately, due to travel restrictions, there is no grain futures price data in todfay’s Breakfast Brief but here’s a link for them

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Being Surprised Again?

Grain markets are slightly in the green this morning with spring wheat leading the way again, thanks to another bullish crop progress rating from the U.S.D.A. While we have been seeing some warmer temperatures as of late, the Australian Bureau of Meteorology recently canceled its El Nino watch as they expect Pacific Ocean temperatures to remain neutral through the end of 2017.[1] This was basically confirmed by rains that have been falling on fairly dry Western Australia (we wrote about it on Friday[2]) and are expected to continue to fall through the end of the week. Harvest has started in southern parts of the Black Sea, meaning we should start to see Egypt come back into the market more aggressively soon, albeit their floppy ergot tolerance policy levels may keep suppliers away (it’s hard to guarantee zero ergot which is why some major grain players don’t bid into Egypt with some premium baked into their price). It’s more than likely that Egypt will stick to a 0.05% ergot policy but we’ve been surprised by them a few times in their grain procurement processes the past few years.

Yesterday afternoon we got the U.S.D.A.’s weekly crop progress report findings and the results were more negativity for the crop, led again by spring wheat.[3] Now just 41% of the U.S. spring wheat crop is in good-to-excellent G/E rating, down 4 points from last week (whereas the market was expecting a 4-5 point increase!) and a strong distance from last year’s 76% at this time. U.S. barley and oats crops were also downgraded, seeing their G/E portion drop by 8 points and 1 point respectfully. This puts 64% of the U.S. barley crop to be in G/E health (77% a year ago) and the portion of the American oats crop rated G/E at 56% (70% a year ago). Some rains last week provided relief to the U.S. corn & soybeans crop, with the portion rated G/E for corn unchanged from last week at 67% (75% a year ago) whereas beans saw a slight upgrade by 1 point to 67% of U.S. crop to be in G/E health (73% a year ago). Finally, 28% of the U.S. winter wheat crop is now in the bin (ahead of last year and the 5-year average) while 49% of the crop is in G/E health, a drop of 1 point from last week and 12 points below last year’s 61% at this time.

Overall, the weather forecasts continue to push towards more benign growing conditions. Rains in the Dakotas are bringing some relief to the area with 55% of South Dakota’s soil moisture conditions rated short or very short, followed by North Dakota at 49% short or very short. Montana isn’t out of the wood either as 49% of soil is also considered short or very short moisture. All things being equal, while you may not like hearing it, bad weather has, for the large majority, already priced in. It’s more than possible that the upgrades that the market was hoping for in spring wheat could come next week, given the recent wet events.  With more rain in the forecast for a lot of places, this can put a bearish tinge on things. Again, as the theme has been the past few days, we’re cognizant of these weather factors and the possibility of some gapping higher to new multi-year highs (especially in wheat). But we’re also aware of just how high we’ve run up the past few weeks. As such, we all can agree that the weatherman has been wrong before.

To growth,

Brennan Turner

President/CEO | FarmLead
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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] “El Nino Watch Cancelled By Australia As Pacific Ocean Cools.” – Bloomberg. June 20, 2017

[2] “Parched or Saturated?” – FarmLead Breakfast Brief. June 16, 2017

[3] U.S.D.A. / N.A.S.S. Crop Progress Report. June 19, 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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