June 20 – Capped Out

In today’s Breakfast Brief, we discuss delayed plantings in India, the Brazilian soybean supply squeeze and upcoming forecasts.

“You can have fun, but you also have to put on your thinking cap every day.”

– Tommy Shaw (US musician)

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Good Morning!

Grains this morning are sharply lower with a “risk-on” feel given new forecast for rains across major growing regions and a Brexit vote tomorrow looking less and less like the U.K. will leave the European Union.

Delayed Planting in India

Funds are now holding more than 250,000 long positions in corn, suggesting weather and export demand remains the focus of their buying, while the net-long in soybeans remain above 200,000 lots. Slower monsoon rains in India are delaying planting activity, with 20.8 million acres sown thus far, 11% behind last year’s pace. However, Indian farmers have until, roughly, the end of July to get a crop in during this “kharif” season and can afford to wait for the rains, which meteorologists say is coming. In the meantime, today’s the first day of summer, meaning it’s officially time to bring the farmer tan and fishing caps out.

On Friday, funds got a little more aggressive and “bought the dip” ahead of the weekend, helping corn get hot again to nearly $4.40 USD / bushel on the Chicago board. The volatility gives you an idea of the uncertainty out there, not only in grain markets (who knows what’s going to get harvested?!?!), but also the broader market, like oil price effects and the aforementioned Brexit vote. The oats futures market is higher this morning as it looks like there is more upside to things, mainly thanks to the increased volatility over the growing season, albeit there is definitely some discrepancy between futures and cash prices these days.

Echoing our call from Friday, while we don’t discount the possibility of upside today in cereals, it look slim. Thus, it’s worthwhile to consider what storage needs will be like in a few months for Harvest 2016 and consider posting something on the FarmLead Marketplace to lock in movement for oats and/or other crops before being rushed into something at the last minute (historically-speaking, we’re all guilty of doing it….)

Soybean Supply In a Squeeze

While the oats market could pop by a few dimes, a supply squeeze in Brazil has caused domestic soybean prices there (in Real terms) to reach new records, echoing that of Brazilian corn prices from a few weeks ago. So far in 2016, nearly 31 million metric tonnes of the oilseed have been exported, a jump of 37% compared to the same timeframe in 2015. Further, soymeal exports are also up 20% year-over-year, creating the question from famed analyst Dr. Cordonnier of “will Brazil run out of soybeans, or will Brazilian soybean export end abruptly?” Considering that China’s protein demand is expected to continue, the lack of Brazilian supply likely means more business for other players, namely the U.S.

Rains Forecasted for U.S.

Weather over the weekend across the North American growing region was generally positive, with some stronger rains (accompanied by hail) seen here and there throughout Western Canada and the Midwest. Eastern Ontario remains dry whereas the large majority of crops in Saskatchewan and 80% of the crops in Alberta are rated in good-to-excellent condition. There are other pockets of dryness in the corn belt, namely northern Indiana, south central & northeast Iowa, and parts of Nebraska, albeit a couple of inches of rain are forecasted for the region this week. The weather has been generally cooperative for the US winter wheat harvest to progress but weekend rains put a halt to most activity in the Southern Plains.

Average yields and test weights for the crop has been very good, while average protein hovering around that 11.5% has Mike Jubinville of Pro Farmer Canada suggesting some premiums may become available. However, given the good start and potential size of the North American spring wheat crop, Mike says a #2, 13% protein HRS wheat price in Canada may be capped at $6.50/bushel.

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
1-306-665-8740 (Office)
www.FarmLead.com
@FarmLead (on Twitter)

At 5:30 AM CDT in the North American futures markets:

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.281 CAD, $1 CAD = $0.7806 USD)

Sept Corn: -7.8¢ (-1.75%) to $4.35 USD or $5.572 CAD
Aug Soybeans: -13¢ (-1.1%) to $11.47 USD or $14.693 CAD
Aug Soybean Meal (per short ton): –$4.20 (-1.05%) to $402.50 USD or $515.60 CAD 
Aug Soybean Oil (cents per lbs): -0.34¢ (-1.05%) to 31.72¢ USD or 40.63¢ CAD 
Sept
 Oats: +4¢ (+1.85%) to $2.218 USD or $2.841 CAD

Sept Wheat (Chicago): -4.3¢ (-0.85%) to $4.905 USD or $6.283 CAD
Sept Wheat (Kansas City): -4.8¢ (-1%) to $4.738 USD or $6.069 CAD
Sept Wheat (Minneapolis): -3.8¢ (-0.7%) to $5.45 USD or $6.981 CAD
Nov Canola: -12.7¢ / -$5.60/MT (-1.1%) to $9.073/bu / $400.06/MT USD or $11.75/bu / $518.10/MT CAD

Friday’s Winnipeg ICE Close

Oct Barley: unchanged at $2.915 USD or $3.734 CAD
Oct Durum Wheat: unchanged at $6.31 USD or $8.083 CAD
Oct Milling Wheat: +8.2¢ (+1.3%) to $4.971 USD or $6.368 CAD

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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