FarmLead Breakfast Brief
Tuesday, June 27th, 2017
“It is the sign of a great mind to dislike greatness, and to prefer things in measure to things in excess.”
– Seneca (Roman philosopher)
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 = $1.3224 CAD, $1 CAD = $0.7562 USD)
Sept Corn: +2.3¢ (+0.6%) to $3.695 USD or $4.878 CAD
Aug Soybeans: +8¢ (+0.9%) to $9.193 USD or $12.135 CAD
Aug Soybean Meal (per short ton): +$1.40 (+0.45%) to $297.40 USD or $392.61 CAD
Aug Soybean Oil (cents per lbs): +0.39¢ (+1.25%) to 32.04¢ USD or 42.30¢ CAD
Sept Oats: +1¢ (+0.4%) to $2.523 USD or $3.333 CAD
Sept Wheat (Chicago): +1.8¢ (+0.4%) to $4.673 USD or $6.168 CAD
Sept Wheat (Kansas City): +2.3¢ (+0.5%) to $4.738 USD or $6.254 CAD
Sept Wheat (Minneapolis): +6.3¢ (+0.95%) to $6.75 USD or $8.911 CAD
Nov Canola: +7¢/bu / +$3.10/MT (+0.65%) to $8.198/bu / $361.48/MT USD or $10.752/bu / $477.20/MT CAD
Yesterday’s Winnipeg ICE Close
Sept Barley: unchanged at $2.309 USD or $3.048 CAD
Oct Milling Wheat: +5.4¢ (+0.75%) to $5.607 USD or $7.403 CAD
Measuring Sticks (How Big is Yours?)
Monday’s Crop Report Surprise
Grains this morning are ticking higher again.
The U.S.D.A.’s crop progress report from yesterday didn’t produce the bearish results expected by the broader market. Forecasters anticipate rains across most North American growing regions through the rest of the week, including the Northern Plains! But they have projected hotter temperatures for upcoming holiday weekend. While the market weighs the surprise bullish crop report, better growing conditions this week will remain a critical factor ahead of Thursday’s price report and Friday’s acreage report.
According to Monday’s crop progress report, U.S. corn’s good-to-excellent (G/E) ratings remained constant from last week at 67%, versus the one to two point increase the market had expected. The market was also pricing in a similar rise in U.S. soybean G/E ratings; however, the figure dropped by one point from last week to 66% G/E. The five-year average of American corn and soybean G/E ratings for the last week of June was 68% and 66%, respectively, suggesting that the crop is on track with historical average.
You could argue with me that 2012’s crop ratings numbers altered the overall average. Corn and soybean crop conditions for the 13th crop progress report of the year in 2012 was just 56% and 53%, respectively. However, at this time of the growing season in 2015, corn’s G/E was 68%, and in 2013 it was 67%. Soybeans’ G/E in 2015 was 63% at this time but was sitting at 72% in 2013.
The hot market (literally) continues to be spring wheat.
Dryness in the Northern Plains dropped the national G/E rating by one point week-over-week to 41%. It is a far cry from the 72% G/E we saw a year ago and the five-year average of 73%. Compared to last week, Idaho’s spring wheat crop was the biggest loser. It’s G/E/ rating fell from 62% to 43%; meanwhile, it’s poor-to-very poor (P/VP) figure increased by 15 points to 24%.
South Dakota is facing a quality crisis. Just 12% of the state’s spring wheat crop is rated G/E (down one point week-over-week). It’s P/VP portion also continues to fall, down eight points since last week at 62%. Montana’s spring wheat crop got a bit better as its G/E rating increased by three points to 22% while North Dakota’s dropped by three points to 39% G/E. The North Dakota Wheat Commission is maybe the most bullish, thinking that this year’s U.S. spring wheat average wheat yield could be in the mid-30s (roughly a 25% drop from the five-year average of 46.4 bu/ac).
Given the temperatures, we’re also eyeing North Dakota’s durum crop. One could argue that it is starting to improve. But our friend Chuck Penner at Left Field Commodity Research points out that with only 24% of the crop rated good and none of it rated excellent, it’s miles away from anything we’ve seen in the past 10 years (G/E has mostly been in the 70s or 80s).
The U.S. winter wheat harvest continues to plug along, sitting at 41%, up 13 points week-over-week and above the 39% combined five-year average by this time in June. The crop’s G/E rating stayed the course at 49% this week. This figure nearly matches its five-year average G/E by this time in the growing season of 50% (notable G/E lows were in 2015 and 2014 at 41% and 33% respectively).
Rounding out the cereals, U.S. barley G/E ratings came in at 60%, down 4 points on the week, and still a good distance from last year’s 75% and the 5-year average of 71% G/E. For the U.S. oats crop, 54% of it is considered to be in G/E health. This is a drop of 2 points from last week, but like barley, still sitting considerably further away from the 67% G/E rating of both last year and the 5-year average.
Factors Affecting Prices Around the Globe
Russia has enough moisture going into harvest. But Ukraine could use a drink, as could a few areas of Western Europe.
M.A.R.S., the E.U.’s agronomy division, has dropped its wheat yield forecast across the bloc to 87.1 bu/ac. Localized estimates include almost 101 bu/ac average in France (+26% year-over-year), nearly 80 bu/ac in Italy, 58 bu/ac in Ukraine (-7% YoY), but less than 40 bu/ac in Spain (-31% YoY) thanks to dry conditions there.
In Brazil, AgResource explains that cash grain prices across the nation have fallen about 5% in the past week thanks to a stronger Real. Despite the downturn, farmers across Brazil have been reluctant sellers: Brazilian soybean export commitments of 48.2M tonnes is only tracking about 10% ahead of last year. The U.S.D.A. is expecting a 23% jump year-over-year when the crop marketing calendar flips to 2017/18 (the crops that South American farmers just harvested counts as part of the 2016/17 crop). Some logical thinking suggests there will be a bigger soybean carryout in Brazil. This supply will directly compete against the fall harvest of U.S. soybeans.
With all of these factors in play, Rabobank remains cautious about raising their grain price expectations. Naturally, this comes as no surprise. The Dutch bank posits that yield losses in North America are being offset by decent crops across the globe. They do acknowledge some price premium though, looking for $4.80 USD/bushel Chicago wheat and $9.40 soybeans in the last three months of 2017. While we know that some premium is getting baked into the market right now, market expectations toward the reports at the end of this week continue to lean bearish.
Ahead of Friday’s stocks report, the average market guesstimate suggests that June 1 grain stocks in the U.S. will be 8.7% higher than last year for corn, 12.7% higher for soybeans, and 16.5% higher for wheat.
We’ll look at some more measuring sticks for the spring wheat markets and this week’s report expectations in tomorrow’s Breakfast Brief.
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