FarmLead Breakfast Brief
Wednesday, June 7th, 2017
“When everything seems to be going against you, remember that the airplane takes off against the wind, not with it.”
– Henry Ford (US industrialist)
Good Morning !
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 = $1.3444 CAD, $1 CAD = $0.7438 USD)
July Corn: +3.3¢ (+0.85%) to $3.805 USD or $5.116 CAD
July Soybeans: +6¢ (+0.65%) to $9.295 USD or $12.497 CAD
July Soybean Meal (per short ton): +$3 (+1%) to $304.10 USD or $408.85 CAD
July Soybean Oil (cents per lbs): -0.03¢ (-0.1%) to 31.36¢ USD or 42.16¢ CAD
July Oats: -0.3¢ (-0.1%) to $2.56 USD or $3.442 CAD
July Wheat (Chicago): +4.8¢ (+1.1%) to $4.405 USD or $5.922 CAD
July Wheat (Kansas City): +5.5¢ (+1.25%) to $4.435 USD or $5.963 CAD
July Wheat (Minneapolis): -0.3¢ (-0.05%) to $5.985 USD or $8.047 CAD
July Canola: -0.2¢/bu / -$0.10/MT (-0.02%) to $8.593/bu / $378.89/MT USD or $11.5553/bu / $509.40/MT CAD
Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.235 USD or $3.005 CAD
July Milling Wheat: +10.9¢ (+1.55%) to $5.263 USD or $7.076 CAD
Facing a Headwind?
Grain markets are mostly in the green this morning as the complex follows on the boost from yesterday’s gains as crop conditions and hotter temperatures in major grain-growing regions around North America became concerning for the complex. As such, traders covered a few shorts and combined with a lower U.S. Dollar yesterday, the grains complex was able to make some healthy gains. The highlights were that Minneapolis wheat closed over $6 USD / bushel for the first time in 2 years while corn tested major technical and psychological levels of resistance around $4 USD / bushel on the Chicago futures December contract. For corn, there’s more suggestions now that the national yield may lose 2-3 bushels off the forecasted 170.7 bu/ac from the U.S.D.A. (will it be upated in Friday’s W.A.S.D.E.? My guess is probably not). Further, due to replanting issues, the corn crop may lose 1 – 1.5M acres from the expected 90M, meaning, with the combined yield loss, 2017/18 carryout could drop below 2 Billion bushels (finally!). We might see some higher moves yet with the weather but we’re strong advocates of selling into strength – don’t miss an opportunity and post your next target(s) this morning. While the bullish catalysts is clearly on the supply side with production concerns, the bearish factors are centering around Brazil starting to ramp up their corn exports program as their harvest starts up, a tough headwind facing American business.
Digging into the areas of most concern (U.S. Northern Plains), the quality of the crop is up in the air. Karen Braun of Reuters points out that there’s not a lot of rain in the forecast for the Dakotas, which are expected to grow 11% of all U.S. soybeans and 9% of the total U.S. corn crop in 2017. This is worth noting as in South Dakota, just 62% of the corn crop is rated G/E, versus the 74% it was a year ago, while North Dakota is sitting 19 points below last year’s rating with just 67% rated G/E while. There’s already buzz in North Dakota that you have to dig more than a few inches to find moisture in the soil (25% of the state is considered to be in moderate drought while the other 3/4s is considered abnormally dry). Our good friend, Chuck Penner over at LeftField Commodity Research, points out that North Dakota durum good-to-excellent (G/E) is at 27%, versus the 78% it was at a year ago. Similarly, Chuck points out that the Montana lentils portion rated G/E dropped 12 points to just 32%.
Speaking of lentils, monsoon season is starting up in India and forecasts are that the rainy season will be about 98% of the long-term average, according to the India Meteorological Department. The agency’s forecast was up 2 points from their previous estimate, measuring it off the 50-year average of 89 centimeters of rain (or 35 inches!). The main reason for the increase was the easing of an El Nino weather pattern. Considering that there are 260M farmers who depend on this main moisture event, it’s pretty important to get them, but even with a good crop, there’s some battling going on between government and farmers over fair prices. While conditions for crop potential though look good in India, there’s certainly some things worth noting in North America, namely U.S. acreage jumping 53% this year to nearly 500,000 acres, as pointed out by Chuck Penner. I would have to agree with him that the increased acreage may mean some softer demand by U.S. for Canadian supply, which saw its own 10% decline in acreage. Overall, there are some good new crop prices available (post a block of yours with an Act of God clause!), but there are some headwinds that the market could face.
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.