In today’s Breakfast Brief, we look at dwindling oil prices, pre- January WASDE guesstimates and the Brazilian corn crop.
“Virtue is relative to the actions and ages of each of us in all that we do.”
– Plato (ancient Greek philosopher)
Commodity markets continued their decline yesterday, with grain prices being pushed lower on rains continuing to fall in key parts of South America (CONAB recently kept its Brazilian soybean forecast at 102.1 million metric tonnes!), and there’s even rain in the forecast for drought-riddled South Africa! Oats took the biggest plunge on the grains markets, dropping over 5% to below $2/bushel in Chicago.
Oil Hitting A Downturn
Oil was again a big loser yesterday, tanking over 5% to its lowest level since 2002 at $31/barrel, which in turn, pushed Western Canada Select heavy crude to less than $17/barrel, another new record low, and the Canadian Loonie down to below 70.5 cents USD (if you’re continuously asking why it keeps going lower, read this). Are we at the lows?
Commodities have started out the year worse than last year’s first few weeks but you likely won’t find any economists admitting to that but it’s hard to peg in another 10% move in the Loonie (down to 63 cents), but a 10% drop in oil would be just $3.10, or 10% in corn would be just 35¢ – puts it in perspective for you doesn’t it.
Speaking of relativity, the Chinese state media is suggesting that the government must lower domestic corn prices to reduce the state reserves/stockpile so as to lessen the impact of imports that could be substituted for corn, such as sorghum, barley, & DDGs. Not surprisingly, China has also begun an anti-dumping investigation into imports of American DDGs after it had been rumoured they would do so back in November. Back on this side of the Pacific, biofuel and ag lobbying groups are joining forces are petitioning a US federal appeals court to challenge the EPA’s recent RFS biofuel numbers finalized in November. It’s certain that ethanol groups are starting to feel the pain of lower oil prices as margins continue to dwindle from black to red.
Going into the specific pre-release trade guesstimates, today’s WASDE report (out at 12 noon ET) is forecasted to show relatively neutral-bearish numbers with Dec. 1 stocks showing 1.698B bushels of wheat (the USDA’s number in their December report was 1.53 billion bushels), 11.237 bllion bushels of corn (11.211 billion in December), and 2.72 billion bushels of soybeans (2.528 billion last month). Total US winter wheat acres are pegged at 39.32M vs the 39.461M that got planted last year. As for the 2015/16 marketing year ending stocks, there’s expected to be 919M bushels of US wheat left over (911M pegged in December), 1.785B bushels of corn (unchanged from December), and 468 billion bushels of soybeans (465 million last month). Some of the other numbers I’ll be looking more closely for in this report will be any changes to US soybean and corn yields, production numbers out of South America, and any changes to export programs from Brazil (soybeans and corn), Argentina (soybeans, corn, AND wheat), Russia (wheat), and Ukraine (corn and wheat).
Brazil Corn Crop To Hit Last Years Highs
With the rains finally falling in the right places in Brazil, research institute CEPEA says that the Brazilian Real is creating incentive for the 2nd / safrinha corn crop to yield 54.5 million metric tonnes (close to last year’s record crop, assuming similar acres and a slight decrease in average yields). With the opportunities to lock in a great domestic price, according to ag institute IMEA, Brazilian farmers in the Mato Grosso state have already forward sold 53.5% of their possible production as of the end of December. This equates to almost 5 times the 11.5% of potential output that was priced at the same time a year ago.
That being said, we continue to see solid basis opportunities in corn and soybeans in Ontario and a few parts of the U.S., and wheat in Western Canada – go ahead & post your basis-only contract on FarmLead by putting the basis level in the price field. As you’re pondering whether or not you should, relative to the past 2 or 3 years, what basis levels have you been able to lock in?
We’re happy to chat about all this & more today if you happen to find yourself at the Crop Production Show in Saskatoon. You can find us in between Richardson & Farmer’s Edge in Hall A talking grain markets and ideas for marketing heading into the your 2016 growing season.
At 6:45 AM CDT in the North American futures markets:
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.421 CAD, $1 CAD = $0.7038 USD)
Mar Corn: -0.3¢ (-0.05%) to $3.52 USD or $5.002 CAD
Mar Soybeans: unchanged at $8.613 USD or $12.238 CAD
Mar Soybean Meal (per short ton): +$0.20¢ (+0.05%) to $270.10 USD or $383.812 CAD
Mar Soybean Oil (cents per lbs): -0.1¢ (-0.25%) to 29.17¢ USD or 41.451¢ CAD
Mar Oats: +0.5¢ (+0.25%) to $1.995 USD or $2.835 CAD
Mar Wheat (Chicago): unchanged at $4.69 USD or $6.664 CAD
Mar Wheat (Kansas City):+1¢ (+0.2%) to $4.633 USD or $6.583 CAD
Mar Wheat (Minneapolis): +0.5¢ (+0.1%) to $4.938 USD or $7.016 CAD
Mar Canola: unchanged at $7.636/bu / $336.698/MT USD or $10.85/bu / $478.40/MT CAD
Yesterday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.789 USD or $3.963 CAD
Mar Durum Wheat: unchanged at $6.168 USD or $8.763 CAD
Mar Milling Wheat: -5.4¢ (-0.85%) to $4.54 USD or $6.45 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.