March 1 – Watching for Next Clues in Grain Markets

Good morning!

Soybean prices are leading the grain market again this morning, with winter wheat prices not far behind, thanks to ongoing drought concerns.

“Success leaves clues, and if you sow the same seeds, you’ll reap the same rewards.” – Brad Thor (US author)




Watching for Next Clues in Grain Markets

Grain markets are mostly in the red this morning with canola prices and soybean prices the only members of the complex in the green.

Part of the reason that grain markets are having a tough time this morning is a stronger US Dollar. With new U.S. Federal Reserve Chair Jerome Powell in place, the broader market is expecting four U.S. interest rate hikes in 2018, instead of the original three. Interest rate increases suggest a strong economy, and therefore a strong US Dollar.

Garrett pointed this out in his regular afternoon recap, Grain Markets Today, although it was wheat prices who stole the headlines again. The next ten days doesn’t show much moisture in the forecast for the US Southern Plains. As such, for nearby movement, Chicago winter wheat prices popped 18 cents USD / bushel while Kansas City winter wheat prices jumped 17.5 cents.

Spring wheat prices also gained, but not as much, which is an indication of the protein price spread continuing to narrow. At its peak, the difference between winter wheat and spring wheat prices was more than $2 USD /bushel; today it’s closer to $1.

Yesterday, in GrainCents, I dug into my expectations for oats prices, cognizant of some of the recent oats deals made on the FarmLead Marketplace, as well as some international trade policy.

Also, cognizant of the recent trip of Canadian pulses members to India, I provided a reaction in GrainCents to some of the headlines coming out. Check out my expectations for the pulses – specifically prices – here for peas subscribers, here for lentils readers, and here for those signed up to chickpeas.

With some of the recent action on both the futures market and in the cash market on the FarmLead Marketplace, we’ll be sending out some GrainCents crop sales position updates today. Thus, if you’re a GrainCents subscriber, watch your email for which crops we’re moving on.


Canola Prices, Soybean Prices Look South

Palm oil prices in Malaysia hit a six-week high before the end of February, as export activity picked up a bit while tracking an underperforming soy oil market.

Soy oil prices haven’t been moving a whole ton, which is why we haven’t seen canola prices move as much maybe as soybean prices have (canola tends to track soy oil more than just soybeans because of its high relevance in the vegetable oils market, a factor that we’re watching in GrainCents).

Heading down into Brazil, central regions are expected to continue to receive rain over the next two weeks, slowing down soybean harvest and second crop/safrinha corn seeding. In the northern areas of Mato Grosso, rain isn’t in the forecast until next week, meaning there should be a flurry of activity in the field as we speak.

In Argentina, temperatures in the upper 80s/lower 90s Fahrenheit in the Santa Fe and Cordoba provinces won’t be helpful to a crop that’s grasping for a drink. These two regions account for about 50% of Argentine soybean production. Grain markets continue to be cognizant of the South American weather premium, especially as it relates to the soy complex.

Grain Markets Expectations in March

Also, worth noting is that soymeal prices are on a tear, gaining nearly 17% in February. The second-best performer was winter wheat prices, up nearly 9% in Kansas City for HRW and more than 7% in Chicago for SRW

Tomorrow, Garrett and I will be publishing a full recap of February 2018 grain markets activity. However, with yesterday’s close of business, we officially move into March. It’s the last month of 1Q2018 and a month where we tend to see more understanding of what’s going on in South America. Namely, the Brazilian soybean harvest is wrapping up, and towards the end of the month, the Argentine soybean harvest should be starting.

Another key thing to note is that at the end of March, we’ll get the USDA’s Prospective Planting report. This report, out every year on March 31, tends to be a bit of a market mover, as it sets the goal posts for the grain markets going into the North American growing season.

We’ll also see the US, European and Black Sea winter wheat crops start to come out of dormancy. As such, we’ll start to understand any actual damage to the crop and if the recent rally in wheat prices back up what’s actually in the field. Two corporate farms in Ukraine are saying that their winter crops have no issues today, even with the cold weather there. [1]

Historically-speaking, February does tend to bring about more price rallies in grain markets, whereas March can tend to bring us back to reality before North American weather premium starts to become the topic du jour in April. Further, there seems to be a bit more geopolitical risk in the air this year, with NAFTA still being renegotiated and US President Donald Trump promising to “use all tools to pressure China on trade.” [2]

Some of the weather forecasts that we’re seeing suggest some effects of La Nina hitting North America this spring, albeit the weather phenomenon will be on its way out by April. That being said, Western Canada and the US Northern Plains could see some cooler, but wetter weather to start spring 2018 off. [3] Move into April though, average temperatures are expected to come into play, but the wetness could prevail.

Given how dry it was last year, the moisture would be welcome. But as always, the grain markets will be watching and pricing production risk accordingly. To be clear, if moisture shows up, grain markets will start to move lower as production concerns are less warranted.

To growth,

Brennan Turner
President | CEO
TF: 1-855-332-7653
@FarmLead or @GrainCents on Twitter

At 7:40 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2855
 CAD, $1 CAD = $0.7778 USD)

May Corn: -2.5¢ (-0.65%) to $3.805 USD or $4.891 CAD
May Soybeans: -5¢ (-0.47%) to $10.548 USD or $13.559 CAD
May Soybean Meal (per short ton): -$3.60 (-0.91%) to $391.40 USD or $503.143 CAD
May Soybean Oil (cents per lbs): -1.7¢ (-0.05%) at 32.06¢ USD or 41.213¢ CAD  
May Oats: -7.8¢ (-2.87%) to $2.703 USD or $3.452 CAD
May Wheat (Chicago): +6.75¢ (+1.42%) to $4.913 USD or $6.315 CAD
May Wheat (Kansas City): +0.5¢ (+0.10%) to $5.225 USD or $6.717 CAD
May Wheat (Minneapolis): +0.3¢ (+0.05%) to $6.215 USD or $7.989 CAD
May Canola: -$0.10 (-0.02%) to $11.80/bu / $520.30/MT CAD or $9.18/bu / $404.75/MT USD

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.

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