“It is nice to have valid competition; it pushes you to do better.”
– Gianni Versace (Italian fashion designer)
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Grain markets are slightly mixed this morning as the complex tries to decipher weekend rains across the U.S. Southern Plains and setting up for the March 31ststocks and acreage report from the U.S.D.A. this coming Friday. A recent poll of analysts by Reuters puts the average trade guesstimate at 88.2M acres of soybeans, just under 91M acres of corn, and 46.14M acres of wheat (U.S.D.A. at 88M, 90M, and 46M acres respectively respectively). On the inventory front, the market is thinking that 1.63 Billion bushels of wheat are still available (which would be +18.5% year-over-year), there’s still 8.53 Billion bushels of corn (+4% YoY), and another 1.68 Billion bushels of soybeans still in the U.S (+3.5% YoY). Overall, the market continues to look for a strong leader amongst the complex as soybeans, wheat, and corn continue to compete for position of fund’s attention (corn seems to be winning the bullish focus right now).
Something we’ve been harping in conversations with FarmLead users since September 2016 (yes the last 7 months) is if you have any feed grains, it’s probably not worthwhile to hold onto it in hopes you’ll be able to take advantage of a spring rally. One of the reasons for this is because of road bans can tend to cut into any of those additional cents / bushel you see in the usual seasonal spring rally but the second is the bearish pressure from the amount of feed grains out there which will be compounded by anything that got left out in the fall that still needs to be harvested. Even going back to September 2016 when it was very apparent there was some disease issues, we made the call then that it wasn’t worth holding onto poor quality grains because we anticipated feed markets being more than well supplied.
Spring wheat area in the U.S. are being forecasted to their lowest level since the early 1970s, with the buzz that things could actually drop below 11M acres. Arlan Suderman from INTL FC Stone believes that there’s going to be better prices available in 2017 thanks to some El Nino concerns but Allendale Chief Strategist Rich Nelson thinks that there’s just too much supply out there and that better prices won’t become available until 2018. Switching into flax, there’s been some decent new crop bids available on FarmLead (post your new crop flax deal), thanks to some lower acreage & production last year and some new regulations affecting exportability of product out of the Black Sea. Expectations are that Western Canadian flax acres could see a solid rebound in 2017/18 as farmers look to diversify away from pulses and/or cereal crops that have been plagued by disease the last few years.
We’ve seen canola fall significantly in the past few weeks alongside soybeans, but things were compounded last week by the buzz over some cancelled orders on the Winnipeg ICE futures exchange. That being said, canola crush volumes in Western Canada hit 97% of capacity through the middle of March, although crush margins have pushed back above $110 CAD / MT, up more than $30 in the last month. Canola has been generally following soybeans lower but as it competes on the oil side of things, many experts agree that it’ll have to improve it’s protein level and lower its fibre amount if it wants to start seriously competing with soybeans on the meal front. Needless to say, with the amount of oilseeds likely to get planted this spring, there’s the possibility of a fair amount of supply available to keep things interesting.
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