FarmLead Breakfast Brief
Wednesday, March 29th, 2017
“If the person at the wheel refuses to ask for directions, it is time for a new driver.”
– Jennifer Granholm (US politician)
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Getting Fresh Directions
On Friday, we’ll get the U.S.D.A.’s stocks and acreage numbers, which will set the tone of the markets for the next few weeks before planters start to roll. Some good rains have fallen across the Midwest the past few days, which will help get things in the right condition as temperatures start to warm up a bit. The rain has also helped winter wheat crops that are in the midst of coming out of dormancy, which got some shorts to cover their positions. Across the pond in Europe, the winter wheat crop there is coming out of dormancy there and things continue to look promising according to the European Commission. France continues to get good rains, there are only minor losses expected from winterkill in Russia, and Ukraine is starting to see “slightly negative conditions” but the coming weeks should be a key determinant in the crop’s direction.
Recent port data shows that Brazil has shipped out 7.9M tonnes of soybeans in March with another 2M tonnes supposedly getting loaded this week, which would put things about 1.7M tonnes ahead of March 2016’s volumes. Moving into next month, just 3.5M tonnes of the oilseed are scheduled to leave but like we mentioned last week, port wait times are drastically lower, meaning it’s more attractive for international buyers to set up something up quickly if need be. Speaking of oilseed exports, Canadian canola exports in 2017/18 are being pegged at 9.5M tonnes by the U.S.D.A.’s attaché in Ottawa, with domestic crush forecasted at 8.6M tonnes. With 21M acres of canola likely getting seeded this spring in Canada, trendline yields would put production at 18.5M tonnes.
Ag Resource says that Brazilian farmers are holding onto more of their crops the last few years due to the appreciation of their currency. In the last year and a half, the Brazilian Real has gained about 19% which in turn drops the local grain price so if the Real continues to gain against the U.S. Dollar, Brazilian producers may be less inclined to make sales. Conversely, it’s been suggested that the American farmer still owns about 50% of their old crop corn, mainly due to the lack of attractive pricing opportunities once the crop started to come off in the fall. Accordingly, forward contracts were filled but there wasn’t a lot more sales made but without a weather scare to help the market pull up its pants a bit, some analysts think that there could be more than a few producers who are “trapped” with having too much old crop and being forced into making a sale down the road. That being said, if you feel you’re a bit undersold on old crop, let’s get your next block or 2 posted on the FarmLead Marketplace today!
With the average market guesstimate suggesting 88.3M acres of soybeans and 90.9M acres of corn will be planted in America this spring, with trendline yields, this would be more than sufficient production to more than satisfy demand. Jerry Gulke argues that the financial incentive to plant more beans and less corn is very evident, not to just the farmer, but also the banker standing behind them. The only surprises that one can really expect would be on the soybeans front – either too little soybeans (i.e. 85M) or more than expected (topping 90M acres). Overall, Friday’s report will give the market fresh directions but with some acreage numbers already baked in and production expectations relatively benign, we shouldn’t be expecting a new crazy new trend to start on Friday.
Finally, about once a quarter I’ll step back for a week or two from writing the Breakfast Brief just to step back and regroup. The next Breakfast Brief you’ll see from me will come next Thursday, April 6th.
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