Mar 7 – Getting Historical

FarmLead Breakfast Brief
Tuesday, March 7th, 2017

“Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him.”
– Dwight Eisenhower (34th U.S. President)

Good Morning!

At 6:25 AM CDT in the North American Futures Markets (*not cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3405 CAD, $1 CAD = $0.746 USD)

May Corn: -1.5¢ (-0.4%) to $3.77 USD or $5.054 CAD
May Soybeans: -2.5¢ (-0.25%) to $10.348 USD or $13.871 CAD
May Soybean Meal (per short ton): +$0.60 (+0.2%) to $334.30 USD or $448.30 CAD
May Soybean Oil (cents per lbs): -0.37¢ (-1.1%) to 33.90¢ USD or 45.44¢ CAD 
May Oats: +0.3¢ (+0.05%) to $2.453 USD or $3.288 CAD
May Wheat (Chicago): -1¢ (-0.2%) to $4.575 USD or $6.133 CAD
May Wheat (Kansas City): +0.3¢ (+0.05%) to $4.743 USD or $6.357 CAD
May Wheat (Minneapolis): -0.3¢ (-0.05%) to $5.42 USD or $7.265 CAD
May Canola: -5.7¢/bu / -$2.50/MT (-0.45%) to $8.957/bu / $394.93/MT USD or $12.007/bu / $529.40/MT CAD

Yesterday’s Winnipeg ICE Close

May Barley: unchanged at $2.225 USD or $2.983 CAD
May Milling Wheat: -8.2¢ (-1.25%) to $4.771 USD or $6.396 CAD

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Getting Historical

Grain markets are lower this morning on a lack of bullish headlines to chase, and instead focusing on some negative ones surrounding bird flu in Tennessee popping up, and the corresponding potential impacts to feed demand. Policy still is on the mind of many traders, grain buyers, and farmers alike, but given the relaxed tone of President Donald Trump’s new travel ban, perhaps the period of rash decision-making process has passed through the Oval Office for good. Time is winding down on what farmers will plant in 2017/18 and the price ratio of new crop soybeans to corn is still sitting above 2.5 but the recent improvement in corn prices has some thinking that there could be a few more acres flip back to the coarse grain. As such, while we know that there’s going to be a lot of soybeans getting planted, will it be as historical as the U.S.D.A. is currently thinking at 88M acres?

French winter crops are looking pretty good, with 93% of France’s wheat crop rated good-to-excellent (G/E), 90% of barley considered in G/E health, and 82% of the durum crop in G/E condition. In Russia, winter grain conditions are “better than normal” per the Hydromecentre, suggesting that portion of the crop that gets categorized as winterkill will be lower this year. According to UkrAgroConsult, 81% of the Ukrainian winter crops are in good or satisfactory condition as the crops start to come out of dormancy. On the export front, Ukraine has now shipped out over 30M tonnes of grain in the 2016/17 year, whereas Russia has now export 24.6M tonnes of grain (down 3.5% compared to this time a year ago), including 19M tonnes of wheat. The strength of the Russian Rouble thus far in 2017 and the Egyptian ergot policy kerfuffle on wheat imports in September / October are some of the main reasons as to why Russian grain export volumes aren’t hitting the targets that everyone had in mind at the beginning of the marketing season.

While Egypt stifled their imports early in the season because of uneducated policies, India’s government went the other direction, opening up their doors to wheat shipments in 2016/17. This year, India will likely import the most amount of wheat in a decade as import duties were dropped for the past few months, helping get over 5M tonnes of wheat in through ports since June. However, the Indian government is expecting to buy 32-33M tonnes of the upcoming harvest for state reserves, a big jump from the 23M tonnes bought by the government last year. With more wheat in government hands, the 2017/18 wheat import estimate for India’s ports will be less than 3M tonnes. Switching in pulses, the Canadian government is winding up its trip to India to try and solve the fumigation exemption (or lack thereof) issue, but nothing has been heard yet. Accordingly, some companies are coming back with new crop bids of 30¢ CAD / lbs for #2 large and small green lentils, 26¢ for medium green lentils, and 22¢ for #2 or better small red lentils (post your new crop lentil deal on FarmLead today to let buyers coming back to the market see your deal!). The lower bids also are a result of the larger carryout of supplies expected, now that India has changed their import policies and not as much is getting shipped out during the question period that is “how are we going to export this product?”.

Speaking of lower levels, in Australia, A.B.A.R.E.S. is expecting Aussie wheat production to pull back substantially from this past year’s bumper crop of 35.1M tonnes to just 24M tonnes in 2017/18, mainly because of yields returning to more trendline values and acres falling 1.1% year-over-year (YoY) to 31.9M acres. On the export front, A.B.A.R.E.S. thinks that 2017/18 wheat exports from the Land Down Undaa will come in at 20.9M tonnes, a drop of 8.4% from this year’s 23M tonnes. Wheat isn’t the only crop pulling back, as Australian barley production is seen dropping 37% YoY to 8.5M tonnes on more average yields but thanks to better returns and higher prices, canola acres in 2017/18 are expected to climb, keeping production elevated. From a price point though, the Australian version of the U.S.D.A. thinks that supply is too thick to wade through, forecasting world wheat and coarse grain prices (i.e. corn, sorghum, and barley) to remain historically low in the short-term (next year or so).

To growth,

Brennan Turner

President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

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.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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