March 7 – Taking Stock of WASDE Expectations, Prices

Good morning!

Grain markets this morning are mostly in the red as the complex positions itself for tomorrow’s WASDE report, out at noon EST.

“Don’t lower your expectations to meet your performance. Raise your level of performance to meet your expectations.”

– Ralph Marston (former NFL football player and motivational speaker)

 

graincents-trial

 

Taking Stock of WASDE Expectations, Prices

Grain markets this morning are mostly in the red as the complex positions itself for tomorrow’s WASDE report, out at noon EST.

The Canadian Dollar has sunk down below 77.5 cents USD, which has supported canola prices lately. However, looking abroad, we’ve noted some weaker palm oil imports demand in places like China and India. This has pushed palm oil prices lower this morning, which is, in turn, putting bearish pressure on soy oil and canola prices.

As Garrett noted in his regular afternoon Grain Markets Today column, soybean prices dipped in yesterday’s grain markets, as productive harvest conditions in Brazil are getting the bears more excited. US soybean ending stocks for tomorrow’s WASDE are expected to be unchanged at 530 million bushels as not much has changed on the American balance sheet.

For wheat, everyone knows that there’s a lot it in the world, so there isn’t expected to be many surprises in this month’s WASDE. What’s worth noting though is that Russian wheat prices for 12.5% protein continue to climb, tracking US futures higher. [1] Russian wheat prices are up almost 10% thus far in the 2017/18 crop year to sit at just under $210 USD /metric tonne at Black Sea ports. Converting tonnes into bushels via GrainUnitConverter.com, that’s the equivalent of $5.70 USD or $7.36 CAD /bushel.

Corn prices gained a penny yesterday as the market is anticipating the US ending stocks to drop by about 40 million bushels. This is because of some healthy international and domestic demand. This is also supporting feed barley prices, something we recently noted for our GrainCents barley subscribers. Bringing Russia back into the mix, FOB Black Sea port barley prices are sitting around $217 USD /metric tonne, or $4.72 USD and $6.10 CAD /bushel.

WASDE Expectations in South America

So, tomorrow is the big day. The March 2018 WASDE is coming down the pipeline with all eyes on South American production. I don’t think the grain market has ever been as interested in the March WASDE numbers as they are right now.

In fact, when South America has weather issues, Garrett took a peek at the historical changes and corresponding changes to both soybean prices and canola prices. Some interesting data points in these links that help set up our expectations for a game plan going into tomorrow’s WASDE report.

Before the WASDE though, CONAB will come out with their estimates for what they think the Brazilian soybean harvest will produce. Most estimates are sitting somewhere between 112 and 117 million tonnes, as compared to the WASDE pre-report average guesstimates of just under 114 million tonnes. As a side note, the Brazilian soybean harvest is nearly halfway complete. This pace is in line with the five-year average.

Sidenote: while the talk of trade wars is certainly heating up between the United States and China, in no situation would China be able to survive off just South American soybeans. Further, the logistical infrastructure of Brazil and Argentine are not efficient enough to be able to export the volume required to satisfy Chinese demand.

For Argentine soybean production, the average pre-report guesstimate for this WASDE is for 48.4 million tonnes. This would be a 5.6 million tonne drop from the USDA’s February estimate of the Argentine soybean crop. That’s not exactly a small reduction month-over-month, but perhaps the market is already pricing this in?

For South American corn, both Brazilian and Argentine crops are expected to see about a 2.5 million-tonne decline to 92.2 million and 36.6 million tonnes respectively. Specifically, for Argentina, rain is indeed in the forecast, but most analysts agree that it’s too little, too late. In fact, 7% of the Argentine corn crop has already been harvested!

march-2018-wasde-estimates-farmlead

 

Looking for Higher Soybean, Canola Prices?

With the WASDE around the corner, some farmers are talking to our team and me here at FarmLead, saying that they’re waiting for $12 CAD /bushel. While those values have been hit in a few places like southern Manitoba for some one-off specials, the $12 handle seems more elusive than the 12-point buck to put on the shop wall. If you’re looking for $12 still, earlier this morning I dug into what’ll need to happen in the canola market for us to get there.

Switching gears a bit, every Sunday morning, for the 12 crops we cover in GrainCents, we send out a email of (1) notable global talking points from the previous week, (2) unique FarmLead Marketplace cash market data points, (3) what we’re expecting for that crop’s price moving forward, and (4) a reiteration of our cash grain sales recommendations. This week, in our March 4 GrainCents canola digest, we outlined our gameplan for canola prices, pointing out where the upside catalysts and downside risks are.

Today, we’ll send another one out, just reminding canola and soybean GrainCents readers of the best tactics ahead of tomorrow’s WASDE.

All things being equal, we’ve seen some heavy action on the FarmLead Marketplace for canola trade. Some deals have been done as just basis contracts, some as straight cash. If you’re looking to do either, today is as good a time as any to do something.

If you are looking for just a basis contract, just to put in $0.01 in the price field of a FarmLead Marketplace New Offer page, and then indicate in the Comments section what sort of basis value you’re looking to negotiate from. This can be very regional dependent, but a good rule of thumb is to take the local basis value take roughly $10 – $15 /MT off it and negotiate from there.

post-new-offer-chickpeas

To growth,

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

At 6:50 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2912
 CAD, $1 CAD = $0.7745 USD)

May Corn: -0.3¢(-0.06%) to $3.880 USD or $5.019 CAD
May Soybeans: -5.8¢ (-0.54%) to $10.69 USD or $13.829 CAD
May Soybean Meal (per short ton): unchanged to $388.00 USD or $501.928 CAD
May Soybean Oil (cents per lbs): -2.1¢ (-0.07%) at 32.27¢ USD or 41.745¢ CAD  
May Oats: -1.0¢ (-0.37%) to $2.668 USD or $3.451 CAD
May Wheat (Chicago): -1.0¢ (-0.35%) to $5.03 USD or $6.507 CAD
May Wheat (Kansas City): -1.8¢ (-0.09%) to $5.41 USD or $6.99 CAD
May Wheat (Minneapolis): unchanged to $6.29 USD or $8.137 CAD
May Canola: -$2.10 (-0.40%) to $11.882/bu / $523.90/MT CAD or $9.185/bu / $404.985/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.

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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