March 29 – Ready for a Heavy USDA Data Day?

Good Morning!

The USDA will present its acres and stocks report later today, which is the last opportunity to trade this month and quarter.

“There is always a heavy demand for fresh mediocrity. In every generation, the least cultivated taste has the largest appetite.” – Paul Gaugin (French artist)

graincents-trial

Ready for a Heavy USDA Data Day?

Grain markets this morning are mixed ahead of a plethora of USDA reports today, as well as the last day of trading for the month AND the calendar quarter.

Grain markets will be closed tomorrow and on Monday in observance of the Easter weekend, which also means no Breakfast Brief will be sent out those days. However, we have a fair amount of new GrainCents content that will get published throughout the rest of the week and weekend, including a full analysis of today’s USDA acreage and stocks report.

Yesterday, grain prices dipped a bit as traders position themselves ahead of today’s USDA reports, but also pulling out of positions before the end of the quarter. As Garrett mentioned in Grain Markets Today, the USDA will also share US export sales this morning.

He also mentioned how rain is still a concern in Argentina, and while a lot of eyes are on the soybean crop there, the corn crop is certainly at risk as well. Just 14% of the crop is rated in good-to-excellent health! Staying in corn, Garrett dug into Chinese corn ethanol imports from the US, and how we need to continue to ignore the noise that is the Chinese ethanol mandate.

In the cereals markets, Adrian made a case for why you need to care about the Mexican durum wheat crop if you are growing and selling durum. For our spring wheat GrainCents readers, we also looked at the financial impact of changing protein requirements for Egypt’s wheat imports.

Soybean Exports Game: Brazil Versus USA

Soybean harvest in Brazil continues to cruise along with the decent conditions they’ve been experiencing. 73% of the crop has been harvested, down from the five-year average of 77% and 82% at this point a year ago. Within the next week to ten days, the harvest should be finished in Mato Grosso, Parana, and Goias (the three most abundant soybean producing states in Argentina).

Higher yields in some fringe areas could potentially push the final soybean number in Brazil higher. [1] Currently, AgroConsult has the highest estimate at nearly 119 million tonnes [2] whereas CONAB is expected to raise their estimate above 114 million tonnes in a few weeks with their next report. Currently, the USDA is sitting at 113 million tonnes.

The Chinese are also noticing that Brazil is producing more beans. In February, US soybean shipments to China were 24% year-over-year. Comparably, Brazil’s were up 154%! [3] If we’re honest though, US soybean exports to China still totaled 3.34 million tonnes in February, whereas Brazil’s were at 1.75 million tonnes. It’s not necessarily the absolute number that interests us, but the trends. The US exports about two-thirds of the soybeans that it produces to China, whereas it’s closer to 74% for Brazil.

However, it’s up in the air if the trend can continue or not. The combination of strong Chinese demand, higher soybean prices on the futures board in Chicago, and a weaker Brazil Real (their currency), soybean prices at Brazil ports hit their highest level in 18 months last week! Currently, Brazilian soybean prices are $11 USD /tonne cheaper than US Gulf of Mexico soybean prices.

Required Reading: Here’s How Much Soybean Prices Would Fall From Chinese Tariffs

Speaking of vegetable oil trade, for our GrainCents canola readers, we broke down India’s 1.2 million tonnes of imports in February. The buzz suggests that may be slightly higher demand in the coming months could support prices, but there is still a lot of supply in the world. We recently dug into the International Grain Council’s estimate for the 2018/19 global rapeseed/canola supply and demand balance sheet. We also gave an important update to GrainCents canola readers on Tuesday going into today’s USDA acres, and stocks report.

USDA Shares Acres & Stocks Estimates

Soybean prices have certainly created more interest in planting them in 2018. This is why expectations are in today’s USDA Prospective Plantings report, we could a see record soybean acres. Accordingly, the market has been pricing this in over the past few weeks.

We’ll know for sure when the USDA releases said Prospective Plantings report at 12 PM Eastern time. The USDA will also share its Quarterly Stocks report of grain still available in America as of March 1. As you can tell from the chart below, pre-report expectations from the market are less corn and more soybeans. Also, spring wheat and durum acres expected to inch higher year-over-year, as are barley and oats.

usda-march-data-acres-stocks-pre-report

 

Soybeans are definitely cheaper to plant for the average Midwest American farmer. At today’s soybean and corn prices, they’re also more profitable. One great analysis I read comparing planting 1,000 acres of corn against 1,000 acres of soybeans in Illinois, it was suggesting you would make less than $29/acre profit in corn, but $90/acre in soybeans. [4] If you haven’t had your coffee yet, that’s about $29,000 in profit planting corn, compared to $90,000 if you planted soybeans.

Where acreage is expected to change the most year-over-year is in the Dakotas and southern states. In the south, soybeans are likely getting replaced with more cotton in 2018. In the Dakotas, especially North Dakota, wheat, durum, and canola are all taking attention away from soybeans. What’s also important to consider is that, if the American farmer can plant corn, they’ll plant corn.

Have a great Easter weekend.

To growth,

Brennan Turner

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

At 7:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2908
 CAD, $1 CAD = $0.7747 USD)

May Corn: +1.3¢ (+0.33%) to $3.748 USD or $4.837 CAD
May Soybeans: -3.8¢ (-0.37%) to $10.143 USD or $13.091 CAD
May Soybean Meal (per short ton): +$0.90 (+0.24%) to $372.20 USD or $480.42 CAD
May Soybean Oil (cents per lbs): -0.1¢ (-0.24%) at 31.5¢ USD or 40.7¢ CAD  
May Oats: +0.3¢ (+1.35%) to $2.248 USD or $2.901 CAD
May Wheat (Chicago): +1.5¢ (+0.34%) to $4.470 USD or $5.770 CAD
May Wheat (Kansas City): +1.3¢ (+0.27%) to $4.623 USD or $5.96 CAD
May Wheat (Minneapolis): +0.05¢ (+0.08%) to $5.900 USD or $7.615 CAD
May Canola: -$1.70 (-0.33%) to $11.893/bu / $524.40/MT CAD or $9.229/bu / $406.913/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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