Mar 3 – Watching Ripples

“While it may seem small, the ripple effects of small things is extraordinary.”
– Matthew Bevin (U.S. politician)

Good Morning FarmLead User!

At 6:45 AM CDT in the North American Futures Markets (*not cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3403 CAD, $1 CAD = $0.7461 USD)

May Corn: unchanged at $3.795 USD or $5.086 CAD
May Soybeans: -0.05¢ (-0.05%) to $10.368 USD or $13.896 CAD
May Soybean Meal (per short ton): -$1.30 (-0.4%) to $333.50 USD or $446.99 CAD
May Soybean Oil (cents per lbs): -0.05¢ (-0.15%) to 34.08¢ USD or 45.68¢ CAD 
May Oats: -1¢ (-0.4%) to $2.373 USD or $3.18 CAD
May Wheat (Chicago): -2.8¢ (-0.6%) to $4.50 USD or $6.031 CAD
May Wheat (Kansas City): -2.5¢ (-0.55%) to $4.678 USD or $6.269 CAD
May Wheat (Minneapolis): -2¢ (-0.35%) to $5.51 USD or $7.385 CAD
May Canola: -1.1¢/bu / -$0.50/MT (-0.1%) to $8.95/bu / $394.61/MT USD or $11.995/bu / $528.90/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.273 USD or $2.983 CAD
Mar Milling Wheat: -2.7¢ (-0.4%) to $4.873 USD or $6.532 CAD

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Watching Ripples

Grains this morning are mostly lower as the market comes down off its midweek highs on profit-taking and a stronger U.S. Dollar, despite some decent export numbers yesterday. U.S. soybean sales are 94% ahead of last year while corn is tracking 77% ahead (albeit slowing down a bit). Next week we’ll get the USDA’s monthly WASDE report but all eyes this month are going to be on the acreage report on March 31st. The see-sawing this week has definitely been highlighted by the ethanol debate in Washington that is now pitting refiner against blender with some executives getting into the name-calling game. Dividing the $26 Billion dollar ethanol industry isn’t a good thing though and much like if something happened to the canola industry in Canada, the ripple would be significant.

The strength of the U.S. Dollar is certainly pushing against export potential of U.S. grains, whereas its strength is creating new windows for Brazilian farmers to sell (much like how the Canadian Loonie goes down and helps Canadian grain prices go up a bit). That in mind, while we’ve seen a nice little tick up in canola values this week, canola futures pulled back yesterday on Informa Economics upping its Brazilian soybean output estimate to a whopping 108M tonnes (USDA at 104M). The analytics firm also raised their Argentinian wheat harvested to 17M tonnes, but that still falls behind the Argentinian Ag Ministry forecast of 18.4M tonnes. Switching crops, AgResource thinks that Argentina needs another 3-5 weeks of average sun and rain to produce good yields, and if benign weather shows up, another 1M – 2.5M tonnes of soybeans could find its way to the bin.

While yesterday I chatted about the U.N.’s 744M-tonne wheat forecast for 2017/18 (of which Russia will account for 74M tonnes apparently), the European Commission made its first 2017/18 forecast, calling for 143M tonnes produced in Europe, which would be a 6.5% rebound from last year’s poor showing Their call is just 800,000 MT behind Strategie Grains’ estimate and like Strategie, this rebound is mainly due to French wheat production returning to normal levels, with the Commission calling for a 26% increase in production. From an acreage standpoint, they see soft wheat area dropping a measly 1.3% year-over-year (YoY) to 58.8M acres and durum acres at 6.18M (down more than 6% YoY). Soft wheat and durum area combined, this would be a 1.8% drop year-over-year and the IGC’s call of 66.5M combined acres planted in Europe in 2017/18.

The Commission also expects soft wheat exports to climb back to 28.9M tonnes versus the 24M forecasted for this year. Separately, EU barley production is pegged at 62.7M tonnes (+5% YoY and 1.4M tonnes more than Strategie’s call) and a 66.6M-tonne corn crop (+10.3% YoY and 5.2M more than Strategie). Overall, we know that global wheat production should dip in 2017/18 but will it dip just a bit or a lot. With the global supply of grain at a record high in all 3 major row crops, there are some significant challenges we have to work through, especially since demand has grown proportionately (albeit it has grown). With the recent stronger dollar, currency headwinds are strong and with grain logistics and production not 100% clear yet, the ripple across the North American ag economy may be positive before we start scratching dirt in just a few weeks.

Have a great weekend!

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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