Mar 15 – Volatile Uncertainty

FarmLead Breakfast Brief
Wednesday, March 15th, 2017

“The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next.”
– Ursula K. Le Guin (US author)

Good Morning!

At 7:00 AM CDT in the North American Futures Markets (*not local cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3446 CAD, $1 CAD = $0.7437 USD)

May Corn: +1.8¢ (+0.5%) to $3.64 USD or $4.894 CAD
May Soybeans: +6¢ (+0.6%) to $10.053 USD or $13.517 CAD
May Soybean Meal (per short ton): +$0.90 (+0.3%) to $328.10 USD or $441.17 CAD
May Soybean Oil (cents per lbs): +0.36¢ (+1.1%) to 32.66¢ USD or 43.92¢ CAD 
May Oats: +0.3¢ (+0.1%) to $2.54 USD or $3.415 CAD
May Wheat (Chicago): +5.3¢ (+1.2%) to $4.358 USD or $5.859 CAD
May Wheat (Kansas City): +6.5¢ (+1.45%) to $4.49 USD or $6.037 CAD
May Wheat (Minneapolis): +6.3¢ (+1.15%) to $5.388 USD or $7.244 CAD
May Canola: +5¢/bu / +$2.20/MT (+0.45%) to $8.71/bu / $384.05/MT USD or $11.712/bu / $516.40/MT CAD

Yesterday’s Winnipeg ICE Close

May Barley: unchanged at $2.218 USD or $2.983 CAD
May Milling Wheat: unchanged at $4.696 USD or $6.314 CAD

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Volatile Uncertainty

Grains this morning are mostly in the green this morning on a lower U.S. Dollar and higher oil prices, contrasting yesterday’s weakness from technical and lower Chinese soymeal prices. There’s some buzz in the market that China was buying corn and barley, likely for the feed market, as the stocks that the People’s Republic are currently holding aren’t of great quality. Wheat made some gains as the bulls are discounting the rains forecasted next week and that some of the colder temperatures could damage crops that have already come out of dormancy after the warm weather the past few weeks. Further, temperatures in U.S. winter wheat areas ahead of the rains is expected to be above normal, suggesting even further degradation of soil moisture conditions. The contrasting fundamentals are pushing up trading ranges in the wheat markets (and accordingly, volatility) at a time when the crop quality is more than uncertain, given the extreme weather conditions.

Allendale Brokers surveyed farmers from 33 U.S. states over 2 weeks through March 10th, asking for their planting intentions. The answers they got weren’t too different from the U.S.D.A. though, forecasting 90M acres of corn (7th-largest all-time) and a record 88.83M acres of soybeans. Compare this to 94M acres of corn last year and the U.S.D.A.’s current forecast of 90M acres and last year’s 83.43M acres of soybeans and the U.S.D.A.’s estimate of 88M acres. On the wheat front, Allendale is estimating nearly 46M acres, the smallest acreage since records started being kept back in 1919. Compare this against the 50.15M acres planted last year and the U.S.D.A.’s peg of 46M acres. Digging deeper, Allendale estimated durum area at 2.045M acres, other spring wheat acres at 11.25M, and land planted with winter wheat at 32.68M acres (U.S.D.A. at 32.38M). From a production standpoint, using trendline yields, this would suggest 13.88 Billion bushels of corn, 4.14 Billion bushels of soybeans, and 1.86 Billion bushels of wheat.

There are some though who think that there won’t as much corn lost to soybeans this year, but rather those acres will come from wheat. Corn tends to get planted earlier than soybeans, so if conditions are right, we could see more corn get drilled in this spring. However, Andy Shissler of S&W Trading is possibly the most bullish out there, thinking that if the American farmer plants less than 91M acres of corn, the coarse grain has the potential to hit $4.80 USD / bushel on the Chicago futures board. Andy might be forgetting that there’s going to be a record amount of corn still available in the U.S. by the time the 2017/18 crop starts getting harvested, as well as the record production coming online from South America. What’s certain is that acreage estimates are, at best, a guess.  A lot can happen in the 6-8 weeks of planting time for most of North America and the usual volatility in the market will ensue, but what actually gets planted in the ground will remain uncertain until then.

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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