Mar 14 – Switching Options

FarmLead Breakfast Brief
Tuesday, March 14th, 2017

“Task switching is hard because we do not control what is on our mind. Despite our efforts, the original task continues to occupy our mental bandwidth.”
– Sendhil Mullainathan (Harvard economics professor)

Good Morning FarmLead User!

At 7:35 AM CDT in the North American Futures Markets (*not cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3459 CAD, $1 CAD = $0.743 USD)

May Corn: -0.8¢ (-0.2%) to $3.603 USD or $4.849 CAD
May Soybeans: -6.5¢ (-0.65%) to $9.995 USD or $13.452 CAD
May Soybean Meal (per short ton): -$2.70 (-0.8%) to $328.20 USD or $441.72 CAD
May Soybean Oil (cents per lbs): +0.06¢ (+0.2%) to 32.18¢ USD or 43.31¢ CAD 
May Oats: -1.3¢ (-0.5%) to $2.448 USD or $3.294 CAD
May Wheat (Chicago): -1.3¢ (-0.3%) to $4.293 USD or $5.777 CAD
May Wheat (Kansas City): -1.3¢ (-0.3%) to $4.415 USD or $5.942 CAD
May Wheat (Minneapolis): -0.5¢ (-0.1%) to $5.308 USD or $7.143 CAD
May Canola: +0.5¢/bu / +$0.20/MT (+0.05%) to $8.73/bu / $384.95/MT USD or $11.75/bu / $518.10/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.211 USD or $2.983 CAD
Mar Milling Wheat: -8.2¢ (-1.3%) to $4.693 USD or $6.314 CAD

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Switching Options

Grains this morning are mostly mixed as the market is tied up on South American production numbers and North American forecasts (especially with all the buzz of a big storm hitting the east coast). Hedge funds last week got shorter on the grains complex, but it wasn’t as much as some people were expecting, suggesting that there may be more selling this week. U.S. grain export inspections this week were poor for soybeans because, as compared to a month ago, shipments are down sharply, indicating buyers are in fact switching to South American options. Tomorrow we’ll get February’s N.O.P.A. soybean crush data and pre-report guesstimates are that 146.1M bushels of U.S. beans were used last month, which would be relatively unchanged from February 2016. Also tomorrow we’ll get the announcement from the U.S. Federal Reserve as to if they’re going to raise interest rates like the market is expecting. A higher interest rate would keep the U.S. Dollar strong, putting pressure on international consumers to want to “Buy American”.

Buying from the U.S. is hard though when there’s so many other options, especially as it comes to grain origination. The Brazilian soybean harvest is now more than half done with the harvest in Mato Grosso almost at 90% combined, about 10 points ahead of last year’s pace. Next door in Argentina, the soybean harvest is set to start up in the next few weeks and just like the Brazilian and American crops have been upgraded in 2016/17, the Argentinian soybean crop is also getting marked up as Dr. Cordonnier just raised his estimate to 56M tonnes.

That rhetoric to “Buy American” is probably hardest felt in the U.S. wheat industry where they’re asking some tough questions as to how to build up their prowess again, yet because of low prices, U.S. farmers are opting to plant different crops. For the crop that’s already in the ground, 35% of the winter wheat crop in Texas was rated good-to-excellent (G/E) but to the north in Oklahoma where 74% of the state is in drought, 42% got a G/E rating (down 1 point from last week). 39% of Kansas winter wheat fields are considered to be in G/E shape but the market isn’t really pricing these lower levels in as a large rain system is expected to hit the Southern Plains next week.

Coming back to trade, the fact remains that under U.S. protectionist policies, it’s not really helping anyone in the U.S., namely farmers. As President’s Trump pick for Agriculture Secretary, Sonny Perdue, still hasn’t been even confirmed to his position yet, many farm groups are questioning where farmers sit on the list of priorities for the White House. While it’s somewhat expected that there will not be a trade war with China (mainly, because it would only cause financial pain for everyone involved), the pursuit of a different NAFTA agreement and saying not to the TPP trade deal suggests more individual trade deals will need to be negotiated (not an easy task). That being said, the other members of the dead-in-the-water TPP deal are looking at alternative ways to get a deal done with the U.S.. Case in point, a recent report from Canada’s Advisory Council on Economic Growth suggests that Canada should invest more in its own agri-food processing infrastructure, which would in turn decrease the need for Canadian ag products to get to the U.S. to get processed there. More simply put, the world will likely move on from trying to play trade ball with the U.S. if all they’re going to is argue and stay on the bench.

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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