Mar 10 – Okay. Thanks. Next!

FarmLead Breakfast Brief
Friday, March 10th, 2017

“A great accomplishment shouldn’t be the end of the road, just the starting point for the next leap forward.”
– Harvey MacKay (US author)

Good Morning!

At 7:05 AM CDT in the North American Futures Markets (*not cash prices*)
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.349 CAD, $1 CAD = $0.7413 USD)

May Corn: -1.8¢ (-0.5%) to $3.653 USD or $4.927 CAD
May Soybeans: -5¢ (-0.5%) to $10.006 USD or $13.498 CAD
May Soybean Meal (per short ton): -$1.90 (-0.6%) to $326.60 USD or $440.58 CAD
May Soybean Oil (cents per lbs): -0.18¢ (-0.55%) to 32.93¢ USD or 44.42¢ CAD 
May Oats: +0.3¢ (+0.1%) to $2.408 USD or $3.248 CAD
May Wheat (Chicago): -1.5¢ (-0.35%) to $4.455 USD or $6.01 CAD
May Wheat (Kansas City): -0.8¢ (-0.15%) to $4.618 USD or $6.229 CAD
May Wheat (Minneapolis): +3¢ (+0.55%) to $5.418 USD or $7.308 CAD
May Canola: -3.6¢/bu / -$1.60/MT (-0.3%) to $8.825/bu / $389.11/MT USD or $11.905/bu / $524.90/MT CAD

Yesterday’s Winnipeg ICE Close

May Barley: unchanged at $2.211 USD or $2.983 CAD
May Milling Wheat: +8.2¢ (+1.3%) to $4.741 USD or $6.396 CAD

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Okay. Thanks. Next!

Grains this morning are mostly lower as the complex continues to digest new USDA numbers amidst a stronger U.S. Dollar on the likelihood of a Federal Reserve interest rate hike next week and new El Nino forecasts and how it may affect crop potential this year. We continue to monitor the situation in the U.S. Southern Plains where wild fires are wreaking havoc, burning up more than 1M acres of land and tens of thousands of animals who couldn’t outrun the blaze. Yesterday the U.S.D.A. came out with their March installment of the world agricultural supply and demand estimates (W.A.S.D.E.) and things were fairly bearish. Ahead of the report, all eyes were on South American production numbers and the bears were rewarded with record soybean and corn production from Brazil. Accordingly, new crop November soybean prices on the Chicago Board of Trade dipping its toe back into single digits while new crop December corn tried to hold its ground, still hovering slightly below the psychologically-significant $4 USD /  bushel. Generally, the market thanks the U.S.D.A. for its slight reset of the playing field but now it’s searching for the next headlines.

The U.S.D.A. announced Brazilian soybean and corn production at 108M (+4M tonnes from last month) and 91.5M tonnes (also a 4M-tonne increase from last month) respectively (Compare this to CONAB who is sitting at 107.6M tonnes of soybeans and 88.9M tonnes of corn). Next door in Argentina, the U.S.D.A. kept soybean production at 55.5M tonnes but raised corn production to 37.5M tonnes. Compare this against the Rosario Grain Exchange who is pegging soybean and corn production in the country at 56M and 38M tonnes. Globally, the bigger South American crops mean that soybean ending stocks were raised by more than 2.4M tonnes to 82.8M tonnes, and world corn carryout for 2016/17 was increased by 3.1M tonnes to 220.7M tonnes (both records). Global wheat ending stocks for 2016/17 was increased by 1.34M tonnes to almost 250M tonnes (another record) as bigger crops from the Southern Hemisphere (Argentina & Australia) offset some readjustments lower in the European Union.

Domestically in the U.S., the 2016/17 soybean carryout was raised by 15M bushels to 435M bushels as exports were lowered by 25M bushels to 2.025 Billion bushels but domestic crush was increased by 10M bushels to 1.94 Billion. Corn put into ethanol in U.S. was increased by 50M bushels, but feed & residual use was lowered by 50M bushels, making the change mute, while exports stayed firm at 2.225 Billion bushels, despite the fact that exports are currently 68% higher than where they were a year ago. On the wheat front, U.S. ending stocks were only lowered by 10M bushels as the U.S.D.A. lowered the import number by the same amount. From a price standpoint, corn and Chicago wheat futures prices were unchanged at $3.40 USD / bushel and $3.85 / bushel respectively, while soybeans were bumped up by 10 cents to $9.60 / bushel.

Overall, the report only really confirmed what a lot of the market already knew: South America is producing a large crop. The 2 questions I have though still are (1) how will this impact 2017 acres in North America and (2) will the U.S.D.A. eventually acknowledge the strong pace of U.S. grain exports in 2016/17? Clearly there’s mounting pressure on the soybean complex but the crop still has to get off in Argentina and the record amount of acres still has to get planted in the U.S.. Moving forward, we’ll be looking at the next headlines for new estimates for American acreage, as well as both domestic and foreign policies of the President Donald Trump Administration (i.e. is the Point of Obligation change in the RFS mandate just rumours?). That being said, China currently has a lot of grain in its reserves (and trying to figure out to work through it) while Japan would prefer to keep agriculture out of economic discussions, so while some may thank Trump for stock market highs, we’re more interested in his next moves as it relates to the grains markets.

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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