May 10 – Unpredictable Clouds

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FarmLead Breakfast Brief
Wednesday, May 10th, 2017

“To penetrate and dissipate clouds of darkness, the general mind must be strengthened by education.”
– Thomas Jefferson (US 3rd President)

Good Morning!

At 6:35 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3701 CAD, $1 CAD = $0.7299 USD)

July Corn: unchanged at $3.665 USD or $5.021 CAD
July Soybeans: -0.8¢ (-0.1%) to $9.733 USD or $13.334 CAD
July Soybean Meal (per short ton): -$0.20 (-0.05%) to $318.30 USD or $436.09 CAD
July Soybean Oil (cents per lbs): -0.17¢ (-0.5%) to 32.72¢ USD or 44.83¢ CAD  
July Oats: -3.3¢ (-1.3%) to $2.425 USD or $3.322 CAD
July Wheat (Chicago): +1¢ (+0.25%) to $4.40 USD or $6.028 CAD
July Wheat (Kansas City): +1.3¢ (+0.3%) to $4.305 USD or $5.898 CAD
July Wheat (Minneapolis): +1.5¢ (+0.3%) to $5.425 USD or $7.433 CAD
July Canola: -6.6¢/bu / -$2.90/MT (-0.55%) to $8.868/bu / $382.98/MT USD or $11.90/bu / $524.70/MT CAD

Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.197 USD or $3.005 CAD
July Milling Wheat: -5.4¢ (-0.85%) to $4.708 USD or $6.45 CAD

This recent weather has pushed up grain prices…
How much of a weather rally do you need to see?
Step your game up with FarmLead & post a target!

Unpredictable Clouds

Grain markets are quiet this morning and mostly in the red as the market awaits one of the most significant U.S.D.A. reports of the year at 12PM EST. Today we get the U.S.D.A.’s monthly look at their world agricultural supply and demand estimates, one that will include 2017/18 forecasts for the first time this year. While it will bring estimates of the 2017/18 crop year, there’s also demand fundamentals the market is looking, namely the U.S.D.A. increasing U.S. corn and soybean export volumes, the latter basically confirmed by China’s torrid pace of imports. The challenge remains the size of the crop carryout across the world – which is tough to hear when there are places that are super wet, cold, etc. The challenge is to get over what I call the “front-window syndrome” and understand it’s hard to see much lower values from today. There’s certainly bullish fundamentals based on Plant 2017 delays and the potentially smaller sizes of the European and American winter wheat crops, mainly thanks to the precarious weather that have challenged the crop’s potential.

Digging into the pulses, despite changing their tone on the fumigation issue, India continues to sit on the sideline when it comes to buying, especially lentils. There are rumours that India is looking at signing a 2-3 agreement to accept Canadian standards, instead of fumigation being required before entry into India. The buzz is that there’s not a lot of green lentils left in Canada, but a fair amount of non-exportable red lentils, creating market conditions that could be potentially volatile again in 2017/18 (especially if a late start lowers acres that actually get seeded with pulses). Wile grain prices for soybeans, corn, and wheat entered May at their lowest level in almost 5 years, we do know there’s usually some late May / early June weather rally opportunities (including in pulses) to consider in your marketing gameplan (post your targets on FarmLead today).

Digging into the pre-report estimates of old crop (2016/17 production), the market is expecting ending stocks of corn in America to show 2.326 Billion bushels (+6M bu from April’s W.A.S.D.E.), U.S. soybeans carryout to sit at 443M bushels, and wheat and a bloated 1.154M bushels. The U.S.D.A. should be using the acreage numbers from the March 30th prospective plantings report (and then average harvested acres from there) and average yields suggested at the AgForum back in February (AKA trendline yields). Accordingly, the average pre-report guesstimates are to show new crop (2017/18) carryout in America of 2.045 Billion bushels of corn, 481M bushels of soybeans, and 954M bushels of wheat. Globally, corn ending stocks are expected to hit 209.72M tonnes in 2017/18, or what would be a 6% decline from the 2016/17 carryout off 223.32M tonnes that the market is expecting to see today. 2016/17 world ending stocks of soybeans are expected to also rise slightly from the last report to 87.53M tonnes, but strong demand should push 2017/18 soybeans carryout down by 1% to 86.59M tonnes.  For wheat, available global supplies at the end of 2017/18 should hit 246.15M tonnes, a 2.5% drop from the estimated 252.16M tonnes that will still be available at the end 2016/17.

Ahead of the report, lots of people are already skeptical of the numbers, given the way that the U.S.D.A. is handling the crop progress report (neutral-to-bearish, especially as it comes to winter wheat crop conditions!) and not raising U.S. corn or soybean export expectations (or maybe this will be the report where they do!). What we’ll be watching for are 2017/18 carryout numbers as production of the major 3 row crops are expected to fall simultaneously for the first time nearly 3 decades. We’ll also be looking at South American production, and if there’s any acknowledgement of a tougher-than-usual start to the growing season in Europe (especially western Europe) and North America. Overall, this W.A.S.D.E. report will give us an idea of the size of the playing field we’re working with this year and it’s the most significant report (in my opinion) until the August W.A.S.D.E. (when the crop is basically known and it’s all about demand prospects). More simply, we’ll digest today’s report, and then head back to watching the clouds (and the variability they can bring, not only to fields but also to markets).

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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