May 18 – Surprising Seats

fl_hubspot_logo_456x57.pngFarmLead Breakfast Brief
Thursday, May 18th, 2017

“Wonder is from surprise, and surprise stops with experience.” – Robert South (English poet)

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 = $1.3637 CAD, $1 CAD = $0.7333 USD)

July Corn: -5.8¢ (-1.55%) to $3.658 USD or $4.988 CAD
July Soybeans: -18.3¢ (-1.85%) to $9.575 USD or $13.057 CAD
July Soybean Meal (per short ton): -$4.50 (-1.45%) to $310.80 USD or $423.84 CAD
July Soybean Oil (cents per lbs): -0.51¢ (-1.55%) to 32.64¢ USD or 44.51¢ CAD  
July Oats: -3.5¢ (-1.5%) to $2.32 USD or $3.164 CAD
July Wheat (Chicago): -3.8¢ (-0.9%) to $4.233 USD or $5.772 CAD
July Wheat (Kansas City): -4.5¢ (-1.05%) to $4.22 USD or $5.755 CAD
July Wheat (Minneapolis): -0.8¢ (-0.15%) to $5.403 USD or $7.367 CAD
July Canola: -11.6¢/bu / -$5.10/MT (-0.95%) to $8.691/bu / $383.22/MT USD or $11.852/bu / $522.60/MT CAD

Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.197 USD or $3.005 CAD
July Milling Wheat: -2.7¢ (-0.4%) to $4.69 USD or $6.396 CAD

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Surprising Seats

Grains this morning are all significantly in the red as a sell-off overnight has caught many traders and farmers just waking up, by surprise, thanks to some Washington, DC geopolitcal risk. While this morning, Western Canada and parts of North Dakota are unfortunately seeing frost (the most terrible F word in the world), the bearish fundamentals of a generally good pace of planting, a decent emergence, and the aggregate remaining supply in the pipeline is just to overwhelming. While the U.S. Dollar has pulled back about 7% from its 14-year high in January, this should be supportive of grain prices and it was, it seems, until yesterday, as those gains made in the last 24-48 hours have been erased! Further, some wet weather forecasted for the U.S. Southern Plains should probably also be a supportive of prices, but that’s just not the case. Olam International continues to be generally bearish on the palm oil market, albeit admitting that production levels hasn’t been as strong as what they were anticipating by now.  While this is probably considered bearish for canola, the market is pulling back a bit this morning, despite the aforementioned cold weather hitting some major grain-producing regions in the Canadian Prairies and U.S. Northern Plains. Needless to say, there’s more than a few producers who are probably looking at the markets this morning, asking “what the heck is going on?” because from where they’re sitting in Plant 2017, most probably think there should be a bit more weather premium built in.

One could argue that there are more bullish fundamentals in wheat than any other crop. Over the next 2 weeks, precipitation events are expected to be in strong supply across U.S. winter wheat growing regions, just at a time when harvest is set to begin. Oklahima is already taking some crop off of and the Wheat Commission there says test weights have been solid around 63 – 65 pounds per bushel with yields ranging from lows 20 to 40 bushels an acre. Any rain falling on these crops that ready (or nearly ready) to be combined just won’t turn out well. Also a bit bullish on wheat is U.S. wheat getting in on some of the action with the G.A.S.C., with 115,000 of HRW wheat being bought for a FOB-American port price of $185 USD / MT (or about $6.50 CAD / bushel). However, Egypt also bought from Russia, Ukraine, & Romania so it’s no clear conclusion that American wheat has any sort of competition edge over product from any other country.

AgResource tries to make the argument that, thanks to some cooler temperatures over the next 2 weeks, there’s stronger possibility of the American corn crop pollinating in the 2nd half of July (While there’s no proven correlation between colder temperatures in May and yield potential, hotter temperatures usually seen in July can have some impact). However, this is entirely speculative at this point and hard to dig into too deeply at this point and that’s what more people will try to do when there’s a lack of market-moving news. Switching over to soybeans, tapes of the Brazilian President talking about bribing witnesses in a corruption scandal has led to the sell-off of the Brazilian Real after a week of continuous moves higher. The weaker Real will increase the domestic price of Brazilian soybeans, making it more attractive for farmers there to start unlocking some bin doors, which would intuitively take away from demand for U.S. supply. Nonetheless, from where I’m sitting, I’m a bit surprised that U.S. soybeans have been able to be this competitive with South American supply for this long

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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