May 19 – Coffee Row Rumours

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FarmLead Breakfast Brief

Friday, May 19th, 2017

“I hate newspapermen. They come into camp and pick up their camp rumors and print them as facts. I regard them as spies, which, in truth, they are.”
– William Tecumseh Sherman (U.S. Civil War-era soldier)

Good Morning!

At 7:25 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3552 CAD, $1 CAD = $0.7379 USD)

July Corn: +2.5¢ +0.7%) at $3.685 USD or $4.994 CAD
July Soybeans: +6¢ (+0.65%) to $9.508 USD or $12.885 CAD
July Soybean Meal (per short ton): +$2.30 (+0.75%) to $309.80 USD or $419.84 CAD
July Soybean Oil (cents per lbs): +0.07¢ (+0.2%) to 32.51¢ USD or 44.06¢ CAD  
July Oats: +3.3¢ (+1.4%) to $2.393 USD or $3.242 CAD
July Wheat (Chicago): +3.3¢ (+0.75%) to $4.29 USD or $5.814 CAD
July Wheat (Kansas City): +5.8¢ (+1.35%) to $4.318 USD or $5.851 CAD
July Wheat (Minneapolis): +2¢ (+0.35%) to $5.468 USD or $7.41 CAD
July Canola: +3.2/bu / +$1.40/MT (+0.25%) to $8.748/bu / $385.70/MT USD or $11.855/bu / $522.70/MT CAD

Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.209 USD or $3.005 CAD
July Milling Wheat: +2.7¢ (+0.4%) to $4.76 USD or $6.45 CAD

A lot of progress in the field lately but…
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Coffee Row Rumours

Grains this morning are in the green as they rebound from yesterday’s sell-off but traders and analysts are still cognizant of the political drama happening in the U.S. and Brazil (and that there may be more to come!). Outside of the geopolitical risk, the market positively took in healthy U.S. export sales from last week while concerns continued to be raised over the pace of Plant 2017 with some recent storms hitting the Midwest and Southern Plains (U.S. winter wheat crops continue to face some challenges). We heard yesterday of some very tough facts for those that did a spring crop in early in Western Canada and U.S. Northern states, but it’s important to remind yourself that one story does not equal consensus. If it was consensus, the market would’ve reacted accordingly…but it didn’t. That being said, there are some below-average temperatures expected throughout the next week or so, which the market may start to price in.  Until then though, this noise is only being extensively talked about at coffee row (what percentage of coffee row rumours would you say that you believe?).

Yesterday’s sell-off in soybeans was nothing short of impressive as Brazilian producers seemingly got into a selling frenzy as the Brazilian Real dropped 8% against the U.S. Dollar, hitting a 6-month low. This pushes up the domestic price of exportable goods in Brazil, meaning those Brazilian farmers who having been holding out for better price, went to the market aggressively as they saw some of the best prices in the past 3 months (or just before their harvest started). It’s already been rumoured that at least 3M tonnes of soybeans were sold by farmers yesterday. Literally about 3% of the entire Brazilian crop in 1 days. Sold. As such, soybeans lost about 2.5% while dragging down other grains with it.  Next door in Argentina, the Buenos Aires Grain Exchange says that there’s still about 11.4M acres of soybeans left to harvest and about 2/3s of this is in areas that are set to get some moisture over the next few days (stalling harvest) or where rainfall has already been plentiful and yields / quality is up in the air.

Strategie Grains recently dropped its estimates for wheat and barley production in 2017, citing frosts in France, Germany, and Poland and dryness in Spain, France, Belgium, & the U.K. as the main reasons for the downgrade. The E.U. soft wheat crop was cut by 1.1M tonnes to 142.7M tonnes, which also meant that European soft wheat exports were cut by 200,000 MT an even 26.2M tonnes. The larger cut was seen in the barley crop though, with Strategie dropping it by 1.7M tonnes to 59.6M tonnes, a mult-year low, but still accounting for about 40% of global production. The corn crop was downgraded by 300,000 MT to 60.1M tonnes while the European durum crop was felled by 300,000 to 8.6M tonnes. Digging regionally, the Germain Farm Co-Op Association (DRV) dropped the Germany corn crop by 744,000 MT to 3.74M tonnes, pegged the rapeseed crop at 4.7M tonnes, and 25M tonnes of wheat.

Finally, U.S. President Donald Trump officially moved to start renegotiations on the North American Free Trade Agreement, seeking to modernize things by addressing or adding new provisions for “intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises.” For the American, Canadian, and Mexican agricultural industries, the stakes are high. Case in point, U.S. ag exports to Mexico and Canada have gone up 5x and 3x respectively since NAFTA was implemented as the 2 countries now buy about $40B USD in agricultural goods annually. With the required 90-day consultation period with Congress/American industry officially started by the top U.S. trade negotiator, Rob Lighthizer, yesterday, the countdown is on until August 16th, 2017 when new tri-lateral talks could begin. This likely isn’t something that will be solved overnight but It’s likely to be another item to discuss at coffee row, especially as mid-August approaches.

Have a great weekend and be safe in the field,

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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