FarmLead Breakfast Brief
Wednesday, May 3rd, 2017
“I think frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out.”
– Jeff Bezos (Amazon founder)
At 6:30 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3706 CAD, $1 CAD = $0.7296 USD)
July Corn: unchanged at $3.723 USD or $5.102 CAD
July Soybeans: +1.3¢ (+0.15%) to $9.70 USD or $13.295 CAD
July Soybean Meal (per short ton): +$1.10 (+0.35%) to $316.10 USD or $433.25 CAD
July Soybean Oil (cents per lbs): -0.16¢ (-0.5%) to 32.46¢ USD or 44.49¢ CAD
July Oats: -1¢ (-0.4%) to $2.405 USD or $3.296 CAD
July Wheat (Chicago): -4.5¢ (-1%) to $4.495 USD or $6.161 CAD
July Wheat (Kansas City): -7.5¢ (-1.6%) to $4.603 USD or $6.038 CAD
July Wheat (Minneapolis): -3¢ (-0.55%) to $5.545 USD or $7.60 CAD
July Canola: -2¢/bu / -$0.90/MT (-0.4%) to $8.603/bu / $379.32/MT USD or $11.791/bu / $519.90/MT CAD
Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.204 USD or $3.005 CAD
July Milling Wheat: -2.7¢ (-0.4%) to $4.845 USD or $6.641 CAD
Keeping It Tight
Grain prices are starting hump day out in the red, as the complex starts to pull-back from the recent rally driven by winter wheat values (traders bought the rumour and sold the fact; did you “sell the rumour and profit on the fact” that I suggested yesterday morning?). There’s more buzz around U.S. corn RePlant 2017 given some of the recent rains though, which is holding prices back from dipping back where they were at last week. The U.S. long-range forecast is showing mostly drier weather for the next weeks, which is supporting the reversal from the last 2 days of good green starts to the market on the futures board. That being said, there’s still a lot of optimism for Plant 2017 to get done on time despite some of the wetness out there right now. Weather in South American is non-threatening right now, we continue to watch precipitation needs in Western Europe, while conditions are fairly benign in the Black Sea. Finally, canola prices started to stabilize yesterday on the Canadian Loonie dropping below 73 cents, buzz around the upcoming StatsCan report on Friday showing tight stocks, and farmer selling slowing on the quick pullback from prices seen the last few days.
On Friday, May 5th, Statistics Canada will give us another report, this time in the form of available Canadian grain and oilseed stocks as of March 31st stocks. Going into the report, the average estimate for remaining canola is for 6.7M tonnes (-22% YoY and the smallest in 4 years). Comparably total wheat supplies is forecasted to hit 18.3M tonnes (+27% YoY and 3-year high), including 5.2M tonnes of durum (which would be practically double what it was on March 31st, 2016). However, we know that most of this is likely going to into the feed market, given some of the disease and quality conditions seen last growing season (if you’ve got below #3 durum quality, you should be posting it on FarmLead now). Rounding out some of the pre-report estimates, there was 1.6M tonnes of oats remaining as of March 31st, 2017 (-12% YoY) and 4.4M tonnes of barley (+18% YoY and another reason you should posting your barley on FarmLead if it’s not malt quality).
Yesterday was the first day of the Wheat Quality Council’s hard red winter wheat crop tour across Kansas and the consensus, amidst some snow still in the fields, it’s too early to know the extent of freeze and snow damage (you can follow along on Twitter through the hashtag #wheattour17 here). There was a significant freeze on April 27th and the wicked snowfall over the weekend so the extent of the damage won’t show until about 7-10 days afterwards, forcing the question that maybe this tour is about a week too early! Digging into the details, 70 scouts in 18 cars made 222 stops, forecasting 43 bushels an acre, down nearly 7% from the 46.1 bu/ac estimated on Day 1 of the 2016 crop tour. As Kansas State University agronomist Jeanne Falk Jones points out, wheat is a pretty resilient crop (it’s a weed for goodness sakes!), but if the stems aren’t broken from the snowfall, it can possibly recover. Further, if there are some tillers lost, the plant can distribute nutrients to other remaining tillers. On the flipside, a more lodged crop could be more prone to disease.
South American farmers continue to hold onto stored soybeans, waiting for higher domestic prices amid the bullish rumours around North American Plant 2017 weather premiums. We pointed out back almost a month ago in another Breakfast Brief column that this probably wasn’t the smart play, and that call is proving true, especially as Chinese crush margins have turned negative and the sentiment towards soyoil (and GMOs in general) by population of the People’s Republic is souring. The hold out on selling by Brazilian producers has caused at least 1 commodity trader there to file for bankruptcy protection as they look to restructure $662M USD in debt, including $200M owed to CHS. Further, ADM admitted in their 1st quarter earnings statement that margins have been tight in Brazil “as farmer selling hasn’t kept pace with export demand due to weak commodity prices and the strong Brazilian Real.” While ADM did have a net income of $339M USD in the quarter, the large amount of grain available globally “continues to limit merchandising opportunities” which is likely why they’re batten down the hatches and consolidating some international offices. Considering a recent survey of U.S. bankers think only 54% of their agricultural borrowers will be profitable in 2017, have you considered taking a tighter approach this year?
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.