May 17 – Grain Markets Divided on Rains

Good Morning!

Grain markets this morning are in the green as the complex tries to rebound from what as a down day for most crops.

“All mankind is divided into three classes: those that are immovable, those that are movable, and those that move.” – Benjamin Franklin (United States Founding Father)

graincents-trial

Grain Markets Divided on Rains

Grain markets this morning are mostly in the green as the complex tries to rebound from what as a down day for most crops. Wheat prices were able to gain yesterday and again this morning as rains in the Northern Plains will slow planting activity, whereas winter wheat prices gained on perceived dryness in Russia and Australia.

The Canadian Dollar pushed back above 78¢, which pressured canola prices. Some technical factors were keeping the bears in charge yesterday as canola prices were down more than 1%. Finally, there is some rain in the forecast for Western Canada, which is finally a good thing for canola crops, but bearish for canola prices. I will defer to the fact though that one shot of rain won’t do the trick as conditions remain dry across a lot of areas in Western Canada.

In yesterday’s FarmLead Breakfast Brief, I talked about the forecast of grain prices in 4Q2018 and 4Q2019.  The largest meat-packing company in the world, JBS, says that they’re planning for higher grain prices. [1] JBS says that there is not going to be a cooling off any time soon because of the laggard effects of drought conditions in Argentina, and now drier conditions in Brazil affecting the second/safrinha corn crop.

Soybeans Flooding Grain Markets?

In the regular Grain Markets Today column, Garrett explained how soybean prices took a big hit yesterdayThis was largely driven by continued concerns around trade with China and the Argentine Peso’s unending slide.

Cargill has come out publicly and said that they don’t agree with the tactics that the US is employing in their negotiations with China. [2] “History has shown that the use of tariffs is unsuccessful in achieving lasting solutions – the current challenges between the United States and China are no different,” wrote Devry Boughner Vorwerk, Cargill’s vice president of global corporate affairs.

Somewhat related, China is expected to grow less rice and corn in 2018/19 and instead put those acres into soybeans. According to local ag agencies, soybean acres in the People’s Republic are forecasted to rise by about 1.65 million acres to nearly 21 million acres in 2018/19.

Conversely, in Brazil, Mato Grosso’s soybean acreage is expected to climb yet again to 23.7 million acres in 2018/19. [3] Soybean area in the largest soybean-producing state in Brazil is now up 13.5% in five years! It’s hard not to think about expanding your acres if you’re a Brazilian farmer when you local soybean prices in Real terms (their currency) are at record levels. This is thanks to the Real being down more than 20% against the US Dollar so far this year!

However, the expansion is slowing as costs of land are making things a bit more difficult. Instead of buying more land, more farmers are looking at the option of irrigation to improve their yields. Further, having artificial rain clouds on their farms might increase the possibility of growing three crops a year, instead of the two that they’re currently able to manage.

Between soybean acreage in the US at a record, soybean acreage in China is expanding. Soybean acreage in Brazil is also climbing, so there’s no likely shortage of soybeans in 2018/19. Maybe the market is starting to realize that (and thus, the sharp drop the past few days in soybean prices?).

Understand What’s Affecting Your Crops

Due to travel, there won’t be any Breakfast Brief tomorrow morning, but you can be sure to get a good download of what’s happening in grain markets in Garrett’s free, daily Grain Markets Today blog. Further, every week, through GrainCentswe’re putting out original, often contrarian analysis on what’s happening in 12 different crops.

For example, yesterday we dug into what impact larger Russian peas acres in 2018/19 might have on North American peas prices. And then we’ve looked at the impact of, what we’re calling the “Trump-Trade Gold Rush” on corn pricessoybean pricesspring wheat prices, and winter wheat prices. Later today, you’ll see some content on how North African countries are trying to be more self-sustainable in their wheat needs (which has an obvious impact on trade flows, considering how much wheat the likes of Algeria and Morocco import).

Click here and sign up for your free GrainCents trial. You can also shoot me an email with what crops you’re looking to get better coverage/understanding on.

To growth,

Brennan Turner

President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

At 7:00 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2782 
CAD, $1 CAD = $0.7824 USD)

Jul Corn: 2.3¢ (0.58%) to $4.015 USD or $5.132 CAD
Jul Soybeans: 5.8¢ (0.58%) to $10.055 USD or $12.852 CAD
Jul Soybean Meal (per short ton): $3.10 (0.82%) to $379.70 USD or $485.333 CAD
Jul Soybean Oil (cents per lbs): 0.02¢ (0.06%) at 30.79¢ USD or 39.36¢ CAD  
Jul Oats: 0.3¢ (0.12%) to $2.415 USD or $3.087 CAD
Jul Wheat (Chicago): 10.3¢ (2.07%) to $5.045 USD or $6.449 CAD
Jul Wheat (Kansas City): 11.8¢ (2.30%) to $5.258 USD or $6.721 CAD
Jul Wheat (Minneapolis): 7.8¢ (1.28%) to $6.190 USD or $7.912 CAD
Jul Canola: $0.80 (0.15%) to $12.020/bu / $530.00/MT CAD or $9.404/bu / $414.65/MT USD

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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