May 23 – Acreage Threats

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FarmLead Breakfast Brief
Tuesday, May 23rd, 2017

“A piece of advice always contains an implicit threat, just as a threat always contains an implicit piece of advice.”
– Jose Bergamin (Spanish author)

Good Morning!

At 6:55 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3463 CAD, $1 CAD = $0.7428 USD)

July Corn: -2.5¢ (-0.65%) to $3.725 USD or $5.015 CAD
July Soybeans: -4.3¢ (-0.45%) to $9.523 USD or $12.82 CAD
July Soybean Meal (per short ton): -$1 (-0.3%) to $306.80 USD or $413.03 CAD
July Soybean Oil (cents per lbs): -0.16¢ (-0.5%) to 32.78¢ USD or 44.13¢ CAD  
July Oats: -0.3¢ (-0.1%) to $2.465 USD or $3.319 CAD
July Wheat (Chicago): -2.5¢ (-0.6%) to $4.318 USD or $5.812 CAD
July Wheat (Kansas City): -4.3¢ (-0.95%) to $4.318 USD or $5.812 CAD
July Wheat (Minneapolis): -3.5¢ (-0.65%) to $5.558 USD or $7.482 CAD
July Canola: -3.6¢/bu / -$1.60/MT (-0.3%) to $8.801/bu / $388.04/MT USD or $11.848/bu / $522.40/MT CAD

Friday’s Winnipeg ICE Close (Canadian long weekend)
July Barley: unchanged at $2.197 USD or $3.005 CAD
July Milling Wheat: unchanged at $4.872 USD or $6.559 CAD

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Acreage Threats

Grain markets this morning are slightly in the red, pulling back from yesterday’s day in the green due to the continued concerns of wet weather in the U.S. and the effects on crop conditions (especially disease potential), replanting, and crop switching. The U.S.D.A.’s crop progress report yesterday showed that corn and soybean planting are back on track in the U.S. but the obvious caveat here is that this doesn’t include the % of acres that have had to get replanted (or won’t get replanted with corn). Next week we’ll get the condition rating of the corn and spring cereals crop but in the short-term, the likelihood of one of the largest corn replantings in history has grain markets this week on a bullish edge. Accordingly, hedge funds got a bit longer last week in the coarse grain while getting shorter in wheat and soybeans, with the latter because of the threat of more soybeans getting seeded instead of farmers replanting corn in some areas. What’s certain is that the U.S. Midwest is free of any drought, with some fields being flooded for the first time ever, threatening any production whatsoever.

84% of American corn acres are now planted (the 5-year average is 85%) with 54% of the crop emerge (55% is the 5-year average). The American area planted in soybeans is now sitting at 53%, 1 point above the 5-year average with 19% of the crop emerged, slightly behind the 21% we usually see by now. Spring cereal planting pace also picked up speed with 90% of U.S. spring wheat now seeded (94% a year ago but 84% is the 5-year average) with 62% of the crop out of the ground (75% a year ago but 59% 5-year average). 88% of the U.S> barley crop is in the ground with 59% of it emerged, which compares to the 5-year average of 87% and 64% respectively. The American oats crop is basically all in with 95% planted (93% 5-year average) and 83% of it is emerged (81% 5-year average). Switching seasons, 72% of the winter wheat crop is now considered headed (last year it was 74% by this week but the 5-year average is 67%) but the portion of the crop rating good-to-excellent (G/E) dropped 1 point week-over-week to 51% (it was 62% G/E a year ago).

In Ukraine, UkrAgroConsult says that the plantings of spring grains is 94% complete as of last week, while the Argentinian corn harvest is basically done. Next door in Brazil, the political saga continues, keeping bearish pressure on the Real against the U.S. Dollar and farmer selling in-stride. Ag Resource says that to-date, Brazilian soybeans commitments are estimated at 40M tonnes, which would be a record & 2.75M tonnes ahead of last year’s record export volumes. Switching over to wheat, the moisture events we’ve seen lately have brought a mixed bag of emotions as while U.S winter harvest is beginning, prices are likely to find support on the likelihood of lower quality and more abandoned acres. It’s likely that wheat grading will be a part of Trump’s N.A.F.T.A. re-negotiations but Canada is already looking beyond that as it and 10 other countries are trying to move forward on a brand-new Trans-Pacific Partnership trade deal without America part of the program.

Coming back to crop conditions, more analysts seem to be getting bearish but acknowledge that there will be small bullish blips that will sway people to thinking there’s a longer-term trend. For corn, Utterback Marketing says the potential is there for prices to go higher but there’s a lot of old crop corn left in the American pipeline that needs to get moved. That being said, without a weather scare, basis could start to get pretty ugly and those without a plan today will be left with worse-off prices in a few months from now as new crop production potential is known and priced into the market. For soybeans, in exactly 5.5 weeks we’ll get the June 30th stocks and acreage report, which will likely be able to show us how many acres switched over from corn to the oilseed. With the threat of an acreage switch, Todd Hubbs of the University of Illinois says that corn has less downside potential whereas any rallies before that Friday, June 30th report should be considered a good opportunity to sell more beans.

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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