FarmLead Breakfast Brief
Tuesday, May 30th, 2017
“Our greatest glory is not in never falling, but in rising every time we fall.”
– Confucius (Chinese philosopher)
At 6:45 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3459 CAD, $1 CAD = $0.743 USD)
July Corn: -3¢ (-0.8%) to $3.713 USD or $4.997 CAD
July Soybeans: -2¢ (-0.2%) to $9.245 USD or $12.443 CAD
July Soybean Meal (per short ton): +$0.40 (+0.15%) to $302.20 USD or $406.73 CAD
July Soybean Oil (cents per lbs): -0.10¢ (-0.3%) to 31.50¢ USD or 42.40¢ CAD
July Oats: -0.3¢ (-0.1%) to $2.44 USD or $3.284 CAD
July Wheat (Chicago): -3.3¢ (-0.75%) to $4.35 USD or $5.855 CAD
July Wheat (Kansas City): -3.8¢ (-0.85%) to $4.338 USD or $5.838 CAD
July Wheat (Minneapolis): -2.3¢ (-0.4%) to $5.665 USD or $7.624 CAD
July Canola: +0.7¢/bu / +$0.30/MT (+0.05%) to $8.636/bu / $380.79/MT USD or $11.623/bu / $512.50/MT CAD
Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.232 USD or $3.005 CAD
July Milling Wheat: unchanged at $4.954 USD or $6.668 CAD
Time For Timestamps
After the American Memorial Day long weekend, grain markets opened up the shortened trading week in the red as relatively benign weather conditions is keeping a lid on any weather premiums. South African corn production is expected to rebound to a record of 15.63M tonnes from last year’s drought-riddled crop, a 9-year low. Thanks to the long weekend, we’ll get the U.S.D.A.’s crop conditions a day later than usual (today), which will include the first crop ratings of the 2017/18 American corn and spring wheat crop. Pre-report estimates are for good-to-excellent (G/E) ratings of 72% and 70% respectively. In France, crop conditions have seemed to stabilize from their free-fall the last weeks, with the soft wheat crop’s G/E portion now sitting at 76%, 1 point higher than last week. Strategie Grains’s monthly estimate of the EU rapeseed crop sits at 21.35M tonnes (or about 5% above last year’s production), with output forecasts lowered in Germany (5M tonnes), maintained in France (4.6M tonnes), and raised in Poland, Romania, the U.K., and Hungary. AccuWeather says though that there’s some hot & dry weather developing across Poland, Ukraine, Belarus, and other Baltic State, which is something we’ll have to keep a close eye on, given that especially Ukraine is the world’s #4 exporter of corn and #6 exporter of wheat! It’s also worth noting that UkrAgroConsult is timestamping a 60% increase in rapeseed exports, thanks to a 70% increase in production this year.
Mike Jubinville from Pro Farmer Canada points out that Western Canadian cash feed barley prices have seemingly found a steady home after a few weeks of rising values. However, Jubinville thinks that new crop feed barley prices could see about a 5-10% increase over the coming months as he doesn’t think there is actually a lot of poor quality wheat actually making it into the feed market & because barley and U.S. corn acres are down. I’d challenge this theory though because if this were the case, then we would’ve already seen stronger values than the usual seasonal upswing for this time of year but we did not. If prices do rise, it will be driven by production concerns in 3Q2017 (July, August, & September), not the current pipeline of supply.
According to the Argentinian Ag Ministry’s chief forecaster, wheat production in the South American country is expected to climb to a 2nd consecutive record in 2017/18 of 20M tonnes, after 2016/17’s massive 18.4M tonnes. There are doubters though as the Buenos Aires Grains Exchange only thinks that production this year hit 16.3M tonnes and 2017/18’s will hit 17.5M tonnes as rainfall has slowed field activity. While the credibility of the Argentinian government forecasts is thin (technology is being cited by the government as a main reason for the increase), what’s for sure is that with no export taxes on corn or wheat, Argentinian farmers are growing more in favour of the 2 row crops. In Russia, according to IKAR, wheat exports are now sitting at 25.3M tonnes for the 2016/17 marketing year, which is a new record, but is expected to be broken by 2017/18’s forecast from the U.S.D.A. of 28M tonnes. With European exports still finding it tough to be competitive after a smaller year of production, it seems to be that the title for top wheat exporter next week will be battled out between Russia & America (ironic given some of the geopolitical risk). Perhaps we can call this battle the Cold Wheat War.
There’s a case to be made for being bullish corn, but this doesn’t mean, in my opinion, that we’ll see 2012 prices. More specifically, Andrew Hecht from the Hecht Commodity Report points out that the likelihood that 90M acres of corn do get planted in America this year seems to be waning and with both domestic (think feed and ethanol) and export demand remaining relatively strong, less supply with consistent demand equates to a higher price equilibrium. Add in some bullish technical factors and a 10-15% gain over the next 6 weeks isn’t out of the question, although I continue to be cognizant of the fact that the highs of the growing season have been seen before the end of June (AKA in the next 4.5 weeks). Any move to the upside will be intuitively intensified by speculative money, who continue to drive volatility, and not fundamentals. Case in point, my friend Ed White from the Western Producer points that this was exactly the case regarding the snowfall on U.S. winter wheat crops at the beginning of the month, followed by a bullish panic, to a calming return to the facts (for the record, we timestamped that this would happen).
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.