Today’s Breakfast Brief looks at the lack of weather premium in wheat, the hope for Mother Nature to turn off the rain, and whether or not you should be managing some risk of your grain prices.
“If you wait for inspiration you’ll be standing on the corner after the parade is a mile down the street.” – Ben Nicholas (Australian actor)
Less Grain Available in Canada
Last week, the Canadian Ag Ministry lowered its forecast for how much grain will be left in the country by the end of this and next year’s crop years (much like Brazil or Russia’s export strength, should we be surprised given the lower value of the Canadian Loonie?).
Of note was canola’s carryout by the end of the 2016/17 year getting pegged at 700,000 metric tonnes, suggesting an incredibly low stocks-to-use ratio of 4.3% with the assumption that Canadian farmers harvest 15.4 million metric tonnes. With production lower though, domestic use and exports are forecasted to drop by 2% and 20% respectively, down to 8.15 million metric tonnes & 8 million metric tonnes for each column.
While canola production is seen lower, Ag Canada bumped its specialty crop production to a record 8 million metric tonnes (it’ll be needed with the tight carryout in peas and lentils of 100,000 metric tonnes and 25,000 metric tonnes respectively!
EU Wheat vs Australian Wheat
Of note is that the French soft wheat crop rated good-to-excellent (G/E) has dropped from 92% in mid-April to 83% as of Sunday. With the mild winter and humid start to the growing season, disease and insect issues are playing a bigger role in the quality of the crop in France.
Nonetheless, Mars, the EU crop monitoring agency pegged the average French wheat yield at 113.6 bushels an acre, a drop of 3.5% from last year’s record. While we’ll have to wait to see if France can jump above 40 million metric tonnes of wheat for the 2nd straight year, the International Grains Council pegged total European wheat production at 153.6 million metric tonnes (including durum).
This would nearly match the European Commission current estimate of 153.9 million tonnes but still fall short of last year’s record 160.1 million metric tonnes.
Rains in Australia have producers in the Land Down Undaa enjoying some of their best conditions to the start of their wheat season in the last few years, especially in the West. Further, the Australian Bureau of Meteorology says that average rainfall is expected from June to August, which Rabobank warns will be needed to ensure wheat fields in Aussie paddocks reach their full potential.
Less Rain, More Grain Prices Risk Management
Speaking of rains, we continue to see rains fall in areas of Western Canada in the most need, prompting some to ask Mother Nature to turn the tap off.
Needless to say, there’s enough of a moisture profile to get the crop up out of the ground and going, which is intuitively why new crop prices are pulling back a bit.
As we finish the month today, volatility and volume have certainly been the mots du jour this May.Normally, we’ll see some volatility with the spring weather / planting concerns but the past few weeks of trading have certainly been exacerbated by adverse conditions in South America.
Overall, our call continues to be locking in oilseed futures values while pricing out basis opportunities in corn and pricing out Chicago values down the road.
The bull parade doesn’t appear to be over yet but managing risk doesn’t necessarily involve waiting til the end of all the floats to admit it was a good show.
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.305 CAD, $1 CAD = $0.7664 USD)
July Corn: -1.5¢ (-0.35%) to $4.113 USD or $5.367 CAD
July Soybeans: +4.3¢ (+0.64) to $10.908 USD or $14.234 CAD
July Soybean Meal (per short ton): +$0.40 (+0.1%) to $402.90 USD or $525.79 CAD
July Soybean Oil (cents per lbs): +0.05¢ (+0.15%) to 31.53¢ USD or 41.15¢ CAD
July Oats: -2¢ (-1.05%) to $1.91 USD or $2.493 CAD
July Wheat (Chicago): -2.8¢ (-0.55%) to $4.788 USD or $6.248 CAD
July Wheat (Kansas City): -1.5¢ (-0.35%) to $4.583 USD or $5.98 CAD
July Wheat (Minneapolis): -0.5¢ (-0.1%) to $5.273 USD or $6.881 CAD
July Canola: -0.2¢/bu / -$0.10/MT (-0.02%) to $8.899/bu / $392.40/MT USD or $11.612/bu / $512/MT CAD
Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.853 USD or $3.723 CAD
July Durum Wheat: unchanged at $6.403 USD or $8.355 CAD
July Milling Wheat: unchanged at $4.964 USD or $6.477 CAD
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