FarmLead Breakfast Brief
Friday, May 5th, 2017
“We only see what we want to see; we only hear what we want to hear. Our belief system is just like a mirror that only shows us what we believe.”
– Miguel Angel Ruiz (Mexican author)
At 6:20 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3772 CAD, $1 CAD = $0.7261 USD)
July Corn: +2¢ (+0.55%) to $3.688 USD or $5.079 CAD
July Soybeans: -1¢ (-0.15%) to $7.733 USD or $10.649 CAD
July Soybean Meal (per short ton): -$1.30 (-0.4%) to $317.30 USD or $436.99 CAD
July Soybean Oil (cents per lbs): +0.17¢ (+0.5%) to 32.67¢ USD or 44.99¢ CAD
July Oats: -0.8¢ (-0.3%) to $2.433 USD or $3.35 CAD
July Wheat (Chicago): +2.5¢ (+0.55%) to $4.403 USD or $6.063 CAD
July Wheat (Kansas City): +3.3¢ (+0.75%) to $4.478 USD or $6.167 CAD
July Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.48 USD or $7.547 CAD
July Canola: +4.1¢/bu / +$1.80/MT (+0.35%) to $8.639/bu / $380.91/MT USD or $11.898/bu / $524.60/MT CAD
Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.199 USD or $3.005 CAD
July Milling Wheat: -16.3¢ (+2.4%) to $4.782 USD or $6.586 CAD
Mirror, Mirror on the Wall
Grain markets this morning are mixed as Plant 2017 concerns weigh against weather forecasts and crop size potential, especially after the crop tour in Kansas wrapped up, which can only be described as unique. Canola continues to gain back some ground lost earlier in the week, thanks to a lower Canadian Loonie and concerns of planting pace in Western Canada. Corn and wheat lost a fair amount of ground yesterday as the market continues to factor in the aforementioned crop potential and current available supply. A recent Farm Journal poll of over 1,300 U.S. farmers showed that 63% think they’ll face some planting delays in 2017, with 32% saying they’re way behind, 31% suggesting they’re only slightly behind, 20% saying they’re on pace, and 18% ahead or way ahead of schedule. Veteran trader Tommy Grisafi admits that every time he’s bet against the farmer to get the crop into the ground, he’s lost every single time. Grisafi also blames new agtech for the lower crop prices as farmers are producing more with the technology. I think that the increase in better non-tech production practices overseas in emerging ag markets like Brazil and Russia is also to blame but there is a point here. Nevertheless, we find ourselves this year again in a low-commodity price environment, mirroring conditions of the last couple of years – do you have a grain marketing plan with this in mind and what sort of discipline is in place to help it play out?
Day 3 of the Wheat Quality Council through Kansas wrapped up yesterday, pegging final yield estimates at 46.1 bu/ac across 469 stops, suggesting a total production forecast of 282M bushels, a figure that includes 20% crop abandonment. This would be a 40% decline or about 185MM bushels less than what was produced a year ago. Given the snowfall and frost conditions that have hit the region a few times leading up to the crop tour, there are many out there who are skeptical of even this number. An interesting point though is that last year’s wheat tour said the crop was going to come off at 48.6 bu/ac and the final state average ended up being 57 bu/ac. Not all fields got measured this year because of snow-cover, and therefore many are feeling that the market is over-stating just how decent the Kansas hard red winter wheat crop is according to the Wheat Quality Council’s tour.
Despite all the controversy and debate over the numbers, I think there’s 3 takeaways from this week’s contentious wheat tour. First, the numbers don’t mean squat until the crop is in the bin and things have been harvested. Second, this tour should be moved back by another week or so. And third, if you’re complaining about how prices have pulled back from where they were on Monday/Tuesday this week, the market had priced in some troubling production issues but the Kansas crop tour challenged that with some decent numbers. If you missed the boat to lock in a block of something on the short-lived rally, don’t blame the crop tour for that; check the mirror. It may be harsh but too many times, solid marketing opportunities present themselves and the relative nature of a rally is ignored with “I think there’s more to go” but without much justification behind it. As such, I remind you to read my 3-part blog post on cash grain price risk management here and start a better plan by posting your first target on FarmLead today.
Have a great weekend!
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.