May 9 – Slightly Saturated

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FarmLead Breakfast Brief
Tuesday, May 9th, 2017

“Everybody’s entitled to their opinions, but I don’t understand why we have to saturate social media with all the negative stuff.”
– Megan Hilty (American actress)

Good Morning!

At 7:20 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3697 CAD, $1 CAD = $0.7301 USD)

July Corn: +1.3¢ (+0.35%) to $3.673 USD or $5.03 CAD
July Soybeans: +1.3¢ (+0.15%) to $9.66 USD or $13.231 CAD
July Soybean Meal (per short ton): +$0.40 (+0.15%) to $314 USD or $430.08 CAD
July Soybean Oil (cents per lbs): +0.06¢ (+0.2%) to 33¢ USD or 45.20¢ CAD  
July Oats: +1.3¢ (+0.5%) to $2.498 USD or $3.421 CAD
July Wheat (Chicago): +0.3¢ (+0.05%) to $4.338 USD or $5.941 CAD
July Wheat (Kansas City): +0.5¢ (+0.1%) to $4.448 USD or $6.092 CAD
July Wheat (Minneapolis): +2.3¢ (+0.4%) to $5.47 USD or $7.492 CAD
July Canola: +0.9¢/bu / +$0.40/MT (+0.1%) to $8.708/bu / $383.96/MT USD or $11.927/bu / $525.90/MT CAD

Yesterday’s Winnipeg ICE Close
July Barley: unchanged at $2.199 USD or $3.005 CAD
July Milling Wheat: -16.3¢ (-2.6%) to $4.749 USD or $6.505 CAD

This recent weather has pushed up grain prices…
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Slightly Saturated

Grains this morning are in the green with wheat and corn trying to pick up some steam on yesterday’s U.S.D.A. data showing a slower planting pace. Good conditions have allowed a fair amount of crop to get seeded in south and the western half of the Midwest, but rains continue to be in the forecast for the eastern Corn Belt, helping build in some premium to the market. 23% of American spring wheat acres got seeded last week, which surprised the market a bit (they were expecting a 14-point jump) but it’s still behind the normal pace. South of the equator, the rainy season has lasted a little longer in central & northern Brazil, an area where 80% of the 2nd-season safrinha crop is grown. With pollination of the crop happening this month, the rains are certainly helpful. Farmers in the United Kingdom are worried about how productive their land will be after the driest winter in 20 years there, hoping that they could get a few drops to saturate the needs of their thirsty soil (but nothing in the short-term is expected).

While we talked yesterday about the healthy pace of U.S. soybean exports, data on China’s appetite for them continues back up the export numbers from Brazil & America. Despite negative margins experienced by crushers right now, in April, China imported 8M tonnes, a jump of 13.4% year-over-year and brining the volume shipped into the People’s Republic over the first 4 months of 2017 to 27.54M, an 18% increase over the same period in 2016. We can expect this import number to continue to tick up as livestock feedstuffs continue to be important for the expanding meat industry there. For example, COFCO is expecting to increase its hog production capacity to 5M animals by the end of 2020, compared to the 2M head it is right now! The Chinese government is trying to get the country to rely less on imports though as soybeans acres are expected to increase by 10.5% to 19.5M acres in 2017 (as China’s National Grain & Oils Information Centre), with production climbing 9.2% from last year to 14.3M tonnes. Conversely, Chinese corn acres are set to fall by 2.7% to 87.5M, with output forecated to drop 3.7% to 211.5M tonnes. Further, rapeseed acreage in 2017 is estimated to drop 3.1% year-over-year to 17M acres, with production declining 1.9% to 13.7M tonnes.

Yesterday’s crop progress update from the U.S.D.A. showed the American farmer was able to get a fair amount of seeding in last week, with 47% of the U.S. corn crop got planted, above the 44% the market was expecting, but still behind the average pace of 52% and 61% a year ago. Notable activity was seen in the northern Plains and the western Corn Belt, specifically South Dakota (+25 points week-over-week to 32% of expected acres planted), Iowa (+24 WoW to 52%), Minnesota (+23 to 35% complete), and North Dakota (+20 to 23%). For soybeans, 14% of the American crop is now seeded, a bit behind the 5-year average of 17%, but southern states are tracking ahead of the seasonal average pace. For spring cereals, 79% of the oats crop is in (matching the 5-year average) & 59% of the crop has emerged (60% usually by now). 53% of the U.S. barley crop is in (5-year average is 68%) with 26% of it emerged (usually 35% by now) while 54% of the American spring wheat crop has now been planted (60% 5-year average) with 21% emerged (29% average). 53% of the U.S. winter wheat crop is rated good-to-excellent, down 1 point from last week, which will cause some more uproar, considering the wet and sometimes wintery conditions that hit many fields a few weeks ago.

Overall, what’s easy to conclude is that U.S. planting is behind the usual pace (“thanks Captain Obvious,” you’re thinking now). This will likely be slightly supportive of prices across the board but more analysts are growing skeptical of the crop not getting in. More acutely, the long-term forecast continues to suggest a growing year like the last few years. Of course, you can’t count it until it’s in the bin but getting a decent start to the growing season is what’s needed. While there’s been a lot of buzz about the pace of planting, the conversation around switching crops has been fairly quiet. More specifically, there could be even more soybeans going into the ground in a few areas, while in Western Canada, it’s possible that you could see less pulse crops if things stay wet in a few areas. Simply put, there’s more than a few areas across North America that are too saturated to get the crop in, but, in a reminder from last Friday’s Breakfast Brief, betting against the farmer to plant a crop has slighted more than a few investors.

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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