Today we review estimates of 2018 acres, the potential for weather premium thanks to South America, and how politics and getting in the way of agricultural progress.
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Grain markets this morning are generally mixed with corn wheat higher and oilseeds lower.
Canola prices remain troubled with weaker palm oil prices and a Canadian Loonie above 78 cents USD. The next major direction could come in a week on Wednesday, December 6th, with the next StatsCan production report. The market is expecting to see 20 million tonnes.
Wheat prices are trying to rebound from the contract lows set yesterday in the March 2018 contract on the Chicago Board of Trade. Paris wheat futures also saw a contract low in their March contract.
Iraq’s recent tender for wheat appears to be won by Australia, who offered a delivered price of around USD 286 / metric tonne (or USD 7.75 and CAD 9.95 per bushel).
In Egypt, Russia won another GASC wheat deal, selling 120,000 tonnes at a delivered price of USD 208 / metric tonne (or USD 5.65 and CAD 7.25 per bushel).
Seeding of the rabi crop is ahead of schedule in India, with pulse acres in thus far up 14% year-over-year. This means that nearly 25 million acres of pulses have been seeded thus far. The Indian Pulses and Grains Association is expecting chickpeas acreage to jump 20% in this rabi crop, which is a reflection of better prices on both the private and public market (the government just raised the MSP for chickpeas) 
More South American weather talk is happening, with everyone pointing to what La Nina should do there.  While drier conditions are supposed to be seen in Argentina and southern Brazil, the former is getting some rain this week. Whether or not that continues through December is another question, as therein lies some of the potential for weather premium.
Using this year’s North American growing season as an example, poking the bullish fire about it being too dry can end up being a bit overblown. However, we will welcome the premium if volatility picks up as we can target some better prices.
Remember, when it comes to volatility, the target should be to “sell the rumor and profit on the fact.”
Politics Weighing on Ag Industry
The European Union voted to allow glyphosate to be used for the next five years.  The last agreement was for 15 years of use, so this is a bit disappointing for some Ag groups, but at least something got done! If it weren’t approved, the herbicide would’ve been de-authorized before Christmas!
However, it’s not all green pastures. French President Emmanuel Macron tweeted that he was instructing his government to move ahead in banning glyphosate use in France within the next three years.
Also in politics, Robert Lighthizer, the lead US Trade Representative in the NAFTA re-negotiations, is getting weary.  After the fifth round of talks in Mexico last week, he’s “concerned about the lack of headway.” The sixth round of talks is scheduled for Montreal in late January.
USDA’s First 2018 Acreage Estimates
In 2017, the US planted the least number of acres of principal crops since 2011 at 318 million.  Will that trend continue in 2018?
In 2017, corn and soybean acres accounted for 56.5% of all principal crop acres or 178.9 million acres. This was the third straight year that this 1-2 punch of many American farmers accounted for a larger share of total acres. It included 90.4 million acres of corn and a record of 90.2 million acres of soybeans.
In 2017, however, only Kansas, North Dakota, and Michigan increased their corn acres over the previous year by a significant amount. Kansas and North Dakota also increased their soybean acres over the previous year by a significant amount. Kansas added 700,000 acres of beans when compared to 2016, while North Dakota added an astounding 1.15 million acres!
Yesterday, the USDA announced that they think US soybean area will indeed increase again in 2018, to a new record of 91 million acres.  They also think corn acres will be 91 million acres.
Increases year-over-year are also expected in rice, sorghum, barley, and oats, whereas cotton and wheat will see less American soil. More specifically, at 45 million acres of all wheat, that would be the lowest seeded number to the cereal since 1919.
From a production standpoint, the USDA thinks that US corn yields could average 173.5 bushels per acre in 2018 (current estimate for the 2017 crop is 175.4). This would imply a production mark of 14.5 Billion bushels (current 2017 estimate is 14.58 Billion). Accordingly, ending stocks by the close of the 2018/19 marketing year would climb to 2.61 Billion bushels, up from 2017/18’s carryout of 2.49 Billion bushels.
For soybeans, the USDA is expecting yields to be average 48.4 bushels per acre in 2018 (49.5 this year in 2017). This means production should hit 4.36 Billion bushels (versus 4.43 Billion this year), but carry out would tighten to 376 million bushels (the current 2017/18 carryout estimate is for 425 million bushels). From a demand perspective, there are some who think that the ethanol number may be too low for corn. But they think that the USDA’s expectations for soybean demand are right on the money.
However, I would remind those analysts that US soybean export sales are sitting 17% behind last year’s pace. And this quarter – 4Q2018 – is when the 53% of America’s soybean exports are usually made. Basically, US soybean export over the next six weeks is crucial to getting on their way to meeting full-year targets.
Finally, the USDA estimated an average 2018/19 marketing year price for USD 3.30 / bushel for corn, $9.40 for soybeans, and $4.60 for winter wheat.
Now, more than ever is the time to do some pencil farming and start putting together a strategy for 2018. This includes plugging in your input costs.  Understanding where crop production returns are in the red or the black is critical process when targeting your new crop grain marketing plan.
At 7:25 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2809 CAD, $1 CAD = $0.7807 USD)
Mar Corn: +1.8¢ (+0.5%) to $3.51 USD or $4.496 CAD
Jan Soybeans: -1.5¢ (-0.15%) to $9.915 USD or $12.70 CAD
Jan Soybean Meal (per short ton): +$0.40 (+0.1%) to $326.20 USD or $417.83 CAD
Jan Soybean Oil (cents per lbs): -0.19¢ (-0.55%) to 33.94¢ USD or 43.47¢ CAD
Mar Oats: -3¢ (-1.15%) to $2.58 USD or $3.305 CAD
Mar Wheat (Chicago): +2.8¢ (+0.65%) to $4.32 USD or $5.533 CAD
Mar Wheat (Kansas City): +2¢ (+0.45%) to $4.298 USD or $5.505 CAD
Mar Wheat (Minneapolis): +2.5¢ (+0.4%) to $6.245 USD or $7.999 CAD
Jan Canola: -2.7¢/bu / -$1.20/MT (-0.25%) to $11.51/bu / $507.50/MT CAD or $8.986/bu / $396.21/MT USD
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.