December 6 – New (Bullish) Moves in Grain Markets

Good Morning!

Today’s Breakfast Brief introduces FarmLead’s newest product, GrainCents, reviews the bullish opportunities in soybean prices (and reminds where canola prices could go), in addition to discussing lost and won opportunities in southeast Asia because of freight.

“Life moves fast. As much as you can learn from your history, you have to move forward.” – Eddie Vedder (American musician)

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Grain markets are mixed this morning with corn prices and soybean prices leading the green players, thanks to dryness concerns in Argentina.

There’s some buzz that the Chinese corn harvest isn’t as big as once thought. As such, corn prices on the Dalian Commodity Exchange (basically China’s Chicago Board of Trade) are up a little bit overnight.

US President Donald Trump is moving the US embassy in Israel to Jerusalem as it looks to recognize the city as the country’s capital. [1] This breaks from decades of policy and an embassy in Tel Aviv and the move could spark some geopolitical unrest, which would negatively impact equity markets (translation: sell off).

It really shouldn’t be a surprise though: President Trump is full of new moves that no other politician has ever tried (or is at least willing to).

Wheat Expectations

Later this morning we’ll get Statistics Canada’s next update regarding crop production estimates. As I mentioned in Monday’s Breakfast Brief, StatsCan has a habit of upgrading their crops significantly from their first estimate to their last. Thus, we should not expect this to be the last upgrade of the crop.

The big numbers that I’m watching for are canola, total wheat, and durum. Click this link to see all the pre-report guesstimates.

Australian wheat exporters are feeling the hit of the Black Sea’s cheaper product displacing them. [2] In the second half of the 2018 calendar year, Australia usually is forward contracting millions of tonnes of wheat to go into Indonesia.

This year, Black Sea wheat exporters scooped that business up by being at a delivered price that was about $100 cheaper than Australian wheat, or USD 190 /tonne (or USD 5.15 and CAD 6.55 per bushels if you convert currency and tonnes into bushels at GrainUnitConverter.com!).

Rabobank recently noted that freight costs are trending higher, which could help Australia gain some of its market share in Southeast Asia (thanks to their geographical proximity). [3]

Sidenote: Australian Grain Export is expecting Indonesia to take over from Egypt in the coming years as the largest importer in the world!

It’s possible Argentina might get in the mix as it will have more wheat to sell. Informa just increased its estimate of the wheat crop there to 18 million tonnes.

Bullish Soybean Prices

As of last week, managed money was sitting in a net long position of about 24,000 lots in the soybean futures market. But the bullish pot is stirring with this dry weather in Argentina.

Nearly 50% of the Argentine soybean crop has been seeded there. There are obvious germination concerns. The La Niña headline is getting some serious headlines with the long-range forecasts calling for very little moisture in Argentina.

Argentina is the largest exporter in the world of soymeal. The last time we saw a soybean production scare was in April 2016. Back then, over the course of about three months – from early March to mid-July – we saw soybean prices on the futures board climb from under USD 9 /bushel to up above $12.

Should we have the expectations that prices should rally 30% again in the coming months? I would say that this would be a bit aggressive at this point, but there’s certainly potential to rally up to $11, based on fund activity and how the market has rallied historically when it comes to South American weather premium.

Conversely, the Brazilian crop is looking okay. FC Stone increased its estimate to 107.6 million tonnes this week while Informa is now calling for a 110 million-tonne crop. Last year, Brazil harvested a record 114.1 million-tonne soybean crop.

The bullishness in soybeans could easily help canola prices, as they play follow-the-leader.

Also supporting some better canola prices could be lower rapeseed acres in India, which could lead to more imports. [4] However, I’ll remind you of the increased import tax on vegetable oils enacted by the Indian government a few weeks ago.

On the flipside, there has been a streak of updates showcasing larger rapeseed/canola crops around the world. [5] We’ve seen bigger numbers in the UK, Ukraine, and most recently, Australia. It’s more than likely that StatsCan will show us something bigger later this morning.

Introducing GrainCents

Today, we’re taking the expertise of the Breakfast Brief to the next level with the launch of GrainCents – making more sense of the markets for the crops you grow.

I’ve built up a risk management process as to how to weigh bearish factors, bullish factors, and how to clear the noise. Read more about my risk management process here.

If you’ve been a reader of the Breakfast Brief for anything longer than the last month, you know all about it. I pride myself on providing comprehensive but also actionable recommendations to better your grain marketing plan.

I wanted to know how I’ve been doing though. So I had the team at FarmLead look back over my calls in the past two years, specifically trying to identify when I said to sell some grain (10-20% at a time!) or wait for better prices. This was a huge undertaking – nearly 450 FarmLead Breakfast Briefs to re-read!

In those columns, we found 130 recommendations. We then cross-referenced when those calls were made and what the cash prices for that specific type of grain did in the following months.

One of our interns, Mallory, took on this tough job (but has done amazing work!) and here’s what she found:

121 of the calls have been correct. 121 recommendations to sell grain, lock-in basis, or wait for better grain prices. Out of 130.

Percentage-wise, that’s batting 93%.

Doubtful? Check out all the timestamped grain marketing calls here. Or just dig through your emails and compare yourself. The content of the columns is no different on that link versus what you’ll find in the email.

Thus, we’ve created GrainCents. Think of it as a more sophisticated, but more customizable Breakfast Brief.

In GrainCents, we explore 12 individual crops in more depth, in addition to continuing all actionable calls of when to sell or hold. There is an annual cost to the GrainCents product, starting at $250, but you can opt in for some discounted prices on some combo options using the code found at the bottom of today’s Breakfast Brief.

Is it worth it?

Divide the cost of your GrainCents subscription by the number of acres you’re farming for those crops you’re subscribing to. My guess is you’ll be looking at less than 40 cents an acre.

I’m still writing the Breakfast Brief daily, but going forward, my more in-depth analysis, my grain sales recommendations, and all FarmLead Insights piece will be found in GrainCents.

There are already over 200 unique pieces of content in GrainCents that I, and others on the FarmLead team, are putting our two cents on to make your grain’s markets easier to understand.

Join us there.

To growth,

Brennan Turner
President/CEO | FarmLead

1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

At 7:05 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2658 CAD, $1 CAD = $0.79 USD)

Mar Corn: +1.5¢ (+0.4%) to $3.553 USD or $4.497 CAD
Jan Soybeans: +4¢ (+0.4%) to $10.125 USD or $12.816 CAD
Jan Soybean Meal (per short ton): +$3.90 (+1.15%) to $347.20 USD or $439.49 CAD
Jan Soybean Oil (cents per lbs): -0.06¢ (-0.2%) to 33.44¢ USD or 42.33¢ CAD  
Mar Oats: -1.3¢ (-0.5%) to $2.533 USD or $3.206 CAD
Mar Wheat (Chicago): -0.3¢ (-0.05%) to $4.325 USD or $5.475 CAD
Mar Wheat (Kansas City): unchanged at $4.315 USD or $5.462 CAD
Mar Wheat (Minneapolis): -0.3¢ (-0.05%) to $6.265 USD or $7.93 CAD
Jan Canola: -1.4¢/bu / -$0.60/MT (-0.1%) to $11.546/bu / $509.10/MT CAD or $9.121/bu / $402.19/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.

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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