October 30 – Getting Back to Normal Grain Prices?

As we near the end of October, grain prices are looking for bullish catalysts to hold on to (especially corn prices).

 

Good Morning!

in today’s FarmLead Breakfast Brief, we look at the short position at the Chicago Board of Trade and if it’s a contrarian indicator or not. We also explore some of the catalysts for stronger corn prices and soybean prices. Finally, we compare some yield estimates in Western Canada, and what it means for prices, namely flax, canola, and wheat (especially considering what the Canadian Loonie has been doing). 

If you’re looking for the futures prices, scroll to the bottom of the Breakfast Brief and you’ll find them there. 

“I don’t know what ‘normal’ means, anyway.”
– Karl Lagerfeld (German fashion designer)

Got the new FarmLead app?
Set a target with over 500 verified FarmLead buyers
Post your next block of your grain on FarmLead!

Getting Back to Normal Grain Prices?

Grain prices this morning are mostly in the green. We can blame the U.S. dollar, which has pulled back from last week’s gains.

At the Chicago Board of Trade, corn prices and soybean prices continue to flirt with psychologically significant levels of $3.50 and $10.00 USD per bushel, respectively.

Wheat prices on the futures board haven’t been able to hold on to any bullish moves though.  In the Chicago wheat trade, funds are now sitting on a net short position of nearly 84,000 lots. Given the bearish factors, Louise Gartner at Agriculture.com argues they may be right. [1]

Chicago-wheat-prices-remain-under-pressure
Chicago wheat prices hit a contract low. Can it go up?

 

Later today, we’ll know how far along the American farmer is with their corn and soybean harvest.

Ahead of the USDA crop progress report, the average estimate for the corn harvest is for 55% complete. Last week it was 38% but the average for this time of year is 75%.

For soybeans, the average pre-report guesstimate is 85% complete, which would be in line with the 5-year average. The figure would also be 15 points higher than last week’s progress.

Will the USDA show the market that combines are catching up to their normal pace? And will that help grain prices trend higher?

Garrett will have the full recap later this afternoon in Grain Markets Today (bookmark the link to his daily trading recap).

Corn Prices and Soybean Prices Looking Up?

Funds (or managed money) are in an abnormally short position of corn for this time of year at nearly 175,000 contracts. With this size of a bearish position, it’s a bit of a contrarian indicator for corn prices.

I would argue that this level of pessimism suggests that there’s more upside likelihood than downside potential right now.

Further, volatility in the corn markets is at yearly lows, as noted by Rich Nelson of Allendale. [2] This means that there is not that much action for corn prices right now.

Blue Line Futures notes that for traders to get bullish on corn, the market needs to close above $3.525 USD per bushel at the CBOT. [3]

The good news though is that the market isn’t pushing too much lower and it is finding some support. There’s just no bullish news to propel corn prices (and soybean prices) higher. [4]

I do suggest keeping an eye on the December 2018 contract. Why? Nearly $4 per bushel is available. Andy Shissler of S&W Trading says he’s selling that value, considering historically bad basis. [5]

In Friday’s Breakfast Brief, I discussed looking at deferred sales in detail. Read up on it here now.

For soybean prices, overnight trade on China’s Dalian commodity exchange closed higher for just the second time in 13 sessions. [6]

Most market analysts expect a rally in soybean prices before corn prices rise. [7] The main reason for this is because South America production shocks or Chinese demand has the potential to provide the bullish catalysts to push soybean prices higher.

If you are selling cash, there are nearly 100 verified buyers of soybeans on the FarmLead Marketplace today.

Post your 2017/18 soybeans on FarmLead now and bring those buyers to you (versus waiting for a bid to show up).

Better Canadian Prairie Yields, Prices?

Last week, Saskatchewan Ministry of Agriculture came out with their yield forecasts, and we saw a big difference in the numbers from StatsCan’s September estimates. Most notable is barley yields are forecasted by the provincial government to be nearly a quarter larger at 63 bushels per acre.

Conversely, soybeans – which are just starting to gain some acreage traction – are expected to come in at 18 bushels per acre, down nearly 25% from StatsCan’s estimate.

Flax yields in Saskatchewan are estimated to be 3 bushels per acre, or 16% higher than StatsCan’s September estimate.

saskatchewan-statscan-agriculture-ministry-2017-yield-estimates
Sask Ag Min’s crop yield estimate a bit different from StatsCan’s

 

On that note, the Canadian Loonie losing nearly 1.5% last week is supporting grain prices in Canada. A couple of the crops that seen better cash values include wheat and canola prices.

Another crop that has seen some notable price improvement is flax. One of the reasons for this uptick is that China has started to buy again, albeit in small increments. [8]

As per the most recent Grains Canada, nearly 52,000 MT of flax has been exported out of Canada thus far this marketing year. That is about 13% below this time a year ago.

There’s still some heavy competition from the Black Sea but considering that growers seem to be waiting for higher prices, will they have to wait a bit more?

Maybe they haven’t been too patient though: producer deliveries of flax so far this marketing season sit at roughly 78,000 MT. That’s almost more than 27% above where it was a year ago.

It’s certainly nicer to truck when it’s not -20 Celsius out there.

After all, AccuWeather is forecasting a cold winter for Western Canada. [9]

On the other side of the country, the weather agency is expecting more snowstorms but normal temperatures.

To growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

At 7:50 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2827 CAD, $1 CAD = $0.7796 USD)

Dec Corn: +0.3¢ (+0.05%) to $3.49 USD or $4.447 CAD
Jan Soybeans: +5¢ (+0.5%) to $9.915 USD or $12.718 CAD
Dec Soybean Meal (per short ton): +1.70 (+0.55%) to $313.80 USD or $402.51 CAD
Dec Soybean Oil (cents per lbs): +0.12¢ (+0.35%) to 34.96¢ USD or 44.84¢ CAD  
Dec Oats: +1¢ (+0.4%) to $2.663 USD or $3.415 CAD
Dec Wheat (Chicago): -0.8¢ (-0.2%) to $4.265 USD or $5.471 CAD
Dec Wheat (Kansas City): -0.8¢ (-0.2%) to $4.245 USD or $5.445 CAD
Dec Wheat (Minneapolis): -1¢ (-0.15%) to $6.16 USD or $7.901 CAD
Jan Canola: +2.5¢/bu / +$1.10/MT (+0.2%) to $9.199/bu / $405.63/MT USD or $11.80/bu / $520.30/MT CAD

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.

Most Recent Posts
Dec. 10 - Grain Markets Reverse Ahead of WASDE
December 10, 2018 Brennan Turner
Grain markets this morning are mostly lower ahead of tomorrow’s December WASDE report, with wheat prices the most notable, pulling back from its significant gains on Friday.
October 4: Corn Prices Edge Higher With October WASDE in Focus
October 04, 2018 Garrett Baldwin
Corn prices ticked higher Thursday as traders and analysts began to speculate on next week’s release of the October WASDE report.