Nov 1 – Trying To Hit The Curve

FarmLead Breakfast Brief

Tuesday, November 1st, 2016

“Everyone knows what a curve is, until he has studied enough mathematics to become confused through the countless number of possible exceptions.”
– Felix Klein (German mathematician)

Good Morning!
At 6:45 AM CDT in the North American futures markets (*not cash prices*):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3382 CAD, $1 CAD = $0.7473 USD)

Dec Corn: -2¢ (-0.55%) to $3.528 USD or $4.72 CAD
Jan Soybeans: -1.3¢ (-0.1%) to $10.105 USD or $13.522 CAD
Dec Soybean Meal (per short ton): -$0.10 (-0.05%) to $316 USD or $422.86 CAD 
Dec Soybean Oil (cents per lbs): -0.22¢ (-0.65%) to 34.95¢ USD or 46.77¢ CAD 
Dec
 Oats: +0.8¢ (+0.35%) to $2.213 USD or $2.961 CAD
Dec Wheat (Chicago): -2.3¢ (-0.55%) to $4.14 USD or $5.54 CAD
Dec Wheat (Kansas City): -0.8¢ (-0.2%) to $4.14 USD or $5.54 CAD
Dec Wheat (Minneapolis): -1.5¢ (-0.3%) to $5.253 USD or $7.020 CAD
Jan Canola: -1.6¢/bu / -$0.70/MT  (-0.15%) to $8.84/bu / $389.79/MT USD or $11.83/bu / $521.60/MT CAD

Yesterday’s Winnipeg ICE Close

Dec Barley: unchanged at $2.156 USD or $2.885 CAD
Dec Milling Wheat: unchanged at $4.82 USD or $6.45 CAD

We’re in a period of low-grain prices…

With the recent rally, shouldn’t you ensure the best price?

Step your game up – post a block of your grain on FarmLead!

Trying to Hit the Curve

Grains this morning are all in the red to start the month of November as the market, much like your kids, are in a bit of a candy coma after a prosperous October (speaking in terms of candy for the kids, profits for the market on the recent rally). Wheat rebounded on its down sessions last week by finding some help in short covering and U.S. exports, who’s inspections are up 28% compared to this time a year ago. Comparably, U.S. corn exports are running about 30% above last year (U.S.D.A. is forecasting a 17% jump YoY) while U.S. soybean shipments are up 11% YoY (a 4.5% jump is forecasted by the U.S.D.A.). Soyoil dropped for the 4th time in the last 5 sessions, on subdued palm oil trade and news that O.P.E.C. production may not in fact be curtailed. Also on the macroeconomics front is U.S. Federal Reserve buzz as the market is looking for clues in tomorrow’s F.O.M.C. committee report as to whether they’ll raise interest rates in December. Currently, odds of a rate increase happening are pegged at 70% but just like we’ve seen in the past few weeks of U.S. Presidential Election trail, a curveball can come out of nowhere.

Speculative money (hedge funds) continue to get a little longer in grain and oilseeds, namely soybeans, corn, and Kansas City hard red winter wheat, while bringing back on some shorts in Chicago soft red winter wheat. The divide in the winter wheat market is due to some concerns over drought concerns affecting planted acres, notably in South Dakota (32% of area in drought) and Oklahoma (25% in drought).  On that note, the U.S.D.A.’s crop progress report tells us that 86% of the U.S. winter wheat crop has been seeded with 58% of rated good-to-excellent (49% a year ago). While drills roll in some parts of America, combines are busy in others as 75% of US corn crop and 87% of the U.S. soybean crop has been taken off thus far, in line with long term averages.

Keeping in harvest mode, 87% of the Ukrainian harvest is in the books with 53.7M tonnes taken off so far as only spring crops are left to combine, although 14.7M tonnes of corn are off (94 bu/ac average) and 3.4M tonnes of soybeans have been harvested (32.5 bu/ac average). In nearby Kazakhstan, a 23.6M-tonne total grain harvest is a 29% increase year-over-year thanks to total acreage expanding 10% YoY but yields also jumping 18% year-over-year. In Western Canada, about 20% of all acres left to combine in Saskatchewan (well behind 5-year average of 99%) and 25% left to go in Alberta. In my opinion, the market is either assuming that the crop will get taken off eventually or it’s already accounting for worst-case scenarios (otherwise, we’d much higher).

While soybean futures continue to lead this current rally (up nearly $1/bushel on the Chicago board in the past month), cash basis across the U.S. has been widening as a result of farmer selling / harvest pressure. We’ve started to see some similar dynamics in the canola market but me telling you to wait for a specific number for your next 10,000 bushel block sale is like putting a $110,000 bet on one number on the roulette wheel and hoping it hits. There’s been many comparisons to 2014 this fall as similar harvest problems helped soybeans rally $1.30/bushel in the last quarter of the calendar year, durum prices were in double digits, and canola sprang up $50/MT on the Winnipeg ICE board. This in mind, we’ve already jumped more than $50 / MT in Winnipeg. Add in that there is a record soybean crop in the US and Brazilian soybean acres seeded is over 40% (above the average pace), the curve to the upside is getting tougher to navigate. Hitting the brakes and managing risk is never an ignorant play (especially considering how many times you’ve waited for prices to get close to the “number that you need” and it didn’t happen).

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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