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)
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
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).
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.