Nov 14 – Security Planning

FarmLead Breakfast Brief

Monday, November 14th, 2016

“Most men love money and security more, and creation and construction less, as they get older.”
– John Maynard Keynes
(British economist)

Good Morning!
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Security Planning

Grains this morning are all in the red on profit taking and combines continue put crop through. We saw a lot of harvest activity over the week and into the weekend on both sides of the border as American soybean and corn farmers tried to finish off their last fields while those in Western Canada took  advantage of good weather to get back into the field after roughly a month! Last week we saw the Canadian Dollar drop a full percentage point week-over-week as oil and volatility in the markets put pressure on the Loonie. Where the Canadian currency heads in the next few months will likely be the dictator of what canola does, not so much how much is left out in the field in Western Canada (something I discussed with Shaun Haney from RealAgriculture.com on site at Agri-Trade in Red Deer, AB). Overall, the market is mostly pricing in the security of having less grain left out in the field.

Looking on the other side of the equator, the Brazilian USDA, CONAB, softly trimmed their top estimate of this year’s soybean crop down there to 103.5M tonnes, from 104M tonnes last month (USDA at 102M tonnes). Conversely, they pegged the top end of Brazilian corn production at 84.6M tonnes (USDA at 83.5M tonnes), thanks to better moisture conditions for first-crop corn, which is also viewed as a positive for soybeans, a crop being planted ahead of schedule. Next door in Argentina, recent rains likely means less soybean acres, as the Buenos Aires Exchange is now suggesting 48.4M acres, a 2.5% drop year-over-year. Although the Climate Prediction Center is calling for weak La Nina conditions to stick around through February, current rains is keeping drills out of the field (meaning planting pace is behind schedule, albeit it is still quite early in the growing season). Alas, given relatively decent conditions setting up in South America, Societe Generale believes that any corn and/or soybean rallies should be viewed as selling opportunities, something we tend to agree with given global 2016/17 production.

It’s been estimated that land already seeded in Russia this fall is at 42.5M acres, about 1M acres ahead of where we were this time a year ago, and SovEcon says we could see as many as 44.5M acres plantedd before snow flies, the most since 2009. However, the largest corporate farm in the world, Black Earth Farming says that Russian wheat prices have dropped about 1/3 in the past year, thanks to the Russian ruble appreciating. Throughout the rest of Europe, the UN is expecting wheat acres to be relatively unchanged in 2017/18 and that better-quality milling wheat continues to see a larger-than-average premium over feed wheat globally as there are some quality issues out there. This includes Europe (mainly France), Canada, and Australia where frost in the west and recent rains in the east are softening ideas for a large volume of milling-quality exports.

Over in Egypt last week, GASC was only able to buy 1 cargo of wheat a delivered price of roughly $201 USD / MT, keeping it about 250,000 MT behind what it bought by this time last year (2.3M tonnes). Part of the reason that it was only able to lock in one load is because of some growing instability in the region, mainly the result of the Egyptian Pound losing about half its value since it began floating a week ago (mainly done to appease the IMF to get a multi-billion dollar). This creates a second issue of the GASC, the largest buyer of wheat globally, being able to secure US-dollar denominated letters of credit, a bigger concern for shippers. Flipping gears, the largest wheat consumer, China, is set to eliminate 95% of its open-air grain storage facilities by 2020. With as much as 100M tonnes stored outside, the move to a better storage policy certainly supports a stronger food security plan.

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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