Nov 16 – Acting Differently

FarmLead Breakfast Brief

Wednesday, November 16th, 2016

“It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that, you’ll do things differently.”
– Warren Buffett
(US businessman)

Good Morning!
At 8:00 AM CDT in the North American futures markets (*not cash prices*):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3486 CAD, $1 CAD = $0.7415 USD)

Mar Corn: +0.8¢ (+0.2%) to $3.50 USD or $4.72 CAD
Jan Soybeans: +3.3¢ (+0.35%) to $9.928 USD or $13.388 CAD
Jan Soybean Meal (per short ton): -$0.30 (-0.1%) to $312 USD or $420.77 CAD 
Jan Soybean Oil (cents per lbs): +0.29¢ (+0.85%) to 34.75¢ USD or 46.86¢ CAD  
Mar Oats: +2.8¢ (+1.2%) to $2.343 USD or $3.159 CAD
Mar Wheat (Chicago): -0.3¢ (-0.05%) to $4.185 USD or $5.644 CAD
Mar Wheat (Kansas City): -1.3¢ (-0.3%) to $4.243 USD or $5.722 CAD
Mar Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.185 USD or $6.993 CAD
Jan Canola: +5.2¢/bu / +$2.30/MT  (+0.45%) to $8.634/bu / $380.69/MT USD or $11.644/bu / $513.40/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.171 USD or $2.928 CAD
Mar Milling Wheat: unchanged at $4.682 USD or $6.314 CAD

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Acting DifferentlyGrains this morning are all in the green as the market looks to rebound on some decent demand numbers and harvest slowing down. Western Canadian Harvest 2016 got stopped in a lot of places after rain and snow started to fall again last night, but there was a lot taken off in the past 2 weeks of good weather. While Monday’s U.S.D.A. crop progress report showed the portion of the U.S. winter wheat crop rated good-to-excellent rising by 1 point to 53%, record temperatures are expected for areas around the Southern Plains, especially Oklahoma (we’ll be starting to ask soon, “where is the snow cover!?”). Recently, we’ve seen a few more tenders that have suggested that demand is buying a low in the wheat market, but also some political unrest in Ukraine and the slower-than-usual pace of the Australian harvest is propping up values overseas. Overall, we’d like to think we’re past the harvest lows but we know that when markets are over-supplied like they are, things tend to act a bit differently than the norm.

After hitting a 4-year high on Friday, palm oil futures in Malaysia continue to pull back as exports the first 2 weeks of November are, per Intertek and SGS, at about 515,000 MT, or about 18% behind what they were in the first 2 weeks of October. However, canola is getting some support from a recent COPA report, which states Canadian canola meal sales to China from January to August 2016 were the highest in 5 years at 415,000 MT (and that follows zero exports last year!). The reason for the big change year-over-year is the trade dispute we saw earlier in the year, as because canola seed exports were up in the air and so domestic crushing would’ve slowed, importers just started buying up canola meal until the dispute was resolved in September. Of note though is that Canadian canola crush profit margins are about double what they were this time last year.

Although we’ve pointed out some rain issues in Argentina, growing conditions in South America continue to be generally favourable. While some hopefuls are waiting for a La Nina weather event to strike, most forecasters see it as being weak, with international grain trader Olam saying it will have little impact. In the past week since the U.S. election, the Brazilian Real has fallen 6% against the U.S. Dollar, which in turn can help increase the value of domestic prices. As a result, it’s created some good selling opportunities for Brazilian farmers who haven’t pre-sold much of the soybean crop that they have just planted or are planting right now, moving the needle from about 20% of the crop pre-sold 2 weeks ago to closer to about 45%.That being said, because the Brazilian soybean crop is going in faster than usual, combined with the recent currency depreciation, more buzz is building that said crop will start getting exported in January!

That being said, while lots of US soybeans and corn have been contracted to date, exporters have only shipped 34% of the U.S.D.A.’s 2016/17 full-year-target thus far (average is 29%), whereas 19% of the corn target has been shipped (in line with the average), mainly thanks to U.S. corn being the cheapest in the world right now. On the flipside, domestic U.S. soybean demand continues to be strong, as yesterday’s N.O.P.A. soybeans crush number for October came in at 164.6M bushels, well above the pre-report average guesstimate of 160.5M bushels. The better question though is this better-than-expected demand a trend, or just a one-off event? Speculation about what Donald Trump will do once in office is raging, and while we’ve talked about NAFTA up in the air, there are some who suggest he’ll be good for domestic grain/oilseed demand, it won’t be the same for the export game. With Trump having campaigned on more protectionist policies, the likes of Olam and other large multi-national grain traders are expecting some changes, but are hoping that President Trump will act differently than Campaign Trump.

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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