Nov 14 – Grain Markets Try to Look Past Bearish Stocks

Good Morning!

Grain markets this morning are all in the green as the commodity complex rebounds a bit from yesterday, driven by a sell-off in oil prices.

 “The price of doing the same old thing is far higher than the price of change.”

– Bill Clinton (Former US President)

Test your grain today!

Grain Markets Try to Look Past Bearish Stocks

Grain markets this morning are all in the green as the commodity complex rebounds a bit from yesterday, driven by a sell-off in oil prices. Grain markets are also keeping the large inventories shown by the November WASDE report last Thursday from the USDA.

Oil prices lost more than 7% yesterday, marking its 12 straight trading session of losses as the markets are responding to more production. There’s undoubtedly a bearish hue on the horizon thanks to softening oil sections by the U.S. on Iran and Saudi Arabia increasing production. [1]

Historically speaking, grain markets tend to relatively correlated to oil prices, and so we need to continue to watch this suddenly bear market in oil prices closely.

Grain Markets Wanting to “Crush” It

In Monday’s FarmLead Breakfast Brief, we discussed some of the possibilities of where soybean prices could go. You have things like lower American exports, larger Brazilian exports, and now Argentina importing more soybeans! [2] As per Ted Seifried, one of the domestic variables that grain markets will be carefully watching though is tomorrow’s NOPA crush report for October. [3]

Average pre-report guesstimates are for just over 170 million bushels of soybeans being used last month were crushed in October, which would be second-largest monthly crush ever and would destroy the current record for October of 164.6 million bushels. The current monthly record was set back in March, which saw 171.9 million bushels of soybeans used.

We have seen US soybean crush margins pull back a bit, but this was after a record amount of soybeans were crushed for September: 160.8 million bushels. The previous September record was 139.9 million bushels from back in 2007.

Overall though, the soybean complex is looking for some bullish news, and the optimism is that, despite crush margins dropping, demand is still strong. If we see an October crush number from NOPA come in below expectations, this would likely push soybean prices lower by a healthy amount. Right now though, they’re pricing in the second-largest crush ever.

Barley Prices Just Heating Up or…?

In last week’s November WASDE report from the USDA, most of the focus was on corn, soybeans, and wheat, and China’s significantly substantial revisions to each of those crops. And the week before, the spotlight from USDA’s baseline estimates was again on corn and soybeans, with the latter again the focus was on the expected.

One of the crops that usually falls under the radar is barley, which the USDA said will see American acreage expand over the next decade. This is mainly because there continues to be a demand for malt barley (more people in developing countries are enjoying a cold beer!) but also a feedstuff ration.

Look no further than Saudi Arabia, the largest barley importer in the world. Last week, the Saudis bought another million tonnes of feed barley, mainly from Swiss-based commodity trader Glencore (for our Australian and Canadian readers, this is Viterra).

The average delivered price of the nearly 46 million bushels was a touch under $267 USD / MT (or $5.80 USD and $7.70 CAD per bushel). While this is way more than some of the domestic prices seen in North America, we have to be mindful of freight costs.

Also, Saudi Arabia refuses to do any business with Canada. A good chunk of the barley that Saudi Arabia bought is expected to come from Russia; Moscow officials are expecting 4.2 MMT of barley to shipped out this year. Comparably, the USDA said last week in the November WASDE that this number actually might be closer to 4.7 MMT.

With that in mind, feed prices in Western Canada seem to be plateauing a bit.

Substitution effects are the main factor here as we see more late-harvested cereals make their way into the feed markets. If you recall, a similar dynamic happened in 2016.

One of the substitutes not seen in 2016 though was American corn. This year, there’s a lot of U.S. corn making its way into Canadian feed rations, at least in Western Canada (and especially in Lethbridge/feedlot alley). [4]

This in mind, if you’ve got feed barley and malt barley that’s not making malt, you should be getting it posted on the FarmLead Marketplace today.

Remember, that grain markets don’t wait around for you to get the best price, and they don’t care how big your bank account is.

To growth,

Brennan Turner

CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

At 7:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3229 
CAD, $1 CAD = $0.7559 USD)

Dec Corn: 1.0¢ (0.27%) to $3.675 USD or $4.862 CAD
Jan Soybeans: 4.5¢ (0.51%) to $8.828 USD or $11.679 CAD
Dec Soybean Meal (per short ton): $1.40 (0.46%) to $305.30 USD or $403.89 CAD

Dec Soybean Oil (cents per lbs): -0.30¢ (-0.11%) at 27.52¢ USD or 36.41¢ CAD  
Dec Oats: 5.3¢ (1.86%) to $2.898 USD or $3.834 CAD
Dec Wheat (Chicago): 1.5¢ (0.30%) to $5.018 USD or $6.638 CAD
Dec Wheat (Kansas City): 3.0¢ (0.62%) to $4.895 USD or $6.476 CAD

Dec Wheat (Minneapolis): 3.3¢ (0.57%) to $5.815 USD or $7.693 CAD
Jan Canola: $1.10 (0.23%) to $10.929/bu / $481.90/MT CAD or $8.261/bu / $364.27/MT USD

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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