Nov 21 – Seen & Unseen Effects

FarmLead Breakfast Brief

Monday, November 21st, 2016

“The most successful ideological effects are those which have no need for words, and ask no more than complicitous silence.”
– Pierre Bourdieu
(French philosopher)

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 = $1.3441 CAD, $1 CAD = $0.744 USD)

Mar Corn: -0.5¢ (-0.15%) to $3.45 USD or $4.637 CAD
Jan Soybeans: +8.3¢ (+0.8%) to $10.105 USD or $13.582 CAD
Jan Soybean Meal (per short ton): +$1.80 (+0.6%) to $314.40 USD or $422.58 CAD 
Jan Soybean Oil (cents per lbs): +0.31¢ (+0.9%) to 34.62¢ USD or 46.53¢ CAD  
Mar Oats: -2.3¢ (-0.95%) to $2.358 USD or $3.169 CAD
Mar Wheat (Chicago): +1¢ (+0.25%) to $4.263 USD or $5.729 CAD
Mar Wheat (Kansas City): +2.3¢ (+0.5%) to $4.333 USD or $5.823 CAD
Mar Wheat (Minneapolis): +2.5¢ (+0.45%) to $5.29 USD or $7.11 CAD
Jan Canola: +5¢/bu / +$2.20/MT  (+0.45%) to $8.724/bu / $384.65/MT USD or $11.725/bu / $517/MT CAD

Friday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.179 USD or $2.928 CAD
Mar Milling Wheat: unchanged at $4.758 USD or $6.396 CAD

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Seen & Unseen Effects

Grains this morning are mostly in the green with soybeans pushing back up above $10 USD / bushel on the Chicago board as we start this shorter-trading week thanks to U.S. Thanksgiving. Corn harvest has been slowed in many places because of snow, including the U.S. Midwest, Eastern Canada, Western Canada, and even Russia. The last few rounds of harvest seem to drag on and on as Mother Nature keeps interrupting things, which is making things tough for Statistics Canada and their production numbers, slated to come out on December 6th. Canola, flax, oats, barley, and durum wheat numbers are likely to be questioned the most, we have seen some prices tick up for each lately. Specifically, the latest international durum tenders show more of a willingness to accept a #3 Canada Western grade with at least 60% HVK (or a #1 US HAD grade – some good pricing opportunities to post your next block on FarmLead). Overall, with Harvest 2016 pretty much in the books, the effects of paper blending are just starting to get priced in.

Palm oil exports out of Malaysia are continuing to track below last month’s, a bearish indicator for vegetable oils but offsetting it is data showing record Canadian canola crush numbers. Thus far in the 2016/17 marketing year, 2.68M tonnes of canola have been used by Canadian canola crushers, up 15% year-over-year, and includes almost 204,000 MT getting crushed last week, up 12.5% from the week prior and representing over 95% of the industry’s capacity! Across the border in the U.S., soybean crush numbers continue to surprise, but are still tracking only slightly ahead of the U.S.D.A.’s full marketing-year estimate. Competing with domestic American soybean crush will be China as crush margins are the best they’ve been in 2 years and almost double year-over-year. This means that China will continue to be in the driver’s seat for soybean demand, but where it comes from – North or South America – is the bigger question.

Soybean planting in Brazil is pretty much complete, but there are some concerns over moisture (or lack thereof) now that the crop is in the ground. Conversely, in neighbouring Argentina, 24% of the soybean crop has been planted but total acres expected to get planted continues to get downgraded as heavy rains are hitting western province (causing flooding) while things are too dry to plant in the south. While eyes are mostly focused on those South American growing conditions, Informa has already come out with their estimates for 2017 acres, calling for 88.6 million going to soybeans (+6% from 2016), 90.8 million acres of corn (-4% year-over-year), and winter wheat acres of 33.8 million (-7.5%). Conversely, the University of Missouri’s FAPRI program is calling for 90.6M acres of corn, 85.7M acres of soybeans, and 49.6M acres of total wheat.

One thing we are watching is the effect the new currency limitations enacted by the Indian government will have on farmers there, and the planting of their kharif crop. The abolishment of 500 and 1,000 rupee notes, or about 86% of the cash in circulation, is putting pressure on the country’s 260M=plus farmers (yes, more than 260 million people farm in India) to pay for the crop inputs required to help them plant over the next couple of weeks. As banks exchanging the notes aren’t commonplace in all rural areas and many don’t even have a bank account, Indians can only exchange up to 2,000 rupees into new money immediately, with the remainder of the notes having to be deposited into a bank (all 500 and 1,000 rupee notes won’t be accepted by banks after December 30th). As most Indian farmers rely on money lenders, the Indian government is trying to help out by allowing farmers to withdraw up to 25,000 rupees against their crop loans, but there are doubts if farmers will use it or even trust the new program. Ultimately, this could slow some planting of the major kharif crop, but just how negative the effects are, remains to be seen.

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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