Nov 23 – Rewriting The Rules

FarmLead Breakfast Brief

Wednesday, November 23rd, 2016

“It’s not wise to violate rules until you know how to observe them.”
– T.S. Eliot
(British author)

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 = $1.3439 CAD, $1 CAD = $0.7441 USD)

Mar Corn: -3¢ (-0.85%) to $3.56 USD or $4.784 CAD
Jan Soybeans: -5.3¢ (-0.5%) to $10.248 USD or $13.772 CAD
Jan Soybean Meal (per short ton): -$1.20 (-0.35%) to $326.20 USD or $438.38 CAD 
Jan Soybean Oil (cents per lbs): -0.18¢ (-0.5%) to 34.59¢ USD or 46.49¢ CAD 
Mar
 Oats: -1.3¢ (-0.55%) to $2.268 USD or $3.047 CAD
Mar Wheat (Chicago): -3.8¢ (-0.9%) to $4.235 USD or $5.691 CAD
Mar Wheat (Kansas City): -2.5¢ (-0.6%) to $4.318 USD or $5.802 CAD
Mar Wheat (Minneapolis): -1.3¢ (-0.25%) to $5.253 USD or $7.059 CAD
Jan Canola: -2.5¢ (-0.2%) to $8.76/bu / $386.26/MT USD or $11.773/bu / $519.10/MT CAD

Yesterday’s Winnipeg ICE Close

Mar Barley: unchanged at $2.179 USD or $2.928 CAD
Mar Milling Wheat: unchanged at $4.759 USD or $6.396 CAD

We’ve been in a period of low-grain prices…

With the recent rally, shouldn’t you ensure the best price?

Step your game up – post a block of your grain on FarmLead!

Re-Writing The Rules

Grains this morning are all lower as the complex pulls back from some of the recent gains made, thanks to domestic and international demand remaining upbeat and the market pricing in some weather factors in South America (some dry spots still in Brazil, wet areas in Argentina). A couple outside macro factors that we’re watching right now include another OPEC discussing production cuts (what is this, like the 10th one?) and the release of notes from the U.S. Federal Reserve meeting early in the month, as the market looks for clues to back up the pricing in its made of a December interest rate increase. What is a known fact though is that a strong U.S. Dollar tends to mean a strong U.S. economy. For the past 8 years, President Obama has relied more on a monetary policy to help guide the American economy (i.e. interest rates), but with Donald Trump heading for the oval office, it looks like the rules are about to be rewritten as fiscal policy (i.e. spending lots of money) will be back in the driver’s seat.

Soybeans have seen their value climb about 50 cents/bushel in the past week, but are now in a position of being strongly overbought, says Signal Trading Group, as this sort of move in a couple of days is historically only seen 5% of the time. That being said, as the oilseed crossed $10.30/bushel, despite the strong USD, it’s becoming a bit clearer that China is in a buy-no-matter-what mode until they know the South American crop is in the bag (ironically enough, they are the owners of the most amount of grain inventory anywhere in the world already). In addition to the export sales, climbing values for vegetable oil prices in China on the Dalian Exchange continue to be support the move higher on the Chicago board. While soybeans remain elevated, canola prices have been tempered by commercial hedging and farmer sales. We continue to see smart selling into strength on this canola rally by FarmLead users – here’s some bids to start negotiating on.

Over in the Black Sea, we know that there are more winter cereals getting planted in Russia this fall (even after their record crop this past year) but next door in Ukraine, not as many acres are getting seeded. After a dry September, wet October, and now some colder weather, Ukraine winter wheat crops have slowly emerged and are a bit more susceptible to winterkill this year. Staying on the weather front, the market continues to monitor drought situations in the U.S. Southern Plains, where there was less winter wheat planted than last year, but things are still a bit too dry in a few places. That being said, there’s still many piles of grain sitting around America from this crop year and we have to work through a bit more of those supplies before the 2017/18 crop concerns becoming a heavier variable. With this in mind, there is a bounty of grain available and hopefully, the railroads will keep busy, especially considering oil is expected to stick around the $50 USD / barrel level.

Finally, we end back on politics as this week U.S. President-Elect Donald Trump made it very, very clear that he would not be signing the TPP (Tran-Pacific Partnership), a free trade agreement that has taken about 10 years to put together between 12 different countries around the Pacific Rim. However, the deal did not include China and so with the US out, I’ve been wondering out loud for the past couple of months if China could potentially sneak in last minute and take America’s place in the deal? As the People’s Republic continue to look for ways to drive their economy, enhanced trade could easily be that driver. While good for the other 11 nations in the deal, U.S. agricultural may have more to lose as it closes the door on continuing to expand exports to Asia to feed a growing population yearning for a richer diet including meat. What’s more clear than anything though is that Donald Trump continues to rewrite the rules of the game that are American politics, and it’s creating a few more unknowns than knowns.

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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