Nov. 28 – Holding Onto Rallies?

FarmLead Breakfast Brief

Monday, November 28th, 2016

“Life is not a matter of holding good cards, but sometimes, playing a poor hand well.”
– Jack London
(US author)

Good Morning!
At 6:50 AM CDT in the North American futures markets (*not cash prices*):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3481 CAD, $1 CAD = $0.7418 USD

Mar Corn: -1.3¢ (-0.35%) to $3.57 USD or $4.813 CAD
Jan Soybeans: +8.3¢ (+0.8%) to $10.628 USD or $14.327 CAD
Jan Soybean Meal (per short ton): +$0.90 (+0.3%) to $324 USD or $436.78 CAD
Jan Soybean Oil (cents per lbs): +0.38¢ (+1.05%) to 37.32¢ USD or 50.31¢ CAD  
Mar Oats: +3.3¢ (+1.5%) to $2.198 USD or $2.962 CAD
Mar Wheat (Chicago): -3.3¢ (-0.75%) to $4.163 USD or $5.611 CAD
Mar Wheat (Kansas City): -1¢ (-0.25%) to $4.285 USD or $5.776 CAD
Mar Wheat (Minneapolis): +1.3¢ (+0.25%) to $5.30 USD or $7.145 CAD
Jan Canola: +9.1¢/bu / +$4/MT  (+0.75%) to $8.954/bu / $394.79/MT USD or $12.07/bu / $532.20/MT CAD

Friday’s Winnipeg ICE Close

Mar Barley: +8.7¢ (+2.9%) to $2.293 USD or $3.092 CAD
Mar Milling Wheat: +2.7¢ (+0.45%) to $4.764 USD or $6.423 CAD

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Holding Onto Rallies?

Oilseeds are higher while corn and wheat are lower this morning after the U.S. Thanksgiving holiday gave stomach pains to not only those who ate too much, but also those who turned their computer/device off. Thanks to an unexpected EPA announcement last Wednesday and continued strong export sale numbers, soybeans gained over 50 cents/bu on the Chicago board, and subsequently, sales were made by US farmers over the Thanksgiving holiday. They weren’t the only ones selling through as South American farmers sell into the strength of the US Dollar, which is weakening their domestic currencies and helping increase domestic grain and oilseed prices. Can this rally continue? There’s a few scenarios where we could see that happening but almost all of them depend on a smaller-than expected South American crop.

To help counter the rally argument, most soybean production estimates for Argentina are around 55M tonnes, while no estimates are below 100M tonnes for the Brazilian soybeans crop, with exports out of Brazil alone pegged as high as 60M tonnes! Combined with current demand expectations, this sort of supply would support prices in the $9-$10 range on the Chicago futures board, with any sort of weather shock propelling values higher (such as today’s prices). Thus far, about 5/6 of the Brazilian soybean crop is in, while rains and cooler temperatures have allowed for only 1/3 of the soybean crop to be planted thus far. Staying in the oilseeds, a recent International Grains Council report calling for major exports’ rapeseed stocks to fall 13% year-over-year to under 3M tonnes, as demand didn’t fall as much this year as production. Nonetheless, the last time we saw canola at $530/MT was mid-June thanks to a lot of speculative money driving up grain prices. Did you say then that you were going to make sales if it came back? (Post that next block of canola on FarmLead this morning then!)

In the Land Down Undaa, the I.G.C. is calling for a 28.3 million-tonne wheat crop, a 5-year high. There have been some unfavourable conditions in the western half of the country whereas things have started to improve in the east. Net-net, the record crop that was once forecasted is no longer on the table, as quality is still up in the air for Aussie wheat. The same thing can be said for the Argentinian harvest where the size AND the quality is also up in the air. The IGC is calling for a 14.2M-tonne wheat crop, whereas the local Buenos Aires Grain Exchange expects 12.5M tonnes. To be fair, the IGC may be one of the most bearish forecasters out there as the firm continues to expect another large wheat crop in 2017/18, with production and planted area likely little unchanged year-over-year.

What we do know today is that the the spread between high and low quality wheat is slowly widening, and that any little effect that La Nina could have will exacerbate drought-like conditions already being experienced in the U.S. Southern Plains. While it remains to be seen if either Australian wheat or Argentinian wheat can help make up for some lower quality in other parts of the world (i.e. Canada and the E.U.), overall, we believe there to be a little more upside of higher quality wheats (we have seen some strong opportunities to make sales though on short-pops). Staying in the quality world, private forecasts are pulling back the Canadian oats production number as the late harvest in the Great White North is likely going to create a smaller pool of quality supply for the likes of General Mills & Quaker Oats to pick from. Final production numbers could drop as much as 20% year-over-year to 2.74M tonnes, which is why we’ve seen oats futures enjoy its best post-harvest rally in the last decade.  With the US relying on Canada for about 90% of its oats imports, what’s holding any further rallies back is the amount of oats left over from last year.

To growth,

Brennan Turner

President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
@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, 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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