FarmLead Breakfast Brief
Tuesday, November 29th, 2016
“It’s like climbing a staircase. I’m on the top of the staircase, I look behind me and I see the steps. That’s where I was.”
– Jeanne Moreau
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 = $1.3444 CAD, $1 CAD = $0.7438 USD)
Mar Corn: -2.5¢ (-0.7%) to $3.558 USD or $4.783 CAD
Jan Soybeans: -9¢ (-0.85%) to $10.47 USD or $14.076 CAD
Jan Soybean Meal (per short ton): -$2.40 (-0.75%) to $325.80 USD or $438.02 CAD
Jan Soybean Oil (cents per lbs): -0.31¢ (-0.85%) to 36.66¢ USD or 49.29¢ CAD
Mar Oats: +1.3¢ (+0.6%) to $2.18 USD or $2.931 CAD
Mar Wheat (Chicago): -3¢ (-0.7%) to $4.135 USD or $5.559 CAD
Mar Wheat (Kansas City): -5.5¢ (-1.3%) to $4.25 USD or $5.714 CAD
Mar Wheat (Minneapolis): +0.3¢ (+0.05%) to $5.358 USD or $7.203 CAD
Jan Canola: -4.5¢ (-0.4%) to $8.821/bu / $388.93/MT USD or $11.859/bu / $522.90/MT CAD
Yesterday’s Winnipeg ICE Close
Mar Barley: unchanged at $2.30 USD or $3.092 CAD
Mar Milling Wheat: +5.4¢ (+0.85%) at $4.818 USD or $6.477 CAD
More Room At The Top?
Grains this morning are all in the red as the complex takes a bit of breather after a run-up over the last week of holiday-fever and E.P.A.-fueled trading. Traders are taking profits and heading to the sidelines after more US soybean exports sales initially helped guide things higher yesterday, while canola has pulled aggressively back from the 16-month highs seen Friday, mirroring soybean oil’s action. In the outside markets, a lot of eyes are on the OPEC meeting in Austria where speculation abounds as to whether we’ll see an oil production cut from the bloc of major producers or not (the market is currently betting that it won’t happen as oil prices are lower this morning). Simply put, there are too many OPEC economies that are dependent on the oil revenues and with oil half of what it was just a few years ago, each less barrel seems to be too much for the players at the top to ignore.
Yesterday’s USDA crop progress showed that 58% of the US winter wheat crop remains in good-to-excellent (G/E) condition, unchanged week-over-week, surprising the market which expected a downgrade because of drought conditions in the Southern Plains. From a trading perspective, Russia wheat exports are likely to come up short of original expectations as competition from Argentinian and Australian product will start to compete in Asian and African markets in the coming months. Ironically, domestic wheat prices in Russia have risen for 8 straight weeks, it’s longest bull-run in 4 years since October 2012, now sitting at a $184 USD / MT ($6.75 CAD / bushel) out of a Russian port position for 12.5% protein quality. Also, Russia is currently dealing with African swine fever in Krasnodar, its top wheat-producing region, which could delay exports further as the government seeks to stop the spread of the disease by quarantining movement of animals and grain from the area.
Switching gears, after 7 straight trading days of higher moves and touching a 4-month high of $10.65/bushel on the Chicago board, soybeans finally pulled back yesterday. The move over the past few trading sessions was its longest since mid-June, right before it violently pulled back. Supporting the move has been international purchases (especially China) and managed money not only in North America but Europe and Asia betting their speculative money on the price of soybeans will continue to go up. The hedge fund “go-long” move may not have run its course yet as the size and quality of the South American soybeans crop is still unknown. Looking a year out, soybean and canola farmers are already looking at taking advantage of 2017 crop sales with this price rally (we made sales yesterday – is your next block posted on FarmLead?). Some question though, with rotation question marks and new varieties like dicamba soybeans, will a similar-sized crop be delivered this time next year? With acreage the same, if not higher, it’s hard to say it won’t be very similar.
With the multitude of factors playing on the oilseeds complex, the biggest unexpected one has been the move from the E.P.A. last week to surprisingly raise their biofuel targets to record levels. This move has effectively put the interests of 2 of U.S. President-Elect Donald Trump’s biggest supporters directly against one another. Big Oil would love to see the ethanol mandate and biofuel blending go away whereas Big Corn/Ag knows that it the demand that the biofuel market brings is significant for domestic demand, including 43% of domestic US corn demand and 36% of all U.S. corn demand, including exports). Overall, the move has provided a great opportunity for farmers to make sales when they can for a block percentage of either old or new crop. This is called managing price risk exposure, versus getting greedy and speculating that there’s a little more room to go, especially when comparing where oilseeds were a year ago.
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.