FarmLead Breakfast Brief
Friday, November 4th, 2016
“The whole purpose of annual reviews is to keep you abreast of whether or not you are fulfilling the requirements of tenure.”
– Norman Finkelstein (US political scientist)
At 6:15 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3408 CAD, $1 CAD = $0.7458 USD)
Dec Corn: -1.3¢ (-0.35%) to $3.468 USD or $4.649 CAD
Jan Soybeans: -4.5¢ (-0.45%) to $9.85 USD or $13.207 CAD
Dec Soybean Meal (per short ton): -$0.70 (-0.25%) to $305.70 USD or $409.90 CAD
Dec Soybean Oil (cents per lbs): -0.34¢ (-0.95%) to 34.76¢ USD or 46.61¢ CAD
Dec Oats: -1¢ (-0.45%) to $2.21 USD or $2.963 CAD
Dec Wheat (Chicago): unchanged at $4.12 USD or $5.524 CAD
Dec Wheat (Kansas City): -1.5¢ (-0.35%) to $4.09 USD or $5.484 CAD
Dec Wheat (Minneapolis): +0.3¢ (+0.5%) to $5.10 USD or $6.838 CAD
Jan Canola: -1.1¢ (-0.1%) to $8.689/bu / $383.12/MT USD or $11.651/bu / $513.70/MT CAD
Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.152 USD or $2.885 CAD
Dec Milling Wheat: -8.2¢ (-1.3%) to $4.547 USD or $6.096 CAD
Grain markets this morning are mostly in the red as farmer sales are capping rallies, some weather premium is getting taken out and market participants are selling positions & moving away from the table as the US Presidential election nears (A Trump win would likely weaken the US Dollar, meaning possibly higher grain and oilseed prices). Despite the weaker US Dollar, oil has dropped more than 8% this week with WTI crude back below $45/barrel as OPEC members haven’t been able to agree on production cuts and US inventories are building up. US export sales from last week came in bearish for wheat, neutral for corn and bullish for soybeans as the 2.51M tonnes contracted was the largest amount since October 2013. Canola continues to be pressured by better weather, farmers sales, and palm oil prices in Malaysia falling as palm oil inventories in the country were expected to climb almost 9% month-over-month to 1.68M tonnes, the biggest improvement in more than a year.
The U.S.D.A.’s attaché in Canada downgraded wheat exports from the Great White North to 21M tonnes (a 4-year low) on quality issues. Further, they also pegged the total Canadian wheat crop at just 29.2M tonnes (a 3-year high), versus the official U.S.D.A. forecast of 31.5M tonnes. Mustard prices have fallen about 20% since our bearish call in mid-July, but bids are around 30¢ CAD / pound with limited upside as the crop that still out in the field is relatively hardy (post your next block on FarmLead). On that note, the weather is looking deluxe for Western Canada to see some more harvest progression this weekend. Further down the line, AccuWeather’s forecast for this winter is for above-average temperatures and below-average snowfall in the Canadian Prairies, whereas Eastern Canada will see more snow and colder temperatures. This forecast may help the railroad companies as a new strategy by the Canadian government released yesterday highlighted $10.1 Billion to be invested in new infrastructure and “reciprocal penalties between shippers and the railways in service level agreements.”
In Argentina, rains in some parts of the country have slowed field activity, meaning total soybean area planted is at 13% thus far, behind the average pace of 23%. It’s been estimated that as much as 500,000 Argentinian acres have been flooded out, meaning the expected corn acreage increase year-over-year of 27% to 12.1M acres likely won’t be realized. Next door in Brazil, soybean planting pace continues to race ahead of the usual average, and while I think this is good, Dr. Cordonnier of Soybean & Corn Digest “fears thatfarmers in Mato Grosso are actually planting too fast, as it will compress a large portion on the harvest into the month of January”, one of the wetter months of the year. Conversely, with more of the soybean crop maturing faster and around the same time, the faster the 2nd crop safrinha corn acres can be planted.
According to a domestic survey by SGS, China’s corn production this year will fall 7.3% year-over-year to 208.1M tonnes, the lowest since 2000 (the asterisk here though is that China’s corn stocks are double what they were just 5 years ago). After moving away from minimum price supports for corn, Beijing is trying to stimulate corn demand by subsidizing corn processors. However, as the People’s Republic try to get more soybeans harvested, corn and rice in certain parts of the country are still more profitable. However, soybean demand continues to be strong (according to Bunge, Chinese crush margins are the best in world right now) so the market could help flip acres over to beans, before the Chinese government waves a policy wand and pays more to soybean grower. On the flipside, in the U.S., a few weeks ago, Informa was calling for corn acres to pull back from this year’s 94.5M to 91M in 2017, while American soybean area would climb to a record 88.5M acres from the 83.7M planted in this past growing season. Conversely, fertilizer company CF Industries is expecting corn acres in 2017 to fall back to 88M acres, matching the number in 2015, but the drop of 6.5M acres from 2016 would be the largest year-over-year reduction in the past 9 years.
Have a great weekend and good luck finishing up any acres you may left.
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.