Nov 8 – Switching Gears

FarmLead Breakfast Brief

Tuesday, November 8th, 2016

“When did the future switch from being a promise to a threat?”
– Chuck Palahniuk
(American journalist)

Good Morning!
At 6:55 AM CDT in the North American futures markets (*not cash prices*):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3364 CAD, $1 CAD = $0.7483 USD)

Dec Corn: +0.8¢ (+0.2%) to $3.47 USD or $4.637 CAD
Jan Soybeans: +8.5¢ (+0.85%) to $10.07 USD or $13.457 CAD
Dec Soybean Meal (per short ton): +$1.30 (+0.4%) to $313.20 USD or $418.55 CAD 
Dec Soybean Oil (cents per lbs): +0.67¢ (+1.95%) to 35.46¢ USD or 47.39¢ CAD 
Dec
 Oats: unchanged at $2.28 USD or $3.047 CAD
Dec Wheat (Chicago): +0.8¢ (+0.2%) to $4.108 USD or $5.489 CAD
Dec Wheat (Kansas City): +1¢ (+0.25%) to $4.11 USD or $5.492 CAD
Dec Wheat (Minneapolis): +1.5¢ (+0.3%) to $5.08 USD or $6.789 CAD
Jan Canola: +11.3¢/bu / +$5/MT  (+1%) to $8.643/bu / $381.11/MT USD or $11.551/bu / $509.30/MT CAD

Yesterday’s Winnipeg ICE Close

Dec Barley: unchanged at $2.156 USD or $2.885 CAD
Dec Milling Wheat: -2.7¢ (-0.45%) to $4.521 USD or $6.042 CAD

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Switching Gears

Grains this morning are all in the green on continued strong export numbers and some weather premiums staying in the market despite some solid harvest progress across North America over the past week. Canola and soyoil are being supported as Malaysian palm oil prices jumped 2% overnight to their highest levels in the past 2.5 years as production in October fell by 3.7%, but more fireworks may come Thursday when October supply and demand tables will be released but expectations are bearish as ending stocks are seen climbing almost 9% from September to 1.68M tonnes. Staying in Asia, China imported 5.2M tonnes of soybeans in October, a drop of almost 6% year-over-year and below the 5.4M tonnes the market was expecting. However, yesterday’s U.S. soybean export inspections reports was the 4th straight week of more than 2.5M tonnes, which is very healthy for demand as we’re not well ahead of the 5-year average. Similarly, U.S. corn export inspections so far in the 2016/17 marketing year are at 10.1M tonnes, nearly double what they were at this time a year ago. While we talked about uncertainty in yesterday’s Breakfast Brief, we know there’s more volatility coming with focus quickly switching from today’s U.S. Presidential Election to tomorrow’s W.A.S.D.E. report.

Most analysts agree that despite the strength of U.S. exports right now, cash basis across America is very weak and they expect things to improve over the next couple of months. Moving to Canada, CP Rail says that it moved almost 16,000 railcars of grain in October to Vancouver from the Canadian Prairies, a new record and an indication that it can move a lot of grain when the pressure is ont. CP sys that the $100s of millions invested in country elevator and port infrastructure has allowed them to move 4% more grain to all destinations than they did in October 2015 and just behind the record set in May 2014. Over in Russia, fresh data shows they’ve exported 13.1M tonnes of total grain so far this marketing year, a drop of 1.3% year-over-year, and includes 10.6M tonnes of wheat, 1.4M tonnes of barley, and 1.03M tonnes of corn.

Yesterday’s U.S.D.A. crop progress report showed us that 86% of the U.S. corn harvest and 93% of the soybean harvest is in the books, both slightly ahead of their 5 year averages. Meanwhile, 91% of the winter wheat crop is in the ground with 79% of the crop emerged, and 58% of it rated good-to-excellent (up 7 points year-over-year, despite some drought concerns through the U.S. wheat belt). In Brazil, soybeans planted are at 53%, well ahead of the season average and conditions remain very good. Next door in Argentina, 5% of soybeans fields has been planted versus the 9% average, but it’s still very early as about 40% of the crop is usually planted by the end of November and things pretty much done by December 31st. However, we continue to watch the impact that heavy rains are having on planting progress, especially in northern regions.

That in mind, the U.S.D.A. attaché in Argentina is expecting soybean production there this year to hit 55M tonnes, a 3% drop year-over-year and the 2nd consecutive annual decline as acreage is expected to decline 3.7% year-over-year to 48.2M. While we may see the official U.S.D.A. forecast change in tomorrow’s W.A.S.D.E. report from the current estimate of 57M tonnes, what’s definitive is that Argentina and Brazil continue to be bigger players on the global stage and it doesn’t really look they intend to slow down. In the past 2 decades, soybean output has grown 260% in Brazil (average yields up 39% to 43.3 bu/ac) and 450% in Argentina (average yields up 32%). For corn, Brazilian production has jumped 120% in the past 20 years (average yields up 77% to 66.8 bu/ac) and 80% higher in Argentina (average yields up 95% to 127.5 bu/ac). Moving forward, Argentina likely has the most room for growth as pastureland is getting turned into corn and soybean acres. All the above known, Todd Hultman from DTN points out that with the election and WASDE aside, futures spreads indicate that US corn and soybean demand is expected to switch to southern competitors over the course of the winter.

Headed over to Red Deer, AB this week for Agri-Trade 2016? Stop by our booth in the Prairie Pavilion (same location we’ve been the last few years) to talk any of the issues with us and get a personal tour through the new FarmLead mobile app!

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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