FarmLead Breakfast Brief
Wednesday, November 9th, 2016
“Three things cannot be long hidden: the sun, the moon, and the truth.” – Buddha
At 7:35 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3430 CAD, $1 CAD = $0.7446 USD)
Dec Corn: -2.8¢ (-0.8%) to $3.515 USD or $4.721 CAD
Jan Soybeans: -1.3¢ (-0.1%) to $10.10 USD or $13.564 CAD
Dec Soybean Meal (per short ton): -$0.70 (-0.2%) to $315 USD or $423.05 CAD
Dec Soybean Oil (cents per lbs): -0.20¢ (-0.55%) to 35.11¢ USD or 47.15¢ CAD
Dec Oats: -0.3¢ (-0.1%) to $2.255 USD or $3.028 CAD
Dec Wheat (Chicago): -3.5¢ (-0.85%) to $4.118 USD or $5.53 CAD
Dec Wheat (Kansas City): -4.3¢ (-1%) to $4.133 USD or $5.55 CAD
Dec Wheat (Minneapolis): -3.8¢ (-0.75%) to $5.103 USD or $6.853 CAD
Jan Canola: -0.7¢ (-0.05%) to $8.614/bu / $379.82/MT USD or $11.569/bu / $510.10/MT CAD
Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.152 USD or $2.885 CAD
Dec Milling Wheat: +8.2¢ (+1.35%) to $4.56 USD or $6.123 CAD
Numbers Don’t Lie
Grains this morning are all in the red as combines continue to roll across North America and if you didn’t stay up to watch it, and you have been living under a rock this morning, Donald Trump shocked the status quo and will be the next President of the United States of America. As I mentioned in Monday’s Breakfast Brief, the market (and main stream media) were calling for a Hillary Clinton win and so with Trump getting closer and closer to 270 electoral college votes required, markets started tanking. The U.S. Dollar was down about 2% as the stock market sold off, Mexican Peso dropped over 13% as fears of “The Wall” and manufacturing duties are now possible, and the Canadian Loonie also dropped almost a cent last night, mainly thanks to crude oil falling almost 4%. However, everything rebounded after Trump came on to give his victory speech, pledging “to be a President for all Americans” and “now it’s time to bind the wounds of division.”. On ya, in case you forgot there’s a U.S.D.A. W.A.S.D.E. report coming out at noon ET but those numbers aren’t expected to shock everyone as much as last night’s results.
Going into the report, expectations are that we’ll see average U.S. corn yields dip again to 173.2 bu/ac from October’s estimate of 173.4 as most survey participants agree that the top of the corn yield potential has come and gone. This translates to a 15.041-Billion-bushel crop (a record) slightly down from last month’s 15.057B bushels. However, the average market guesstimate is that U.S. ending stocks will only drop by the same amount as production from last month to 2.3 Billion bushels, basically suggesting that the market thinks U.S. demand will be unchanged from the October (hard to believe that after the past month of export sales & inspections).
From a global perspective, we’ll obviously be watching what the U.S.D.A. thinks about corn and soybean prospects in Brazil and Argentina, as well as any wheat production changes in Canada, the E.U., and Australia (given the tough weather they’ve all faced sometime through this growing season). Back in the U.S., wheat ending stocks are expecting to climb 3M bushels from last month to 1.141 Billion, but we’ll be watching the feed and residual use column closely as the spread between corn and wheat is relatively low, suggesting substitution effects could have started to play out. For soybeans, average yields are expected to climb from 51.4 bu/ac in the October report to 52 bu/ac, per the pre-report surveys. This record yield means a record crop of 4.314 Billion bushels (4.27 Billion in the October W.A.S.D.E.) but the market is accounting for the recent demand as ending stocks are only expected to climb 25M bushels from last month to 420M bushels (versus the 45M bushel increase in production).
Coming back to Election Night in America, more than half of the country (and pretty much every one else around the world) is asking “how did Donald Trump get elected and what’s going to happen now?” As polls and data have never been so wrong before (albeit there was plenty of warning signs), shock and disbelief and other emotions are still raw this morning as the world seemed, but maybe never moreso than last night when the Canadian immigration website crashed! Overall though, a lot of comparisons are being made to the Brexit vote in the UK earlier this year as they echo the general republic raging against a deaf, status-quo-seeking establishment. What we can expect is the market will likely take the rest of this week to workthrough what Donald Trump as POTUS means, but one key thing to consider is the protectionist trade rhetoric that he campaigned on.
While the U.S. Dollar is weaker, and should be helpful for more U.S. exports in the short term, I’m expecting free trade agreements are going to pulled away from (including NAFTA and the TPP). Overall though, for the first time in a decade, Republicans will be in charge of the White House but also will have more people in the law-creating arms that are the Senate and the House. Finally, one could argue that the pulse of America has been completely misread by pretty much every media outlet, but with the numbers now fact, it’s time for them to help build up America again after a tough night, regardless if one thought it wasn’t great to begin with.
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.