Oct 14 – Multi-Year Looks

FarmLead Breakfast Brief

Friday, October 14th, 2016

“Your living is determined not so much by what life brings to you as by the attitude you bring to life; not so much by what happens to you as by the way your mind looks at what happens.” – Kahlil Gibran (Lebanese poet)

Good Morning!
Due to an early travel schedule, the futures market data isn’t listed below but can be viewed by clicking this link

We’re in a period of low-grain prices…

With values depressed, shouldn’t you explore every sale option?

Step your game up & post a block of your grain on FarmLead now!

Multi-Year Looks

Grains this morning are all in the green in a risk-off type of environment as managed money has been covering shorts as well as building more weather premium into the market. Specifically, for the wheat market, we’ve been calling for patience in holding on to your better quality stuff and we’re getting to that point to consider selling into this strength in the market in 10% blocks (post yours on FarmLead now with spec sheets and photos of samples!). Soybeans continue to be pressured by off-the-combine sales but that’s not really impacting canola as there’s still a few million tonnes worth of the oilseed in the field waiting to be combined. Conversely, corn, because it’s winning the storage war against soybeans (AKA farmers are putting it in bins and shutting the doors), is facing some resistance. At the end of the day though, some healthy moves in the wheat market are being welcomed from their multi-decade lows (can it continue though?!).

The rationale behind some of the wheat rally (in addition to some weather premium) is that US HRW wheat was offered in the latest Egyptian GASC tender at a FOB US port price of $174 USD / MT (or $6.25 CAD / bushel at this morning’s exchange rate). However, the US wheat, offered by Louis Dreyfus, was disqualified from the getting in the race because its higher protein, helping wheat futures prices jump almost 5% yesterday. Russian and Romania cargoes ended up selling the winning offers for an average price of $187 USD / MT delivered (or $6.70 CAD / bushel). This takes total GASC purchases to 1.5M tonnes for the marketing year, 600K behind a year ago (blame some poor ergot policies for the pace). Ultimately though, the conclusion from this is that US wheat is available and its clear that the stuff is competitive on the world market. That being said, it probably doesn’t come at a much better time as both Algeria and Saudi Arabia put out some big tenders. Sidenote: Russia did some aggressive backdoor dealing, selling 1M tonnes to Syria at a delivered price of $168 USD / MT ($6 CAD / bushel).

A great piece on the state of agriculture in Ukraine came out in Bloomberg yesterday (worth the short read), outlining the challenges of commercial farming in the middle of war as well as against tough credit conditions.  A couple of interesting points to take away include that 17% of Ukraine’s arable land isn’t even being farmed (despite 3-4 feet of good black soil!) and that only about 25% of all acres farmed area reaching yields seen in the developed world (because of lower-quality seeds, fertilizers, and equipment). Loans with interest rates of 20% are the norm in Ukraine, but with a devalued currency (the hryvnia), its ability to compete is quite strong today. For example, with Brexit looming, UK producers may find themselves taxed up to €90/tonne to export their grain into the EU (for the record, that’s not economical for trade), whereas Ukraine is seeing its access to the EU cereals market only improving.

Speaking of the United Kingdom, smaller acres and yields are being blamed for a 30% decline in rapeseed production year-over-year of just 1.77M tonnes. With area down by 11% to 1.43M acres and yields down 21.5% to 21.3 bu/ac. Wheat production in the UK also fell, down 12% YoY to 14.5M tonnes, mainly because of yields down 11.6% compared to last year to 47.6 bu/ac. Ultimately, as we hit the halfway point for the month of October, we sit here with a fair amount of the crop still in the field and grain prices at multi-year lows. However, the good news is that we’ve been seeing demand slowly but surely start to cure some of these low prices (case in point, wheat). Conversely,fertilizer prices are at decade lows, mainly being influenced by the fact that supply is outweighing demand, especially since China has ramped things up in the past few years.

Have a great weekend!

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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