FarmLead Breakfast Brief
Thursday, October 20th, 2016
“You cannot hold on to anything good. You must be continually giving – and getting. You cannot hold on to your seed. You must sow it – and reap anew. You cannot hold on to riches. You must use them and get other riches in return.”
– Robert Collier (US author)
At 6:25 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3151 CAD, $1 CAD = $0.7604 USD)
Dec Corn: +1¢ (+0.3%) to $3.585 USD or $4.715 CAD
Jan Soybeans: +3.5¢ (+0.35%) to $9.95 USD or $13.085 CAD
Dec Soybean Meal (per short ton): +$2.36 (+0.85%) to $309 USD or $406.37 CAD
Dec Soybean Oil (cents per lbs): -17¢ (-0.5%) to 35.23¢ USD or 46.33¢ CAD
Dec Oats: -2¢ (-0.95%) to $2.07 USD or $2.722 CAD
Dec Wheat (Chicago): +0.5¢ (+0.1%) to $4.208 USD or $5.533 CAD
Dec Wheat (Kansas City): +1.8¢ (+0.4%) to $4.27 USD or $5.615 CAD
Dec Wheat (Minneapolis): +1.3¢ (+0.25%) to $5.32 USD or $6.996 CAD
Jan Canola: -2.9¢/bu / -$1.30/MT (-0.25%) to $8.843/bu / $389.92/MT USD or $11.569/bu / $510.10/MT CAD
Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.205 USD or $2.885 CAD
Dec Milling Wheat: +10.9¢ (+1.75%) to $4.889 USD or $6.396 CAD
Returning to Normal
Grains this morning are mostly in the green, climbing off of their lows seen yesterday as this risk-off mentality continues to swing through the markets. Corn is getting support from bigger ethanol production, soybeans on some more export sales, canola still slowly climbing on the delayed Canadian harvest & upside for palm oil prices, and wheat seems to be following everyone else. Couple of the headlines taking attention this morning include Strategie Grains cutting its EU wheat output and export estimates, but raising the size of the EU corn crop.As pointed out by Karen Braun of Reuters, funds are still historically short the wheat market, despite prices sitting around decade lows. Finally, Chinese corn prices have seen a bump the last few days on buzz that Beijing may return to their normal practices of subsidizing the corn industry, mainly processors as a way to boost consumption (although they have announced they are focused on new crop buying and won’t be auctioning any more grain from their massive reserves).
Next door, discussion on India’s planting practices continue (which we first pointed in Tuesday’s Breakfast Brief), with more buzz around wheat, rice, and even sugarcane getting planted (the thirstiest of crops!). While we saw record acreage in places like the US, Canada, and Australia, you can bet that there’ll be more acres on pulse crops planted this year in India as well, hence our call for the last 7 months that we’ve seen the highs in lentils prices that has stood up (albeit we’ve seen a recent bounce lately on filling of some open contracts and a little more Middle Eastern demand). Overall, the Indian government continues to mainly dictate which crops get the most support. While one government ag policies wallow, the Argentinian government recently gave soybean growers a break as instead of dropping export taxes by 5% like they promised in the election cycle this time last year, they’re instead directly giving farmers a 5% tax rebate. This may lessen the blow of expected soybean acreage declined, which is currently estimated at 48.4M acres, or a drop of 2.5% year-over-year, for a 53M-tonne crop.
There hasn’t been much talk on La Nina lately as its strength has been brought into question and the recent grains market rally has taken over headlines. Last Thursday, the La Nina watch that was removed by the US Climate Prediction Center was reissued, suggesting that conditions will help develop the weather phenomenon in the next 6 months, specifically, a 70% chance we see it in the northern hemisphere this fall and 55% during winter 2016. It’s also worth noting that the equatorial trade winds and a few oscillation indices are favouring a La Nina event, but Bryce Anderson from DTN points out that things have been see-sawing (hence why the La Nina watch was pulled and then reissued?) That being said, using history as a reference point, specifically 1998, but the La Nina event was already plowing ahead full steam by this time back then.
Ultimately, we can conclude that this is 1998, but that we’re cognizant of the possibility that a short La Nina event could happen over the course of the next 6 months or so. While we don’t ignore the possibility, most weather agencies have agreed that if a La Nina were to finally develop, it would be a weak one. Looking forward, in the U.S. near normal temperatures are expected through the end of the year, whereas AccuWeather says that Canada will be bloody cold, especially in the Prairies where below-average snowfall is also expected (talk about living up to stereotypes!). For South America, With a La Nina event, dry weather will likely have an impact on crops in Argentina and southern Brazil to end 2016 / start 2017. However, with the data far from complete, we tend to skew more towards more normalized weather than crop devastation from a weak La Nina event.
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.