FarmLead Breakfast Brief
Tuesday, October 25th, 2016
“Constantly choosing the lesser of two evils is still choosing evil.”
– Jerry Garcia (US musician)
At 6:05 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3314 CAD, $1 CAD = $0.7511 USD)
Dec Corn: +0.8¢ (+0.2%) to $3.49 USD or $4.647 CAD
Jan Soybeans: -3.8¢ (-0.35%) to $9.985 USD or $13.294 CAD
Dec Soybean Meal (per short ton): -$0.40 (-0.15%) to $306.90 USD or $408.60 CAD
Dec Soybean Oil (cents per lbs): -30¢ (-0.85%) to 35.69¢ USD or 47.52¢ CAD
Dec Oats: +1.5¢ (-0.7%) to $2.148 USD or $2.859 CAD
Dec Wheat (Chicago): +0.5¢ (+0.1%) to $4.03 USD or $5.365 CAD
Dec Wheat (Kansas City): unchanged at $4.125 USD or $5.492 CAD
Dec Wheat (Minneapolis): -1.5¢ (-0.3%) to $5.223 USD or $6.966 CAD
Jan Canola: +0.9¢/bu / +$0.40/MT (+0.1%) to $8.746/bu / $385.64/MT USD or $11.44/bu / $504.50/MT CAD
Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.167 USD or $2.885 CAD
Dec Milling Wheat: +2.7¢ (+0.45%) to $4.824 USD or $6.243 CAD
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Grains this morning are mixed on some profit-taking and risk-on attitude from the market after a few days running higher. The oilseeds complex fared the best yesterday but corn and cereals couldn’t keep up as they ended lower. We’re starting to see a little more volume in the complex as recent data suggests fresh speculative money has entered the market, mirroring what we saw last spring when every hedge fund manager and their mother got a little more active in grain and oilseeds (since no other market is really providing a return). Speaking of returns, US investors are putting more money in the Brazilian ag industry, while $1.2 Billion USD will be invested by the likes of Cargill, COFCO, Glencore, & Bunge in the Argentinian Rosario export hub. While we know that North America continues to be the global leader for ag production, when it comes down to where a company is putting its investment dollars, it’s clear to me that the global grain trade is focusing on the less expensive of 2 eviis in South America (versus North America).
Many farmers we talk to are hoping this canola rally will keep going (remember: hope is not a risk management strategy) so I want to walk through some of the bearish and bullish factors in the vegetable oil market. For starters. Malaysian palm oil futures are trading at their highest levels since March 2013, soybean oil futures are trading at their highest levels since 2014, but canola is only trading at its highest since late June (albeit not above the highs reached that month). On the bullish side, Malaysian palm oil stocks are down 41% year-over-year and a slow rebound in production, a bunch of canola remains uncombined in Western Canada, less soybean acres are getting seeded in Argentina, and we may see some weather premium priced into the South American crop. On the bearish side, palm oil inventories have a seasonal trend of build up around this time of year, in addition to the record U.S. soybean harvest coming off that’s satisfying a lot of international demand right now.
More specifically, as Darrel Good from the University of Illinois points out, U.S. soybean prices will be mainly influenced by export demand (looking at you China) and South American production prospects. That in mind, yesterday’s crop progress report from the USDA showed that 76% of the U.S. soybean crop has been combined, matching the 5-year average, but still behind the pace car that was the 84% taken off by this time last year. 61% of the US corn crop has been harvested, slightly behind the 62% 5-year average and last year’s 70%. On the contrary, 79% of U.S. winter wheat crop has been planted with 60% emerged (both in line w/ last year and the 5-year average), but 59% of the crop has been rated good-to-excellent (G/E), up from last year’s 47%.
Yesterday, the Canadian Loonie traded down to its lowest level since March, on the fact that the free trade agreement with the EU (CETA) has evaporated after the deal was gift-wrapped for them by the previous Canadian government. However, the Loonie was able rebound on the buzz from the Bank of Canada that they’re not afraid of implementing a little more fiscal stimulus / policy (much like you’ve seen the U.S. Federal Reserve do) and that lower interest rates aren’t expected. A lower Canadian Dollar would intuitively improve basis for Canadian cash values but in the next couple weeks, we would expect a little more volatility as the market figures out what are the best and worst case scenarios of the U.S. election (rather the lesser of the two evils that get elected).
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.