Oct 3 – Fresh Optimism?

FarmLead Breakfast Brief

Monday, October 3rd, 2016

“Few things in the world are more powerful than a positive push. A smile. A world of optimism and hope. A ‘you can do it’ when things are tough.” – Richard DeVos (US businessman)

Good Morning!
At 7:35 AM CDT in the North American futures markets (not cash market prices):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3082 CAD, $1 CAD = $0.7644 USD)

Dec Corn: -0.5¢ (-0.15%) to $3.363 USD or $4.399 CAD
Nov Soybeans: +1.3¢ (+0.15%) to $9.553 USD or $12.497 CAD
Dec Soybean Meal (per short ton): +$3.10 (+1.05%) to $302.70 USD or $396 CAD 
Dec Soybean Oil (cents per lbs): -0.34¢ (-1%) to 33.10¢ USD or 43.30¢ CAD 
Dec
 Oats: +2.8¢ (+1.55%) to $1.81 USD or $2.368 CAD
Dec Wheat (Chicago): -2.5¢ (-0.6%) to $3.995 USD or $5.226 CAD
Dec Wheat (Kansas City): -2.5¢ (-0.6%) to $4.13 USD or $5.403 CAD
Dec Wheat (Minneapolis): -0.5¢ (-0.1%) to $5.14 USD or $6.724 CAD
Nov Canola: +0.2¢ / +$0.10/MT (+0.02%) to $8.039/bu / $354.45/MT USD or $10.517/bu / $463.70/MT CAD

Friday’s Winnipeg ICE Close

Dec Barley: unchanged at $2.205 USD or $2.885 CAD
Dec Milling Wheat: +10.9¢ (+1.8%) to $4.722 USD or $6.178 CAD

Harvest 2016 continues with more crop coming off

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Fresh Optimism?

Grains started the month of October with a quick buzz overnight before pulling back on some more optimistic weather conditions. However, snow is in the forecast for the Western Canadian provinces, meaning combines are rolling and things are likely going to be taken off a bit tough. The Western cornbelt is looking to have a drier weekwhile things are likely to get a little wetter the closer you get to the Great Lakes. Hedge funds reverted to getting shorter again last week, as only Kansas City hard red winter wheat and soybean oil got longer love from managed money. Overall, with combines running hard and yields still being relatively decent, the optimism to get off the 2016/17 crop is high, despite the fact that prices are not.

On Friday, the U.S.D.A. came out with their updated numbers for the final carryout of the 2015/16 crop and the big question that many market participants have been asking themselves is how much demand have these lower grain prices bought. For corn, things appear to be improving as a record amount of corn was taken off the balance sheet for the 4th quarter, putting U.S. ending stocks at 1.74 Billion bushels (627 million bushels, or 36% of which, is still held on farm, a jump of 6% year-over-year). For soybeans, the U.S.D.A. says that 197 million bushels of the oilseed are available in America (+3% year-over-year, below pre-report guesstimates, mainly thanks to a 4thquarter usage that, like corn, was also a record. Helping push the ending stocks lower though was a revision to the 2015 harvest production number. With expectations that this year’s crop is also going to be large, more market analysts are expecting price pressures on soybeans to remain.

Total U.S. wheat inventories to end the 2015/16 crop year came in at 2.53 Billion bushels, 133 million bushels above what the market was expecting, a 21% increase year-over-year, and the largest available supply for America in the past 3 decades. On the wheat production front, total output for 2016/17 was pegged at 2.31B bushels, including 1.67B bushels of winter wheat, while also raising its outlook for the durum crop to 104M bushels. Between the size of the U.S. wheat crop and the amount of corn used in the 4th quarter of the crop year, it’s safe to assume that corn is still being sought after by feeders, not wheat. This intuitively puts pressure on the spread between wheat and corn, as wheat seems to be overpriced compared to its coarse grain competitor.

Overall, we ended the month of September in a better position that where we started it on the price front. We’ve also gotten closer to getting the 2016/17 crop in the bin here in North America but there’s still a fair amount of work to get in. Rains have continued to slow progress and no one likes the stop and go nature of things but it’s gotta get done. The majority of grains are below where they were a year ago, but that’s because the market continues to lie in a price coma after it’s been ingesting too much for its own good (there’s just too much supply out there). While bins do continue to fill up here in North America, we continue to watch for any weather alerts on the other side of the equator (as per Brazil, Argentina, & Australia) as we still have optimism to jump off fresh harvest lows.

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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