Oct 5 – Climbing Back Up

FarmLead Breakfast Brief

Wednesday, October 5th, 2016

“After climbing a great hill, one only finds that there are many more hills to climb.” – Nelson Mandela (South African President)

Good Morning!
At 7:30 AM CDT in the North American futures markets (not cash market prices):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3198 CAD, $1 CAD = $0.7577 USD)

Dec Corn: -2.8¢ (-0.8%) to $3.455 USD or $4.56 CAD
Nov Soybeans: +1.8¢ (+0.2%) to $9.653 USD or $12.739 CAD
Dec Soybean Meal (per short ton): +$2.30 (+0.75%) to $308.60 USD or $407.29 CAD 
Dec Soybean Oil (cents per lbs): -0.27¢ (-0.8%) to 32.83¢ USD or 43.33¢ CAD 
 Oats: -0.8¢ (-0.4%) to $1.805 USD or $2.382 CAD
Dec Wheat (Chicago): -1.3¢ (-0.3%) to $3.943 USD or $5.203 CAD
Dec Wheat (Kansas City): -1.3¢ (-0.3%) to $4.018 USD or $5.302 CAD
Dec Wheat (Minneapolis): +1.3¢ (+0.25%) to $5.235 USD or $6.909 CAD
Nov Canola: +4.1¢ / +$1.80/MT (+0.4%) to $8.056/bu / $355.21/MT USD or $10.632/bu / $468.80/MT CAD

Yesterday’s Winnipeg ICE Close

Dec Barley: unchanged at $2.186 USD or $2.885 CAD
Dec Milling Wheat: +5.4¢ (+0.9%) to $4.722 USD or $6.232 CAD

Harvest 2016 continues with more crop coming off

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Climbing Back Up

Grains this morning are mixed with the oilseeds doing better on some decent demand fundamentals and some tighter US soymeal stocks, but pressures in the vegetable oil markets is keeping gains in check. The U.S.D.A. will pay farmers more than $7 Billion this fall in PLC/ARC (crop insurance) payments as the insurance helps offset the current low-commodity price environment (the other smart money would be to post that grain on FarmLead…). After finally changing its ergot policy back to the world standard of max 0.05%, Egypt is starting to get a little more action on its wheat tenders. Helping their cause is also their willingness to let cargo inspections take place at the port of origin, instead of on arrival, which intuitively drops the price of rejected cargoes. As usual, Black Sea wheat is the cheapest delivered option at about $186 USD / MT (or $5.05 USD or $6.65 CAD per bushel). While Egyptian officials are likely happy to see more wheat being offered to them, they still have a ways to go to climb back up into the good graces of all their trading partners.

Argentinian President Macri confirmed that they will not be dropping the soybeans export tax from 30% to 25% like they had promised in their campaign a year ago. Instead, the cut will be delayed a year until January 2018 and then it will drop by 0.5% per month for the next 2 years. I, and many others, are doubtful that this promise will be fulfilled as Argentina still depends on ag export taxes for a large portion of their operating income, especially when inflation in the country is running at 35% (below the target of 20-25% set by Macri for the end of 2016). With the soybean export tax still in place, we can expect less soybean acres and more corn and wheat, as the export taxes on those two crops have been killed completely. This in mind, rains in Argentina have been helping wheat conditions and the soil moisture profile for corn and sunflower acres.

Currently, Buenos Aires Grains Exchange is estimating Argentine corn planting at 22% complete (vs 13% last year), suggesting a strong pace to hit the 25% increase in corn acres year-over-year for the country.  Next door in Brazil, Syngenta is doubling down its chemical and seed operations as although growers “continue to face economic uncertainty and credit constraints, their underlying profitability remains robust.” Thus far in Brazil, soybeans have slowly started to get seeded, while the 1st corn crop planting is now at 25%, behind the 34% that was seeded by this time a year ago. We continue to watch South American weather as a potential catalyst for corn and/or soybean prices to improve a bit. However, challenging this theory is some of the strong yield numbers of 200 bu/ac corn and 70 bu/ac soybeans in Illinois, Iowa, and Minnesota (as per Allendale).

We do know the current average yield estimates by the USDA of 174.4 bu/ac for corn and 50.6 bu/ac for soybeans are well above trendline values. This in mind, recent analysis by the University of Illinois concludes that we are more likely to see a lower final average corn yield number in January but a bigger soybean number. Obviously we could potentially get a little more clarity next Wednesday when the USDA puts out their October WASDE. For soybeans, demand continues to be solid as there’s been buzz that China bought at least 40 cargoes from the US and South America last week, but that corn does have some work cut out for it to climb back to the $4/bushel handle that many producers are looking for.

To growth,

Brennan Turner

President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
@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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