October 10 – Sideways Grain Markets

FarmLead Breakfast Brief
Tuesday, October 10th, 2017

“Talent without discipline is like an octopus on roller skates. There’s plenty of movement, but you never know if it’s going to be forward,backwards , or sideways.”
– H. Jackson Brown, Jr. (American author)

Good Morning!

At 7:15 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2509 CAD, $1 CAD = $0.7994 USD)

Dec Corn: +0.3¢ (+0.05%) to $3.498 USD or $4.495 CAD
Nov Soybeans: +5.5¢ (+0.55%) to $9.723 USD or $12.162 CAD
Dec Soybean Meal (per short ton): +2.70 (+0.85%) to $318.20 USD or $398.05 CAD
Dec Soybean Oil (cents per lbs): -0.18¢ (-0.55%) to 33.08¢ USD or 41.38¢ CAD  
Dec Oats: +2.3¢ (+0.9%) to $2.505 USD or $3.134 CAD
Dec Wheat (Chicago): -0.8¢ (-0.15%) to $4.353 USD or $5.445 CAD
Dec Wheat (Kansas City): -0.5¢ (-0.1%) to $4.303 USD or $5.382 CAD
Dec Wheat (Minneapolis): +2¢ (+0.3%) to $6.253 USD or $7.821 CAD
Dec Canola: +2.7¢/bu / +$1.20/MT (+0.25%) to $9.018/bu / $397.62/MT USD or $11.281/bu / $497.40/MT CAD

Friday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.576 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $6.113 USD or $7.821 CAD
Dec Milling Wheat: +13.6¢ (+2.15%) to $5.113 USD or $6.396 CAD

Got the new FarmLead app?
Set a target with all 500 verified FarmLead buyer
Post your next block of your grain on FarmLead!

Sideways Grain Markets?

Grain markets this morning are mixed with soybeans leading the way on some planting concerns out of South America.

Hedge funds did get a little shorter in soybeans in last week’s trading activity. [1]

The biggest change was in soy oil, which lost nearly 45,000 long positions.

This decline is the biggest sell-down since 2006.

On Thursday this week, the USDA will come out with their October WASDE report. There are updates expected on both yield and acreage in this report, but we’ll dig more into it in tomorrow’s Breakfast Brief.

The market has been constantly bullish going into these reports (and rightfully so considering where crop conditions are at). However, this time around, the trade might be leaning a little more sideways in anticipation of not getting surprised.

La Nina: The Grain Price Savior?

La Nina is finding its way into more headlines these days in agricultural markets. A La Nina event sees cooler water in the Pacific Ocean and can cause floods and droughts, depending on how close you are to the body of water.

Right now, the NOAA, Australia’s Bureau of Meteorology, and the UN’s Meteorology Organization all are predicting a 50% to 55% chance of La Nina hitting in Q4 2017. It should also carry over in 2018.

What this usually means is drier conditions in Brazil and Argentina. This is already the case though as rainfall in major grain-producing northern regions of Brazil is dry.

On the other side of the world, La Nina means more rain for Australia. Some precipitation was in the forecast for this weekend, but it’s too late to save the winter crops in the Land Down Undaa .

Conversely, farmers are optimistic that the rains will support better spring production (as a reminder, seasons in the Southern Hemisphere are the opposite of the Northern Hemisphere).

In Canada, La Nina could bring some colder, snowy conditions to the Prairies. [2]

La Nina tends to bring cooler-than-normal temperatures to the American Northern Plains and drier conditions in the Midwest.

Mother Nature put an asterisk on things though as more rain over the weekend in the Corn Belt slowed harvest again. [3] While it slows things down, the storm could be considered beneficial for two reasons.

First, it helps replenish some salivating soils in the majority of areas in the eastern Corn Belt.

Second, as pointed out by our Doug Kirk over the weekend, it gives a chance for soybean movement to end-users to get back to normal. The problem is that, like Doug, many Midwest farmers continue to see really solid yields as they cut through more fields. [4]

Considering where basis levels are at across most of the U.S., the slowdown is welcome. For those who want to “push it ‘tll, she plugs,” having combines sit idle at this time of year is frustrating.

For this time of year though in grain markets, most price upside catalysts will be found in what happens in South America.

january-soybeans-10-dollar-bounce-off-support
Can January 2018 soybeans get back up above $10 a bushel on the CBOT?


Canadian Grain Disappearance

Heading into October, more grain has been leaving Canadian shores than compared to a year ago. According to the Canadian Grain Commission, more than 6.3 million tonnes of grain, oilseeds, and pulses have been exported since the start of the 2017/18 marketing year.

That’s more than 7% better than where things were at a year ago.

As a sidenote , the time Canadian grain spends in the supply chain from producer delivery to loading at port has been steadily decreasing since 1999. [5]

Marketing-year-to-date, more than 2.7 million tonnes of Canadian wheat have shipped out of the Great Wheat North (not including durum). That’s up 21% compared to where we were a year ago.

Durum wheat exports are doing even better at 641,000 MT exported thus farm. That’s 57% better than the same point in 2016.

Canadian barley exports up 424% year-over-year to 260,500 MT thus far while oats shipments out of the country are up 18% to 314,100 MT.

Movement of pulses has been much slower. With only 742,100 MT of peas exported thus far, that’s down 36% compared to the 1.15 million tonnes already moved by this time a year ago.

For lentils, it’s worse: only 71,000 MT have been exported. That’s a drop of 60% compared to a year ago.

Canadian flax and soybeans exports also aren’t faring that well. Soybeans shipments are down 69% from a year ago to just 66,400 MT. Flax is tracking 41% lower with just 34,700 MT moved abroad so far in the 2017/18 crop year.

Canola is the one oilseed tracking well. Exports of Canadian canola are up 12% year-over-year at nearly 1.4 million tonnes.

Thus far in the 2017/18 crop year, a little more than 3.5 million tonnes of canola have been delivered by Canadian farmers. That’s up 5% compared to where we were a year ago and about 8% better than 2015.

On the domestic demand front, COPA says that 89% of Canada’s canola crushing capacity was used last week. That’s better than the previous week, but it still means only 1.48 million tonnes of canola have been crush thus far.

The Canadian Oilseed Processors Association said members crushed 197,153 tonnes of canola in the week to Oct. 4, up 6.7 percent from the week before. [6]

That represented a strong capacity use of 89%. To date, the crush is 1.48 million tonnes still behind last year’s pace of 1.56 million tonnes (or 5% lower).

Soybeans crush thus far with just under 300,000 MT used, according to COPA. That’s down about 14% compared to a year ago.


2017/18 Planting Update

Safras & Mercado says that the seeding of soybeans in Brazil is about half of where it was a year ago, with just 5.6% of the crop planted thus far.

It’s worth noting though, however, that the 5-year average is 5.3%.

Also per Safras & Mercado, 14% of the 2017/18 soybeans crop in Brazil has been sold thus far by farmers. A year ago, it was 22%. The 5-year average Is 26%.

In addition to this, there’s still more than 20 million tonnes of the record 2017/18 crop that remain unsold.

Sidenote: if you haven’t read it yet, Brazil is what we think is the most bearish thing about soybeans.

In the Black Sea, there are a few corporate farms that continue to flag dry conditions in eastern Ukraine. [7]

Where this probably has the most immediate impact is on spring-seeded crops as late summer heat will impact final production numbers.

This is notable for corn and soybeans in Russia and Ukraine, but not so much wheat as most of the cereal grown in the region is fall-seeded.

It’s not the 2017/18 crop year, but the University of Missouri’s FAPRI think tank thinks that US farmers will plant 93.2 million acres of corn in 2018. [8]

That would be a 2.3 million-acre bump from the 2017 number.

For soybeans, FAPRI thinks that US farmers will have to rotate out of beans in 2018, meaning acreage would drop to 86 million. That’s down 2.5 million from this year’s sowings but still would be the second-largest area planted into soybeans on record.

From a production standpoint, if these acres hold up, it would result in a 2018 corn crop of 14.65 Billion bushels and a soybean crop of 4.08 Billion bushels. Respectively, those would be the second- and third-largest harvests on record.

Looking from left-to-right (sideways), yes we’ve produced some pretty big crops the last few years. Grain prices just continue to reflect this.

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.

Most Recent Posts
Dec. 10 - Grain Markets Reverse Ahead of WASDE
December 10, 2018 Brennan Turner
Grain markets this morning are mostly lower ahead of tomorrow’s December WASDE report, with wheat prices the most notable, pulling back from its significant gains on Friday.
October 4: Corn Prices Edge Higher With October WASDE in Focus
October 04, 2018 Garrett Baldwin
Corn prices ticked higher Thursday as traders and analysts began to speculate on next week’s release of the October WASDE report.