October 5 – Grain Markets Tracking Year-Over-Year

FarmLead Breakfast Brief
Thursday, October 5th, 2017

“More business is lost every year through neglect than through any other cause.”
– Rose Kennedy (American philanthropist)

Good Morning!

At 7:35 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2475 CAD, $1 CAD = $0.8016 USD)

Dec Corn: +1.3¢ (+0.35%) to $3.495 USD or $4.36 CAD
Nov Soybeans: +4¢ (+0.4%) to $9.623 USD or $12.004 CAD
Dec Soybean Meal (per short ton): +$1.70 (+0.55%) to $308.60 USD or $384.98 CAD
Dec Soybean Oil (cents per lbs): +0.01¢ (+0.03%) to 33¢ USD or 41.17¢ CAD  
Dec Oats: +1¢ (+0.4%) to $2.473 USD or $3.084 CAD
Dec Wheat (Chicago): -0.3¢ (+0.4%) to $4.473 USD or $5.511 CAD
Dec Wheat (Kansas City): +0.3¢ (+0.05%) to $4.363 USD or $5.442 CAD
Dec Wheat (Minneapolis): +4¢ (+0.65%) to $6.14 USD or $7.66 CAD
Dec Canola: +2¢/bu / +$0.90/MT (+0.2%) to $8.986/bu / $396.23/MT USD or $11.211/bu / $494.30/MT CAD

Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.583 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $6.13 USD or $7.648 CAD
Dec Milling Wheat: unchanged at $4.952 USD or $6.178 CAD

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

 

Grain Markets Tracking Year-Over-Year

Grain markets are in the green this morning as the market starts to price in some planting premiums.

The United Nations has joined the cognizant camp of winter wheat seeding being behind schedule in the Northern Hemisphere. [1]

U.S. winter wheat planting is behind schedule because of some intermittent rains.

Dryness in the Black Sea is causing some concern for the germination of recently seeded crops there.

In wheat trade, Russia won another Egypt trade tender, this time for 180,000 metric tonnes.

The delivered price for November movement was about $5.80 USD or $7.20 CAD for 12.5% protein wheat. 

What’s Next for Biofuels?

It seems like some of the rest of the market is coming around to our belief that China’s corn needs may not be as strong as everyone believed them to be. [2]

Garrett discussed this exact corn-for-ethanol-use yesterday and made some simple comparisons to American corn production after the ethanol mandate came into law in 2007.

Staying in biofuels, Agrimoney pointed out yesterday that there are three things that we should be looking out for soy oil prices to bounce. [3]

First U.S. exports must improve, and this could be helped by China coming back to the market after their holidays. This factor would be supportive of both palm oil and canola prices as well.

The second factor they posit is hedge fund sentiment. It is suspected that managed money has been net buyers but can that bullishness be sustained.

Finally, soy oil tends to correlate well with oil markets. With lows being seen last week and oils now following, is it time to rebound?

A year ago, soy oil saw its fall lows seen in mid-September before rallying up above 38 cents per pound by early December. Is it time for soy oil (and canola and palm oil) to break out?

South American Acreage Questions

In Monsanto’s quarterly wrap-up, they noted that soybeans are winning acres over from corn in the first crop season. [4] From their third-party ears, estimates are as high as a 30% decline in corn acres in the summer seeding season (which starts now for them).

Monsanto’s words would contrast the USDA’s forecast of slightly higher corn acres year-over-year. They’re currently estimating 43.3 million acres of corn will get planted in 2017/18 in Brazil.

Next door in Argentina, private and public estimates are sitting at around 13 million acres of corn getting planted.

Argentinian soybeans acres are expected to fall in 2017/18 because of export taxes still in place. There is a wide range of estimates still though, from 45 million up to 47 million acres.

In Brazil, most analysts agree that soybeans acres will come in near 88 million acres for the 2017/18 crop year.

Despite the acreage increase, planting pace is starting off slow. [5]

This is mainly because of the dryness – Maybe Brazilians don’t believe the adage of “Plant into dust, and bins will bust?”. From a sales standpoint, Brazilian farmers have been reluctant to sell, mainly because of an unfavorable exchange rate.

To date, only about 15% of new crop sales have been made, well behind the normal average by this time of year.

Switching into wheat, the Brazilian research institute, Cepea, says that this year’s crop is variable.[6]

Heavy rains in the Parana state have dropped the size of the wheat harvest there from the August estimate of 3.1 million tonnes to today’s forecast of 2.3 million tonnes. Today, more than two-thirds of the wheat crop has been harvested.

Last year’s harvest in the Parana – Brazil’s largest-producing state – was 3.5 million tonnes.

Despite some of the lower production (and corresponding quality), Brazilian wheat prices have a dropped a bit due to harvest pressures. 

U.S. Wheat Quality

The U.S. Wheat Associates recently released their quality report from the 2017 American wheat harvest. [7]

For the hard red winter wheat crop, average protein came in at 11.4% with falling numbers averaging 367. A year ago, the average quality of the U.S. HRW wheat crop was 11.2% protein with 392 falling numbers. Average test weight in 2017 was 60.8 pounds per bushel versus 60.7 a year ago.

Why share falling number?

It’s one of the most important characteristics when trying to sell your wheat into the milling market.

Do you know the other 4? We list them, right here.

For the U.S. soft red winter wheat crop, the average protein level was 9.5%, while falling number was 320 this year. Last year, it wasn’t that different with averages of 9.4% protein and a 330 falling number.

Test weight was also similar at 58.8 pounds per bushel in 2017 versus 58.6 a year ago. What’s notable is that the number of samples tested was down 44% year-over-year to 270.

U.S. soft white spring wheat was notably of lesser protein this year with the average kernel yielding 9.6% versus 10.1% a year ago. Falling number was higher this year at 335 compared to 314 a year ago. Test weight was similar though at 60.9 pounds per bushel in 2017 and 60.8 in 2016.

For hard red spring wheat in America, average protein is 14.6%, up a bit from 2016’s 14.2% average. Falling number is lower though in 2017 at 397 versus 2016’s 413. Test weight is fairly similar year-over-year at 61.2 pounds per bushel this year versus 61.3 pounds per bushel a year ago.

Finally, vitreous kernels (measured as HVK in Canada and DHV in America) is sitting at 76% in 2017. A year ago, the average was 79%.

An average protein of the U.S. durum wheat crop is seen at 14.5% with a falling number of 384.

A year ago, in one of the best years of quality for durum, the average protein was 13.7% with falling numbers at 11.

Test weights are similar at 60.4 pounds per bushel in 2017 versus 60.5 in 2016.

Average kernel content is set at 83% this year, compared to 85% a year ago.

Conclusion: protein is up while falling numbers are down compared to a year ago for all wheat except soft white spring, which is native to more northwestern growing regions. While the spring wheat crop is certainly similar to last year’s quality, it’s clear that the size of the crop is a big difference.

As mentioned in Monday’s Breakfast Brief, the American spring wheat crop is 15% smaller than last year at 416 million bushels. Further, the U.S. durum wheat crop is down 47% year-over-year. Healthy carryout numbers have kept prices relatively subdued (for now).

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.