October 6 – Getting Competitive Again

FarmLead Breakfast Brief
Friday, October 6th, 2017

An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”
– Jack Welch (Former General Electric CEO)

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 = $1.2568 CAD, $1 CAD = $0.7957 USD)

Dec Corn: +0.3¢ (+0.05%) to $3.498 USD or $4.396 CAD
Nov Soybeans: -0.3¢ (-0.05%) to $9.68 USD or $12.165 CAD
Dec Soybean Meal (per short ton): -$0.80 (-0.25%) to $316.10 USD or $397.26 CAD
Dec Soybean Oil (cents per lbs): +0.10¢ (+0.3%) to 33.10¢ USD or 41.60¢ CAD  
Dec Oats: +0.8¢ (+0.3%) to $2.48 USD or $3.117 CAD
Dec Wheat (Chicago): +0.8¢ (+0.15%) to $4.415 USD or $5.549 CAD
Dec Wheat (Kansas City): unchanged at $4.343 USD or $5.457 CAD
Dec Wheat (Minneapolis): +5.5¢ (+0.9%) to $6.21 USD or $7.804 CAD
Dec Canola: +2.9¢/bu / +$1.30/MT (+0.25%) to $8.6/bu / $395.07/MT USD or $11.26/bu / $496.50/MT CAD

Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.564 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $6.085 USD or $7.648 CAD
Dec Milling Wheat: +2.7¢ (+0.45%) to $4.981 USD or $6.26 CAD

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Getting Competitive Again

Grain prices have pulled back a bit from yesterday’s gains, but are mixed this morning. Canola prices and Minneapolis hard red spring wheat prices are leading the positive gains. For canola, prices are up mainly thanks to the Canadian Loonie falling back below 80 cents USD for the first time in about 5 weeks.

Rains are slowing down the U.S. harvest. The wet weather helped push up corn and soybean prices yesterday. As Garrett discussed in Grain Markets Today, U.S. corn exports announced yesterday were pretty healthy at 814,000 MT.

Mexico was the largest buyer of U.S. exports.

This trend is interesting given that U.S. President Trump has been a very vocal critic of Mexico. While Mexico has been exploring alternative sourcing options, no one has been able to meet their needs. Argentina is the likely next best supplier, but the nation seems a little unreliable at times, relative to America’s geographical supremacy and stronger supply chain. [1]

U.S. soybeans exports came in on the lower end of expectations at a little more than 1 million tonnes. That said, the rains helped keep the oilseed in the green.

In other export news, American oil shipments are soaring. [2]

Last week, a record of 1.984 million barrels per day got exported last week. That’s almost 500,000 barrels more than the previous week, which was when the country set its previous record.

To give some context of how large this oil export program is, Kuwait, a major oil player, usually ships out just over 2 million barrels per day.

Coming back to the farm, U.S. government checks are in the mail this week. [3]

Nearly $8 Billion in Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs will hit farmer’s mailboxes across America. There’s another $1.6 billion coming from the Conservation Reserve Program (CRP).

Given the drought issues in the Northern Plains and lower grain prices, one hopes these payments will help the individual feel competitive again with a bit of a stronger bank account.


Brazil Running Out of Grain?

The Brazilian government recently said that the country shipped out 4.3 million tonnes of soybeans in September. That’s another monthly export record and slightly above what the private shipping data had indicated.

Ag Resource says that there are is 2.7 million tonnes of Brazilian soybean scheduled to get shipped out in October. [4]

They are speculating, however, that this number could come in above 3 million tonnes, given the trend of final numbers surpassing expectations the last few months.

It’s worth mentioning that 75% of Brazil’s exported soybeans have gone to China. [5]

This means that China is more important to Brazil than it is to America. With a record crop getting shipped out a record pace, the carryout numbers that are currently being estimated may be on the high side.

Conversely, despite shipping out a lot of corn, there’s likely to be a record amount of corn left over in Brazil by the end of the 2017/18 crop year. This is intuitively keeping farmers more interested in planting more soybeans.


EU Wheat Woes

The UK’s Ag Ministry says that this year’s wheat harvest will be 15.2 million tonnes. [6] This is much higher than the International Grains Council’s estimate of 13.9 million tonnes and Coceral’s forecast of 14.75 million tonnes.

However, there is a tight wheat carryout in the UK, mainly thanks to the ethanol plants’ use of wheat. As such, farmers are hoping for better prices and are not selling.

Agrimoney notes that the spread between feed wheat and feed barley is widening in the UK. [7] This comes as malt barley prices are also improving, mainly because of some quality issues.

In Europe, wheat exports are down significantly compared to a year ago. 2 million fewer tonnes were exported this week than a year ago. Corn exports in the EU are up 1.3 million tonnes compared to the same week a year ago.

What’s certain is that the size of the Russian wheat export program is weighing on the ability for Europe to compete. With some poorer quality in Germany, France has become the only major player that can export decent quality in droves.

Have a great weekend and Happy Thanksgiving to our Canadian readers!

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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