FarmLead Breakfast Brief
Wednesday, October 11th, 2017
“Opportunities are like sunrises. If you wait too long, you miss them.”
– William Arthur Ward (American poet)
At 7:05 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2506 CAD, $1 CAD = $0.7996 USD)
Dec Corn: -1.5¢ (-0.45%) to $3.478 USD or $4.349 CAD
Nov Soybeans: -0.3¢ (-0.05%) to $9.658 USD or $12.078 CAD
Dec Soybean Meal (per short ton): -$0.30 (-0.1%) to $315.90 USD or $395.07 CAD
Dec Soybean Oil (cents per lbs): +0.02¢ (+0.05%) to 33.13¢ USD or 41.43¢ CAD
Dec Oats: +1.3¢ (+0.5%) to $2.508 USD or $3.136 CAD
Dec Wheat (Chicago): -2¢ (-0.45%) to $4.333 USD or $5.418 CAD
Dec Wheat (Kansas City): -3.3¢ (-0.75%) to $4.28 USD or $5.353 CAD
Dec Wheat (Minneapolis): -0.3¢ (-0.05%) to $6.173 USD or $7.719 CAD
Dec Canola: -0.2¢/bu / -$0.10/MT (-0.02%) to $8.978/bu / $395.88/MT USD or $11.229/bu / $495.20/MT CAD
Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.577 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $6.115 USD or $7.821 CAD
Dec Milling Wheat: -2.7¢ (-0.45%) to $5.092 USD or $6.368 CAD
A Warm-Up to the WASDE
Grain markets are mostly in the red this Wednesday morning, despite the somewhat-bullish reports released yesterday.
Soy oil and canola aren’t necessarily in that camp though as Malaysian palm oil stocks topped 2 million tonnes for the first time in 19 months.  Malaysian palm oil exports also disappointed. This continues to weigh on soy oil and canola prices.
NAFTA renegotiations are gaining more headlines as Mexico, America, and Canada head to their fourth round of talks in Washington, D.C. During the negotiations, the U.S. is expected to be aggressive in their demands.  Should a deal not be worked out, it would negatively impact agricultural industries in all three countries.  Mexico has already threatened to reduce its corn imports from the United States without a deal.
Heavier rains are expected to continue in southern Brazil and northern Argentina. In central and northern Brazil – the nation’s major grain-producing regions – temperatures are expected to stay in the 80s and 90s (Fahrenheit). Limited rainfall is in the forecast over the next month.
This dryness will negatively affect soil moisture conditions.
Rains have been falling in the U.S. though, which has stalled the harvest and fall-seeding campaigns.
The USDA Leaves Few Surprises
The USDA’s crop progress report arrived Tuesday, a day late due to the Columbus Day holiday. 
As Garrett mentioned in Grain Markets Today, the U.S. corn harvest was 22% complete, well behind the 5-year average of 37%. The market was expecting somewhere around 25% to 30%.
The report said that 36% of American soybean fields had been combined. This figure is also behind the 5-year average, which sits at 43%.
Also, 48% of the U.S. winter wheat crop has been seeded which was in line with expectations. This figure is ten percentage points behind the 5-year average for this time of year. Thanks to the delayed planting, only 25% of the crop has emerged, versus the usual 30% by now.
Where we wheat fell short of expectations yesterday was export shipments data. Numbers were about 20% lower than where they were a year ago and were the major contributor as to why prices fell yesterday.
Following Tuesday’s figures, the grain markets are looking at tomorrow’s October WASDE report.
We’ll take a deeper dive into expectations today, but a few estimates from on the other side of the equator will help give you a frame of reference.
CONAB Expects Big Brazilian Soybeans Crop
The Brazilian version of the USDA, CONAB, put out its estimates for the 2017/18 crop yesterday.
It confirms that we continue to know: Brazil is growing a lot of soybeans (and why we think they’re on the major bearish factors out there).
While CONAB is expecting yields to return to more normalized levels from their records in 2016/17, production is still expected to come in somewhere around 106 million to 108 million tonnes.
Last year’s record harvest was 114 million tonnes.
The USDA’s September WASDE estimate was for 107 million tonnes in 2017/18. The International Grain Council’s estimate is for 108 million tonnes. Local analyst AgRural is at 109.9 million tonnes.
CONAB is estimating average soybean yields in Brazil to be nearly 46 bushels per acre. Last year they harvested a record average yield of 50 bushels per acre.
This year though, there will be more acres of the oilseed going in. The top end of CONAB’s estimates is for 87 million acres, or nearly 3% higher than 2016/17. This figure is getting precariously close to American acreage numbers.
With more soybeans going in during the first crop, this means less corn. Getting specific, CONAB is expecting first crop corn acres to be about 10% lower than last year. Their estimate ranges from 12.2 million to 13 million acres.
If the lower end of this range is realized, it would be lowest acres on record for the first crop planting season.
This trend also equates to the likelihood of the lowest production in more than a decade. Expectations are for a Brazilian first crop corn harvest of somewhere between 25 million to 26 million tonnes.
This is going off an average yield of just 81 bushels per acre though. Last year’s first crop average corn yield in Brazil was 88.5 bushels per acre.
Total 2017/18 corn production is estimated by CONAB to come in somewhere between 92.2 million to 93.6 million tonnes. Last year’s record corn crop in Brazil was 97.8 million tonnes.
Comparably, the IGC is currently estimating a 90-million tonne crop.
The USDA’s September WASDE estimate was for 95 million tonnes.
October WASDE Preview
The market is expecting an average yield of 170.1 bushels per acre in tomorrow’s report. This would be an increase of 0.2 bushels per acre from the USDA’s September WASDE estimate.
This sort of yield would equate to a production number of 14.2 Billion bushels, also slightly higher than last month’s estimate.
Given some decent demand though, U.S. corn ending stocks are expected to come in at 2.29 Billion bushels. It was 2.335 Billion in September. Globally, the 2017/18 corn carryout is pegged at 201.9 million tonnes, which would be about 500,000 MT lower than the last forecast from the USDA.
For soybeans, the market is guesstimating that the October WASDE will show an average U.S. soybean yield of 50 bushels per acre. The September’s WASDE estimate was 49.9. August’s WASDE estimate was 49.4.
Our Doug Kirk is taking the over on the soybeans yield estimate in tomorrow’s October WASDE. I’m taking the under and staying at 49.9 bushels per acre.
This would equate to a production of 4.45 Billion bushels, or about 20 million bushels bigger than the September WASDE estimate. The key factor in this production number will be harvested acreage.
Given the USDA’s stocks report on Friday, September 29th showing the 2017/18 crop year starting with 301 million bushels, expectations are that the October WASDE’s 2017/18 carryout number will be lower than the September WASDE forecast.
Specifically, the average analyst guesstimate is for 447 million bushels. Worldwide, 2017/18 ending stocks are expected to come in roughly 1 million tonnes lower at 96.5 million.
For wheat, U.S. 2017/18 carryout is pegged at 946 million bushels, which is slightly higher than the September WASDE estimate.
Apart from the yield and carryout numbers for U.S. crops, we’ll be looking at production numbers out of Russia, Australia, Brazil, and Argentina. We’ll also be interested in seeing if there are any changed to export numbers of these countries.
Right now, the range of estimates for Australia’s wheat crop is from 17 to 22 million tonnes!
The UK’s AHDB thinks that “long-run risks to the global grain market are growing.”  This intuitively means more volatility (and opportunities to take advantage of).
Not much change is expected on the global front in this WASDE but shave a million tonnes from the production here and add a million tonnes for demand there, it can get bullishly exciting.
That would be the sort of WASDE that most farmers would receive a warm feeling.
We’ll know by tomorrow 12 p.m. EST.
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