September 1 – Just Own It!

FarmLead Breakfast Brief
Friday, September 1st, 2017

“Once people take ownership over the decision to receive feedback, they’re less defensive about it.”
– Adam Grant (US author)

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 = $1.2344 CAD, $1 CAD = $0.8101 USD)

Dec Corn: +1.8¢ (+0.5%) to $3.595 USD or $4.438 CAD
Nov Soybeans: +4.8¢ (+0.5%) to $9.50 USD or $11.727 CAD
Oct Soybean Meal (per short ton): +$2.10 (+0.7%) to $298.60 USD or $368.60 CAD
Oct Soybean Oil (cents per lbs): +$0.07 (+0.2%) to 34.88¢ USD or 43.06¢ CAD  
Dec Oats: +3¢ (+1.25%) to $2.40 USD or $2.963 CAD
Dec Wheat (Chicago): +5¢ (+1.15%) to $4.395 USD or $5.425 CAD
Dec Wheat (Kansas City): +4.3¢ (+0.95%) to $4.405 USD or $5.438 CAD
Dec Wheat (Minneapolis): +2.5¢ (+0.4%) to $6.43 USD or $7.937 CAD
Nov Canola (Winnipeg): -2.7¢/bu / -$1.20/MT (-0.25%) to $9.155/bu / $403.67/MT USD or $11.301/bu / $498.30/MT CAD

Yesterday’s Winnipeg ICE Close
Oct Barley: unchanged at $2.515 USD or $3.157 CAD
Oct Durum Wheat: -5.4¢ (-0.65%) to $6.526 USD or $8.056 CAD
Oct Milling Wheat: -13.6¢ (-2.05%) to $5.247 USD or $6.477 CAD

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Just Own It!

Grain prices are mostly in the green to start the first day of September.

Corn and soybeans found a good bid yesterday, thanks to some healthy export sale data.

However, canola prices and spring wheat values dipped, despite relatively bullish numbers out from Statistics Canada (see our chart below). Canola prices are certainly being pressured this morning by the Canadian Loonie hitting 81 cents USD.

A recent Reuters survey suggests that Canada will only have 1.5 million tonnes of canola left over going into the 2017/18 crop year.

That’s the smallest in 4 years and down 26% from last year.

Technically, StatsCan will tell us on Sept. 6 where they believe final numbers will fall.

Here’s what I believe: The 18.2-million-tonne number from StatsCan will mean a lower carryout number for the 2017/18 season.

However, StatsCan, much like every other government reporting agency, has a habit of revising numbers.

I expect they will revise the spring wheat, durum wheat, and canola crops significantly this winter.

I think we all wish they would just own the number and be done with it (but that’s not how this game works, is it?)

2017 Canada Grain Production Estimates
2017 Canada Grain Production Estimates

Have Corn Prices Bottomed?

Corn prices found a nice jump yesterday, as recounted by Garrett in the Grain Markets Today.

This was mainly due to better-than-expected new crop corn export sales of more than 804,000 MT in just one week. That’s 24% better than the same week a year ago.

As reported by Agrimoney , a year ago on Aug. 31, corn prices hit a bottom and lost 10% in August 2016. [1]

Thanks to yesterday’s rally, corn prices only lost about 5.6% in August.

Terry Reilly from Futures International only thinks that, thanks to upcoming harvest pressures, unpriced old crop, and unpriced new crop, $3.75 USD / bushel is where any rally will stop. [2]

The complex has been oversold for a few weeks now, and as we get closer to harvest, the yield and corresponding production picture is getting clearer.

On that note, FC Stone raised its estimate for the US corn yield to 166.9 bushels per acre.

Its last estimate was 162.8. This would equate to a crop of 13.94 Billion bushels (very similar to the Pro Farmer Crop Tour’s estimates from last week).

For soybeans, FC Stone raised its forecast to 49.8 bushels per acre! That’s a solid bump from their previous estimate of 47.7 bushels per acre and even 0.5 bushels above the official USDA forecast. If FC Stone’s yield estimate holds true, it would add up to a 4.42 Billion-bushel bean crop in America.


Why Are North American Wheat Prices Falling?

Despite Statistics Canada telling us that Canada will only harvest 18.9 million tonnes of spring wheat this year, Minneapolis spring wheat prices fell hard yesterday. [3]

Why?

The market was expecting an even lower number! The decline is 7.7% drop from last year’s 20.45 million tonne crop. It’s also 12.4% below the 5-year average harvest of 21.6 million tonnes.

Worth noting as well is that Canadian spring wheat yields are forecasted to come in at 44.8 bushels per acre. That’s more than 14% lower than last year’s 52.1 bushel-per-acre crop and 6.3% below the 50year average of 47.3.

Combine this with some harvest movement pressure in both Canada and the US, prices don’t need to be higher today to immediately lock up some supply.

With yesterday’s relatively bullish report though, there are more than a few farmers who talked to the FarmLead team and mentioned locking the bins doors.

While it’s important to be optimistic about higher prices, let’s be cognizant of where wheat prices have been the last few years as you consider when that first next sale may be.

More importantly, take the time while your bin doors are locked to get your grain tested! Order from any and all labs from GrainTests.com – especially for wheat where knowing both US and Canadian grain can be helpful when marketing said wheat.

International Wheat Prices

While South Africa is set to have a record corn crop this year, the wheat crop there isn’t in the same camp. Lower acreage and dry weather have led to expectations of just a 1.6 million-tonne crop. [4] This would mean that South Africa would have to import more than 2 million tonnes.

Over in the Black Sea, rainfall this season across Ukraine has been at a six-year low according to corporate farm Agromino. [5] This won’t have much of an impact on wheat yields, but it can certainly affect corn, which is significant considering that the Ukraine is world exporter #4 of the coarse grain.

Regarding Russia, some believe they won’t hit the 31.5-million-tonne export number that the USDA has forecasted for them in August. [6] Comparably, the EU Commission sees Russian wheat exports at 29.9 million tonnes while the International Grains Council is the most optimistic at 32.1 million tonnes.

However, according to Agritel, the pace of exports “seems weak compared to the country’s export availabilities.” In July, wheat exports were nearly 10% lower than what they were in July 2016 at just 1.4 million tonnes.

The one obvious factor that can influence shipments is the price.

If the price is not good, farmers sales will be slower.  FOB Black Sea port prices for 12.5% protein wheat is sitting around $185 USD/MT.

(By the way, that would be $5 USD or $6.35 CAD per bushel. You can calculate these numbers in seconds by using our free, farmer-friendly tools at GrainUnitConverter.com).

Earlier this week, Egypt bought another 240,000 MT of wheat from Russia, 60,000 MT from Romania, and 55,000 MT from Ukraine at an average delivered price of about $203 USD/MT.

This figure equates to roughly $5.50 USD or $6.95/bushel. Apart from freight costs, this is the lowest price that Egypt has paid for Russian wheat thus far in 2017.

Russia has won more than 2/3s of Egypt’s wheat business this year, contract 1.96 million of the 2.91 million tonnes purchases thus far.

Add in the fact that Russia is aggressively breaking into the Asian wheat import market (exports +60% from 2015/16 to 2016/17), it’s clear that they want to own the title of the top exporter. [7]

Have a great weekend!

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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