September 11 – Ironic Grain Market Tendencies

FarmLead Breakfast Brief
Monday, September 11, 2017

“Those who cannot remember the past are condemned to repeat it without a sense of ironic futility.”
– Errol Morris (US film director)

Good Morning!

At 7:00 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2102 CAD, $1 CAD = $0.8263 USD)

Dec Corn: -1.3¢ (-0.35%) to $3.555 USD or $4.302 CAD
Nov Soybeans: +1.8¢ (+0.2%) to $9.638 USD or $11.663 CAD
Oct Soybean Meal (per short ton): -$0.30 (-0.1%) to $302.10 USD or $365.61 CAD
Oct Soybean Oil (cents per lbs): +$0.20 (+0.6%) to 34.88¢ USD or 42.21¢ CAD  
Dec Oats: +1.8¢ (+0.75%) to $2.338 USD or $2.829 CAD
Dec Wheat (Chicago): -4¢ (-0.9%) to $4.338 USD or $5.429 CAD
Dec Wheat (Kansas City): -5¢ (-1.15%) to $4.365 USD or $5.283 CAD
Dec Wheat (Minneapolis): -5.5¢ (-0.85%) to $6.413 USD or $7.76 CAD
Nov Canola (Winnipeg): -3.4¢/bu / -$1.50/MT (-0.3%) to $9.149/bu / $403.40/MT USD or $11.072/bu / $488.20/MT CAD

Friday’s Winnipeg ICE Close
Oct Barley: unchanged at $2.608 USD or $3.157 CAD
Oct Durum Wheat: -16.3¢ (-2.1%) to $6.319 USD or $7.648 CAD
Oct Milling Wheat: -2.7¢ (-0.45%) to $5.24 USD or $6.341 CAD

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Ironic Grain Markets Tendencies

Grain markets this morning are mostly mixed but the big focus this week is on Tuesday’s WASDE report from the USDA.

It’s a big week for FarmLead as we’ll be at both Canada’s Outdoor Farm Show in Woodstock, ON and the Big Iron Farm Show in Fargo, ND this week. Click the links to find our booth location to chat grain markets face-to-face!

As per pre-report estimates go, most of the market is expecting lower US corn and soybean yields (and, intuitively, lower production figures).

We’ll get into the pre-report estimates later but the September WASDE isn’t usually a huge game-changing report.

Typically we must wait until October for the real impact of USDA numbers.

Also on Tuesday, Farm Services Agency will update its US acreage estimates.[1] Pre-report expectations are that we’ll see less corn but more soybeans. Most market participants agree that soybeans have the most potential for a “price pop.”[2]

This sentiment is mainly due to more yield unknowns about the US soybeans crop at this point, but also some better-than-expected demand.[3]

Corn prices could be the sleeper figure though. The last two years we’ve seen the market put in a late-summer low before rallying in September.[4]

Malaysian palm oil prices touched a 5-month high this morning after stocks came in lower-than-expected.[5] According to reports, 1.94 million tonnes are still available as of August, but the market was expecting more than 2 million. However, this number is the highest in 18 months.

Meanwhile, Malaysian palm oil production fell in August, albeit only by a little bit.

This downturn is unusual given this time of year is usually peak production. On the trade front, Malaysian palm oil exports hit 1.49 million tonnes in August, the tops for the last year.

Despite some of the better palm oil prices, canola has barely reacted, whereas soy oil has improved a bit. The stronger Canadian Loonie and harvest pressure have pushed down canola over the last two weeks. Exports and domestic crush volumes in Canada are still behind the pace from this time a year ago.

There are still a lot of fields in Western Canada that were seeded late and so harvest is still at least a week away. However, for a crop, though that was going to be terrible, field reports over the weekend continue to suggest better-than-expected yields.

USDA Pre-Report Estimates

Check out the tables below (silly for me to write out what I can just show.)

Do you agree?

Tomorrow, we’ll be looking for changes in US yields and US exports in the WASDE report.

We’ll also be monitoring figures for the production and exports from Europe and the Black Sea.

It’s worth mentioning that SovEcon increased its wheat production estimate to 81.1 million tonnes on Friday.

september-2017-usda-wasde-estimates
September 2017 USDA WASDE Estimates

 

South American Planting Starts

In Argentina, seeding is a little behind schedule because of elevated moisture issues. Last year, 20% of Argentina’s corn was planted by the end of September.

Right now, the top-end of estimates are that only 10% will be planted by the end of the month.

Over the weekend, soybean planting started in the southern parts of Brazil, and towards the end of the week, things will begin in Mato Grosso.

It’s worth mentioning that current Brazilian corn prices, net back to the farmgate , are below the cost of production.[6] In Mato Grosso, corn prices are about $1.70 USD / bushel while in the south, things are almost double at $3.20.

As such, you can figure out why first-crop corn acres in Mato Grosso are predicted to head lower this year. Conversely, soybean acres are expected to go up.

Soybeans moving higher but resistance ahead?
Soybeans moving higher but resistance ahead?

 

Now, let’s take a look at policy news.

The US ethanol industry is asking the White House to intervene in a recent trade spat with Brazil. [7] They’re hoping President Trump can help redact or reduce the 20% levy that’s being put on Brazilian imports of US ethanol.

A bit ironic though after the US just slapped tariffs on Argentinian biodiesel.

Finally, our Doug Kirk will be offering his expectations ahead of Tuesday’s WASDE report later this morning. Look out for his insight later this morning at FarmLead Insights.

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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