Sept 14 – Checking Grain Prices Expectations

FarmLead Breakfast Brief
Thursday, September 14th, 2017

“The expectations of life depend upon diligence; the mechanic that would perfect his work must first sharpen his tools.”
– Confucius (Chinese philosopher)

Good Morning!

At 7:20 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2207 CAD, $1 CAD = $0.8192 USD)

Dec Corn: +2.3¢ (+0.65%) to $3.538 USD or $4.318 CAD
Nov Soybeans: +4.5¢ (+0.45%) to $9.65 USD or $11.78 CAD
Oct Soybean Meal (per short ton): +$1.60 (+0.55%) to $303.70 USD or $370.73 CAD
Oct Soybean Oil (cents per lbs): +0.07¢ (+0.2%) to  34.90¢ USD or 42.60¢ CAD  
Dec Oats: +2¢ (+0.85%) to $2.398 USD or $2.927 CAD
Dec Wheat (Chicago): +4.3¢ (+0.95%) to $4.475 USD or $5.463 CAD
Dec Wheat (Kansas City): +3.5¢ (+0.8%) to $4.478 USD or $5.466 CAD
Dec Wheat (Minneapolis): +0.5¢ (+0.1%) to $6.44 USD or $7.861 CAD
Nov Canola (Winnipeg): +1.1¢/bu / +$0.50/MT (+0.1%) to $9.059/bu / $399.44/MT USD or $11.059/bu / $487.60/MT CAD

Yesterday’s Winnipeg ICE Close
Oct Barley: unchanged at $2.586 USD or $3.157 CAD
Oct Durum Wheat: unchanged at $6.265 USD or $7.648 CAD
Oct Milling Wheat: +5.4¢ (+0.85%) to $5.172 USD or $6.314 CAD

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Checking Grain Prices Expectations

Grain markets this morning are in the green again.

The sentiment is a follow-on from yesterday’s upbeat performance, as recapped by Garrett in Grain Markets Today.

Rains continue to be in the forecast for most of Western Canada and the US Northern Plains over the next few days. While the weather will slow down the harvest, it’s a welcome moisture event for very dry cropland. From what we’ve already seen, this area of the country is susceptible to going up in flames.

The rain also provides some needed moisture for parched soils that will need replenishing to make a 2018/19 crop.

Recent harvest reports continue to suggest better-than-expected peas and lentils yields.[1]

We spoke with several international pulse crop buyers touring the Big Iron Farm Show in Fargo, ND. The theme was that supplies are there. However, there’s more carryover of pulses in Canada.

(Reminder: If you’re in Fargo, ND, stop by the FarmLead booth in Barn K. If you’re in Woodstock, ON for Canada’s Outdoor Farm Show, head over to the FCC Pavilion to chat with the FarmLead team.)

Despite some tougher growing conditions in the Dakotas and Montana, larger acres this year will make up for lower yields, albeit production will still be below the 5-year average and last year’s harvest.

We continue to see a bit of upside potential for green lentils, but the optimism is less warranted for red lentils. For peas, things continue to trade sideways but $8 CAD/bushel handles are available in Western Canada and $7 USD / bushel FOB farm is trading in the Northern Plains.

Check in your pulses’ price expectations and list a load or two on the FarmLead Marketplace.


Brazilian Corn Exports Cruising

According to AgResource, just over 1.7 million tonnes of Brazilian corn have sailed in September.[2]

There are another 3.2 million tonnes that’s set to sail in the last 2.5 weeks of the month.

If it comes to fruition, it would be close to 5 million tonnes of corn shipped out from Brazilian ports. This number would fall just below August’s number. However, the figure is a record for September and double what was done in September 2016.

Much like the American corn industry, Brazilian corn exporters are wondering what the Chinese ethanol announcement made yesterday will mean for them.[3]

Can it push prices higher? Or will it just be a way for China to clear out its older stocks? Ultimately, I think we need to remember three things:

  1. China is the number 2 producer of corn in the world. When there’s a demand factor there, they’ll grow lots of corn.
  2. This program isn’t set until 2020, so there is about 2.5 years there before China even thinks about importing
  3. The full gauntlet of corn-for-ethanol needs won’t hit 100% the first year the program is in place. It’ll take a few years.

While exports of Brazil’s monster crops continue, the attention of the farmer is turning to planting their first crop. Dryness is persistent in the southern regions of Brazil, but regions in the north, like Mato Grosso, are doing a bit better.

Ultimately, Brazilian farmers need to see rains in early October for normal first soybeans/corn crop seeding to be realized.

Only Way for Grain Prices is Up?

One company to gathers forecasts from multiple market analysts is FocusEconomics.

Currently, their aggregation of estimates suggests that most of the market thinks the grain markets sell-off has gone far enough.[4]

Their tracking suggests that the average analyst/market participant thinks that corn prices on the Chicago futures board in the first quarter of 2018 should get closer to $4.15 USD/bushel. This figure is a bit shocking considering that the current corn price on the March 2018 contract is 50 cents below that.

The average forecast now is calling for a 14% rally in the next 6 months.

For soybeans, the bullishness is less intense. FocusEconomics says that the average forecast is for $9.82 in 1Q2018. This estimate is a little bit above the current March 2018 soybean contract, which is sitting at $9.73 today.

Finally, on Chicago wheat, the average guesstimate is calling for a rally up to $4.74. This number is also about 10 cents above where the current March SRW wheat futures price is sitting.

One of the consistent themes we continue to hear in backing the bulls is the lower US Dollar. Some analysts are even pointing back to 2009 when corn was trading in Chicago around $7.50 USD per bushel.[5]

However, anyone is now thinking about their bin doors till that price approaches should get that thinking out of their head right now. The supply and demand structure of the market 8 years ago is much different than it is today.

Namely, there was no 2-billion-bushel plus corn carryout in 2009.

Competition from the likes of Brazil, Argentina, and Ukraine on the export front wasn’t as intense as it is today.

Yes, with a weaker US Dollar, US agricultural products become more competitive on the world market. The contrasting factor is that the export competition can easily compete at lower values as well (their cost of production isn’t the same as in America.

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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