FarmLead Breakfast Brief
Tuesday, September 19th, 2017
“Last year we said, ‘Things can’t go on like this’, and they didn’t, they got worse.”
– Will Rogers (US actor)
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 = $1.2296 CAD, $1 CAD = $0.8133 USD)
Dec Corn: +1.3¢ (+0.35%) to $3.528 USD or $4.337 CAD
Nov Soybeans: -1¢ (-0.1%) to $9.77 USD or $12.013 CAD
Oct Soybean Meal (per short ton): -$0.20 (-0.05%) to $312.40 USD or $384.11 CAD
Oct Soybean Oil (cents per lbs): –0.15¢ (-0.45%) to 34.28¢ USD or 42.15¢ CAD
Dec Oats: -0.5¢ (-0.2%) to $2.393 USD or $2.942 CAD
Dec Wheat (Chicago): +2.8¢ (+0.6%) to $4.4623 USD or $5.487 CAD
Dec Wheat (Kansas City): +3¢ (+0.7%) to $4.453 USD or $5.475 CAD
Dec Wheat (Minneapolis): +1¢ (+0.15%) to $6.233 USD or $7.663 CAD
Nov Canola (Winnipeg): +1.1¢ (+0.1%) to $9.046/bu / $398.84/MT USD or $11.122/bu / $490.40/MT CAD
Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.621 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $6.264 USD or $7.702 CAD
Dec Milling Wheat: -5.4¢ (-0.9%) to $4.936 USD or $6.069 CAD
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Is This Last Year’s Grain Market?
Grain markets this morning were mixed after a down day Monday.
Wheat prices are up due to more bullish news out of Australia.
Grain prices pushed lower yesterday thanks to the lack of buying interest and no new headlines to trade off.
From a weather perspective, there is sentiment that recent weather won’t help fill soybeans and finish corn. Will corn and soybeans prices start to reflect this?
The USDA’s crop progress report doesn’t support the thesis, but it is a possible scenario. Given the USDA’s habit of underwhelming the market with their monthly WASDE grain reports lately, they might not reflect it right away.
Much like every farmer we talk to, Chinese farmers aren’t fans of current corn prices. They’ve started to hold back sales of their crop, as they hope for better prices.  Many have the short-term memory of when last year, corn prices in the People’s Republic rallied a few months after harvest and many producers didn’t capture the premium.
The move coincides with the Chinese government moving away from minimum price supports for corn. To aid in their effort to hold the crop, farmers are building warehouses.
Between slower sales and delayed planting to the summer crop, corn prices in China recently hit 2-month highs. Still not where they were a year ago though.
Crop Progress Report
Leaves are falling, but it’s not on the trees. Soybeans harvested has started with 4% of the crop cut thus far, nearly in line with the 5-year average for this time of year.
However, crop ratings dropped 1 point from last week to 59% good-to-excellent (G/E).
According to them, 7% of the American corn crop has been harvested, behind the 5-year average of 11%. The portion of the US corn crop rated G/E remained at 61%. However, there were some significant improvements in a few major corn states.
This report includes Minnesota up 1 point to 82% G/E, Nebraska up to 2 to 64%, Iowa up 1 to 60%, and Illinois up 4 to 56% of their fields rated good-to-excellent.
It’s worth noting though that in nearly every major growing state, the maturity of those corn fields is way behind their 5-year averages.  This is pushed to the extreme in more northern states.
For example, in Minnesota, only 13% of fields are considered mature, versus the 5-year average of 35%. 14% of South Dakota’s corn crop is rated mature, well behind the 5-year average of 38%. In Wisconsin, it’s just 10% considered mature, versus the 28% 5-year average.
While corn certainly needs to “grow up,” 13% of the 2018 US winter wheat crop has been seeded thus far. This is nearly in line with the 5-year average of 15% going into the second half of September.
Another South American Update
To give you some perspective on the drier conditions in Brazil, average precipitation for September in the great-growing state of Mato Grosso is just 2.3 inches. Last year it was just 1.65 inches. This year, just 3/4s of an inch has fallen.
September isn’t over yet, but the 2-week forecast doesn’t have much in the cards for growers in central and northern Brazil.  While acreage is looking to expand, it will be hard to match the 2016/17 bumper crop.
The USDA is expecting total South American soybean production to top 6.57 Billion bushels (or 178.8 million tonnes if you’re using the bushel conversion tool at GrainUnitConverter.com) South American production is supposed to account for more than 51% of total global soybean production.
With the dryness, some are doubting that Brazil will pull off the 107-million-tonne bean crop in 2017/18.
But there is the saying that, when you plant into dust, bins will bust.
Does the adage hold true for Brazilian soils?
Food for thought: a year ago, Brazil was coming out of one of its driest “winters” (they’re May-September is their winter but our summer), as evidenced by the tiny corn crop produced.
Downgrades in the Land Down Undaa
The Australian USDA, ABARES, downgraded its expectations again, this time for Aussie grain exports. 
ABARES says that Australian wheat exports will come in at 18.15 million tonnes this year. This new estimate is a 2.7-million-tonne drop from its previous estimate and below the USDA’s recent estimate of 18.5 million tonnes.
Last week, we discussed how ABARES downgraded their wheat production estimates to 21.64 million tonnes, the smallest crop in Australia since 2008/09. The National Australia Bank is forecasting a 20.1-million-tonne crop.
For canola, ABARES is expecting 74%, or 2.04 million tonnes, of the expected 2.75 million-tonne harvest in Australia to get exported this year. This volume is a drop of 43% year-over-year. A factor in this equation is fewer needs from Europe, given bigger-than-expected harvests, especially in Ukraine.
What’s clear is that this year’s crop in Australia is a far deviation from last year’s bumper crop.
The natural question is why aren’t grain prices reflecting it?
Global competition from the likes of the massive Russian wheat crop and Ukrainian rapeseed crop is being priced in faster than ever before.
Further, with larger grain supplies globally for the three main row crops, rallies will likely be stifled. This is a major theme that we started talking about this time a year ago. We continue to be cognizant of upside opportunity though once harvest pressure subsides.
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