September 21 – The Short Story of Grain Markets

FarmLead Breakfast Brief
Thursday, September 21st, 2017

“Perseverance is not a long race; it is many short races one after the other.”
– Walter Elliot (Scottish politician)

Good Morning!

At 7:10 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2358 CAD, $1 CAD = $0.8092 USD)

Dec Corn: -0.5¢ (-0.15%) to $3.495 USD or $4.319 CAD
Nov Soybeans: -6¢ (-0.6%) to $9.64 USD or $11.913 CAD
Dec Soybean Meal (per short ton): -$0.70 (-0.25%) to $309.40 USD or $382.35 CAD
Dec Soybean Oil (cents per lbs): -0.40¢ (-1.15%) to 34.51¢ USD or 42.65¢ CAD  
Dec Oats: +3.5¢ (+1.4%) to $2.498 USD or $3.086 CAD
Dec Wheat (Chicago): -2.3¢ (-0.5%) to $4.475 USD or $5.53 CAD
Dec Wheat (Kansas City): -2.3¢ (-0.5%) to $4.458 USD or $5.509 CAD
Dec Wheat (Minneapolis): +3.3¢ (+0.5%) to $6.248 USD or $7.721 CAD
Dec Canola: -2.9¢/bu / -$1.30/MT (-0.25%) to $9.022/bu / $397.80/MT USD or $11.149/bu / $491.60/MT CAD

Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.608 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $6.232 USD or $7.702 CAD
Dec Milling Wheat: +8.2¢ (+1.35%) to $4.977 USD or $6.151 CAD

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The Short Story of Grain Markets

Grain markets, along with the rest of the broader commodities market, are all red in as the US Dollar strengthened a bit yesterday.

As Garrett mentioned in Grain Markets Today, the US Federal Reserve noted that they’re still considering an increase in their interest rate in 2017.[1] They’ve also approved the unwinding of their $4.5 Trillion (yes, with a “T”) balance sheet, which has helped push up the US Dollar.

Agritel thinks that the Russian wheat harvest could get bigger yet.[2] Yields in the Central, Volga, and Ural regions are tracking 27%, 27% and, 12% higher than 2016’s! 82% of the wheat harvest is in the books with average yields above 51 bushels per acre!

Last year, those average yields were just over 43 bushels per acre.

With these sorts of yields, total harvested volumes are already above 78 million tonnes. As such, Agritel thinks that the USDA’s target of an 81-million-tonne wheat crop in Russia may be underestimated.

Australian east coast wheat prices are moving up as it becomes clearer what the production will end up being this year.[3] The Aussie wheat tends to compete with US hard red winter wheat traded on the Kansas City futures board. Australian wheat prices on the Sydney futures board are currently sitting at a price of around $225 USD / tonne (or $6.12 USD or $7.60 CAD per bushel).

As I mentioned in yesterday’s Breakfast Brief, the market seems to be starting to price in Southern Hemisphere production risks.

However, there aren’t many new headlines to the grain markets this morning, so this Breakfast Brief is pretty short (and sweet, if you’re not a big reader!).

US Exports Improving?

Taiwan made a big announcement yesterday, buying more than $500 million worth of US wheat.[4] The Taiwan Flour Millers Association purchases and imports wheat on behalf of all 20 flour mills in the Asian country and agreed to purchase 1.8 million tonnes of US wheat for 2018 and 2019 combined.

The wheat will come mainly from Idaho, North Dakota, and Montana, and will mainly be soft white wheat used to make noodles, crackers, and cookies. Some hard red winter wheat will also be in the mix.

Food for thought: the US supplies more than 80% of Taiwan’s total wheat imports every year.

US soybeans don’t account for that much of China’s total soybean imports but the last 2 weeks have seen some consistent buying by the People’s Republic. This trend was again emphasized by China buying 132,000 MT of new crop 2017/18 soybeans.[5]

Additionally, another 1.08 million tonnes were booked for unknown destinations. This number would put it in the top 10-largest sales in US soybean export history. It helps US soybeans sales get closer to where they were tracking at this time a year ago.

This factor helped soybeans prices crept closer to $10 per bushel on the Chicago Board of Trade yesterday. However, as we mentioned in our deep-dive piece, “The Most Bearish Thing About Soybeans,” South American supplies/competition continue to limit further gains for US soybeans prices.

Later this morning the USDA will announce total US export sales. The market’s range of pre-report estimates includes 1.2 million to 1.5 million tonnes of soybeans, 700,000 – 1 million tonnes of corn, but just 300,000 – 500,000 MT of wheat.

The market is looking to these exports to help keep prices afloat and help offset some harvest pressure.[6]

If the US dollar’s weakness is starting to help exports, then the opportunities should not be ignored.

Joe Vaclavik of Standard Grain says that if corn price rallies 20 or 30 cents per bushel or soybeans prices improve 50 cents, then those opportunities that can’t be wasted.[7]

A short and simple rule of thumb: if grain prices rally a bit relative to the range they’ve been trading sideways in, that’s an opportunity.

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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