September 23 – Quick Policy Premiums

Good Morning!

In today’s Breakfast Brief we look at a premium for when combines might get rolling again, prices for pulses and specialty crops, and the price paid for a new trade deal with China to help canola exports get back in there.

“One is taught by experience to put a premium on those few people who can appreciate you for what you are.” – Gail Godwin (American author)

Harvest 2016 continues with more crop coming off
Where does your grain marketing plan sit now?
Manage price risk and list your grain on FarmLead today

Grains this morning are mostly in the red as harvest pressures and some profit-taking are trumping the effect that some wet weather is going to have on crops. While the Midwest has gotten pounded this week, it doesn’t look like there’s going to be much reprieve in the next month or so in the Western side of the cornbelt as spotty precipitation seems to be in the forecast (but the eastern parts are expected to dry out).

For Western Canada, where we’re trying to finish off canola, beans, and some late cereals. Some heavy rains and strong winds in the forecast are going to keep the combines parked from last night through Sunday in many areas. This will probably support prices a bit as quality concerns will start to pick up and premiums get built in.

That being said, don’t expect a 10% jump in the next week because the market tends to have a policy of slowly pricing any bullish weather risk, versus the rally that most farmers are hoping for ASAP.

Egypt Buys More Expensive Wheat

After getting the message from the rest of the market, Egypt finally was able to buy some wheat but it wasn’t cheap.

4 cargoes of Russian wheat was purchased for $187/MT delivered. That’s $12/MT more than what they paid a couple of weeks ago.

And for wheat that’s of a little worse quality (12% protein vs 12.5% protein).

Why? 2 reasons.

First, they needed to get some supply security.

Second, the market wasn’t going to lock up any contracts without some sort of risk premium to protect themselves.

Switching gears, the premium for better quality durum wheat in Canada hasn’t climbed to the levels we saw 2 years ago when things were in the double digits. It does feel like there is some upside to durum prices though. Regardless of what it looks like you’re taking off, we continue strongly recommend getting your grain tested, especially for disease (order the US-Canada combo grain tests directly on FarmLead here).

Selling Pulses, Specialty Crops

We’ve also been strongly recommending off-the-combine mustard sales for the past month as bids in Western Canada have fallen a bit on some harvest pressures but mostly because of limited demand compared to the size of the crop. $0.30/lbs is still available for the most part but given a large Canadian crop (more than double last year’s & 42% above the 5-year average), it’s the demand size of the table that isn’t huge and a new/lower price equilibrium needs to be found.

Switching to pulses, recent rains in Australia have some thinking that the Aussie chickpeas crop this year could be smaller than the record 1.23 million metric tonnes currently forecasted by ABARES.

We’ve seen record prices recently as the global market has been short but between at least 1 million metric tonne crop in the Land Down Undaa, favourable weather conditions in India, and Canadian production back over 100,000 metric tonne, at this point I’m about managing risk.

Could we see higher prices? Yes there’s a chance, but I also know that I can protect profit and lock it in today on some of my production (post your block of grain on FarmLead today!).

Canada-China Canola Deal Reached

Yesterday canola prices got a bounce as Chinese and Canadian negotiators were able to come to an agreement on the canola dispute, extending the 2.5% dockage tolerance on Chinese imports until 2020!

While Canadian Prime Minister Trudeau called the deal “science-based”, 4 separate business deals worth a couple billion dollars were also approved, including nuclear, oil and gas, and the sale finalization of the Canadian weight loss/nutrition company behind Hydroxycut (so yes, some politics were played).

Also supportive of oilseed prices in general was palm oil prices on the Dalian Commodity exchange touching 2-year highs yesterday, mainly because a typhoon hammered one of China’s top producing regions and crushers had to cut output.

While palm oil can be substituted with other options (discussed this in Tuesday’s Breakfast Brief), of note here is that the Chinese oilseed crush capacity has expanded in recent years (up to 40M tonnes a year!).

That being said, crush margins in China are fairly positive with processors filling there October & November needs with US soybeans. Additional support for the elevated domestic prices is that the market isn’t expecting Beijing to start auction reserves until June of next year (although China has been known to change its mind on policy very quickly…).

Have a safe and great weekend!

To growth,

Brennan Turner

President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

At 6:00 AM CDT in the North American futures markets (not cash market prices):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3036 CAD, $1 CAD = $0.7671 USD)

Dec Corn: -2.3¢ (-0.65%) to $3.345 USD or $4.361 CAD
Nov Soybeans: -7.5¢ (-0.75%) to $9.69 USD or $12.632 CAD
Dec Soybean Meal (per short ton): -$1 (-0.35%) to $306.50 USD or $399.56 CAD 
Dec Soybean Oil (cents per lbs): -0.23¢ (-0.65%) to 33.98¢ USD or 44.30¢ CAD 
Dec
 Oats: -0.3¢ (-0.15%) to $1.77 USD or $2.307 CAD

Dec Wheat (Chicago): -1.5¢ (-0.35%) to $4.04 USD or $5.267 CAD
Dec Wheat (Kansas City): -2.5¢ (-0.6%) to $4.183 USD or $5.452 CAD
Dec Wheat (Minneapolis): +0.5¢ (+0.1%) to $5.018 USD or $6.541 CAD
Nov Canola: +0.2¢ / +$0.10/MT (+0.02%) to $8.196/bu / $361.38/MT USD or $10.684/bu / $471.10/MT CAD

Yesterday’s Winnipeg ICE Close

Dec Barley: -4.4¢ (-1.5%) to $2.221 USD or $2.896 CAD
Dec Durum Wheat: unchanged at $5.741 USD or $7.484 CAD
Dec Milling Wheat: +5.4¢ (+0.95%) to $4.551 USD or $5.933 CAD

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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