September 27 – Going on the Grain Marketing Offensive

FarmLead Breakfast Brief
Wednesday, September 27th, 2017

“Life is an offensive, directed against the repetitious mechanism of the Universe.”
– Alfred North Whitehead (English philosopher)

Good Morning!

At 7:25 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2376 CAD, $1 CAD = $0.808 USD)

Dec Corn: -1.5¢ (-0.45%) to $3.508 USD or $4.341 CAD
Nov Soybeans: -2¢ (-0.2%) to $9.615 USD or $11.90 CAD
Dec Soybean Meal (per short ton): -$1.20 (-0.4%) to $312 USD or $386.14 CAD
Dec Soybean Oil (cents per lbs): -0.05¢ (-0.15%) to 33.40¢ USD or 41.34¢ CAD  
Dec Oats: -0.3¢ (-0.1%) to $2.50 USD or $3.084 CAD
Dec Wheat (Chicago): -1.8¢ (-0.4%) to $4.52 USD or $5.594 CAD
Dec Wheat (Kansas City): -2¢ (-0.45%) to $4.503 USD or $5.572 CAD
Dec Wheat (Minneapolis): +1.8¢ (+0.25%) to $6.478 USD or $8.017 CAD
Dec Canola: -0.5¢/bu / -$0.20/MT (-0.05%) to $9.012/bu / $397.37/MT USD or $11.154/bu / $491.80/MT CAD

Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.604 USD or $3.222 CAD
Dec Durum Wheat: unchanged at $6.223 USD or $7.702 CAD
Dec Milling Wheat: unchanged at $5.212 USD or $6.45 CAD

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Going on the Grain Marketing Offensive

Grain markets are mostly in the red this morning as the U.S. Dollar continues to strengthen.

The decline is a follow-on from yesterday’s down day as grain prices faced pressure by the strength of the U.S. Dollar. The U.S. Federal Reserve reiterated its stance of whittling down its $4.5 trillion balance sheet starting next month and potentially increasing interest rates again before the end of 2017.

Garrett took some time yesterday to discuss what this means and, ultimately, how the Fed will affect the farm in 2018.

The recent slide of the Argentinian peso (thanks to the U.S. Dollar strength) is providing some strength for domestic grain prices there. [1] More rain is in store for the South American country though. This could have an impact on wheat fields that are in development and the pace of soybean planting.

Corn Production Surges in South Africa

In South Africa, the market is expecting a record corn crop of 16.5 million tonnes. [2]

This figure Is more than double last year’s drought-riddled crop of just 7.8 million tonnes. Accordingly, local prices have dropped 65% in the past 18 months or so.

Worth noting is that South Africa currently sits at 46th on this year’s list of DuPont’s Food Security study, behind countries like China. [3]

Ireland is the most “food-secure” country in the world. This ranking is measured by factors like food affordability, availability, and quality/safety, and natural resources (which is more of a climate measurement than anything).

America was ranked 4th.

Canada was 8th.

Ireland won the top spot thanks to its aggressive, offensive support agricultural research and its industry.

What About Pulses?

We haven’t chatted a lot about pulse crops lately, mainly because they continue to trade sideways. There is a pretty sizeable amount of inventory that’s carrying over from 2016/17 to the 2017/18 crop year.

There is also some decently-sized crops coming out of the Black Sea. Estimates show that Russia and Ukraine will produce a combined 3.7 million tonnes of peas this year! That number is up 19% year-over-year.

Part of the carry over into this year includes a record crop in India after some excellent monsoon rains last summer. Chuck Penner of Left Field Commodity Research recently noted that the first estimate of this year’s kharif (summer) pulse crop production in India is down 8% from last year at 8.71 million tonnes.[4] Again though, last year was a record crop.

I expect the total number will be somewhere close to about 12% to 15% below last year’s crop. Acres are substantially lower (more than a 30% drop year-over-year), and monsoon rains weren’t as good this year.

Considering that the rabi (winter) growing season in India produces above 50% more than the kharif season, India will likely see its second-largest crop of pulses ever this year.

Getting more specific in the peas markets, Chuck notes that acres shifted away from green and into yellow significantly this year in both the U.S. and Canada. [5]

In Canada, green peas production is estimated at 35% to 40% lower than last year, while yellow peas production is down just 20% from last year. Across the 49th parallel, American green production is expected to be about 65% lower year-over-year, whereas the yellow peas harvest should come in only about 30% lower.

As such, we’ve been sellers of yellow peas lately, and those looking for $8 CAD / bushel handles are finding them in Western Canada on the FarmLead Marketplace. In America, we see things trade closer to $7 USD / bushel. Keep in mind, these are picked-up-at-the-farm prices too.

Should You Sell Wheat Now?

When one talks about wheat prices, it’s essential to distinguish the differences in quality or type. Packaging durum in with spring or winter wheat just does not work. They are all different markets.

That being said, is right now the best time to sell wheat, regardless of the type or quality? [6]

We’ve been advocating for growers to look at moving fall cereals, including winter wheat, for the past couple of weeks.

Don’t wait for bids to show up. Go on the offensive. Get your sales plan in motion and post on the FarmLead Marketplace.

There’s certainly a fair amount of “what if” scenarios in the wheat marketing playing out right now though.

What if Argentina continues to be wet? What if Russia and Ukraine fail to receive the fall rains or snow cover their crops need? What if France doesn’t get moisture in the spring? What if Australia doesn’t get any rains this summer (Reminder: winter in the Northern Hemisphere winter occurs at the same time summer happens in the Southern Hemisphere.)

All things being equal, I’d lose my mind trying to factor in all these what-ifs into my grain marketing plan.

That’s why I don’t.

And you shouldn’t either.

Play the game in front of you and base it on what you know.

Cash winter wheat prices in the U.S. Southern Plains are hovering closer to $3.50 U.S. D / bushel, but there’s a healthy carry available for deferred delivery.

Locking something up on that carry be worth considering. If futures prices creep up more from where we’re at today, one can expect that carry to start to fade.

In Canada, the carry is less pronounced, but even with a stronger Canadian Loonie. Good values are available. We’ve seen $5.50 and up to $6 CAD FOB farm trade in the past month on the FarmLead Marketplace.

Moving over to spring and durum wheat, there’s uncertainty in what the U.S. DA will show in its stocks report on Friday. Will better yields in the eastern part of the Northern Plains make up for lack thereof in the western areas of North Dakota and nearly the entire state of Montana?

No, it won’t, which is why inventories will be lower year-over-year. Accounting for production in Canada as well, we continue to think that there are some better opportunities in the months ahead as harvest quality and size sorts itself out.

Before that happens though, we continue to advocate getting your spring or durum wheat tested to know all its specs to maximize its marketability.

Order your inspections through any one of our partners on GrainTests.com now.

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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