September 29 – Bring on the Grain Reports!

FarmLead Breakfast Brief
Friday, September 29th, 2017

“I don’t think the intelligence reports are all that hot. Some days I get more out of the New York Times.”
– John F. Kennedy (35th US President)

Good Morning!

At 7:40 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2444 CAD, $1 CAD = $0.8036 USD)

Dec Corn: unchanged $3.525 USD or $4.387 CAD
Nov Soybeans: -2.8¢ (-0.3%) to $9.568 USD or $11.906 CAD
Dec Soybean Meal (per short ton): -$0.90 (-0.3%) to $310.60 USD or $386.51 CAD
Dec Soybean Oil (cents per lbs): -0.01¢ (-0.05%) to 32.81¢ USD or 40.83¢ CAD  
Dec Oats: -3.5¢ (-1.4%) to $2.46 USD or $3.061 CAD
Dec Wheat (Chicago): -0.5¢ (-0.1%) to $4.545 USD or $5.656 CAD
Dec Wheat (Kansas City): -0.8¢ (-0.15%) to $4.523 USD or $5.628 CAD
Dec Wheat (Minneapolis): unchanged at $6.45 USD or $8.026 CAD
Dec Canola: -0.9¢/bu / -$0.40/MT (-0.1%) to $8.938/bu / $394.09/MT USD or $11.122/bu / $490.40/MT CAD

Yesterday’s Winnipeg ICE Close
Dec Barley: unchanged at $2.589 USD or $3.222 CAD
Dec Durum Wheat: +2.7¢ (+0.45%) to $6.211 USD or $7.729 CAD
Dec Milling Wheat: unchanged at $5.161 USD or $6.423 CAD

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Bring on the Grain Reports!

 

Grain markets are again mostly red to start this Friday.

Today, September and 3Q2017 trading will end, but not before the release of a few critical USDA reports.

At noon EDT, we see the USDA’s Quarterly Stocks report and their Small Grains Production numbers.

This report arrives on the heels of news that the International Grain Council increased its estimate of the 2017/18 global grain crop. The IGC now expects the second-largest crop on record (the record was set in 2014). [1The IGC says that the world will produce 2.07 Billion tonnes of wheat and coarse grains (i.e. corn) this year.

The IGC increased its global corn output forecast by 12 million tonnes to 1.03 billion tonnes total.

The IGC also suggested that wheat acres globally could expand a bit in 2018. Still, these acres are threatened by more profitable oilseed prices, namely soybeans in the U.S. and rapeseed in the EU.[2]

Apart from the reports, Harvest 207 is rolling full tilt across North America. There’s some rain in the forecast for next week (and even the potential for snow in Western Canada) which means that the window of opportunity to combine is happening now. [3]

While the grain reports come out later today, a lot of farmers are likely to hear it from their combine, tractor, or semi cab.

US Export Sales Mixed

US soybeans export figures were fairly strong yesterday; however, the market didn’t have much of a reaction. More than 3 million tonnes were sold last week to international buyers.

The demand is great!

However, the market priced this in last week when the larger individual sales were announced each day. All in though, the sales were nearly a 1/3 higher than last week’s already-large volumes.

They were also 150% bigger than the same week a year ago. Despite the big sales, U.S. soybeans exports sales are still tracking about behind the 5-year average by about 50 million bushels (or 1.36 million tonnes if you’re using GrainUnitConverter.com)

For wheat, U.S. export sales were within expectations at 436,000 MT which keeps it in line with what the USDA is forecasting for full-year exports.

Corn export sales from America for last week disappointed the market yesterday. Only 320,000 MT were sold. This figure came in below expectations and was also off by 40% from a week ago.

It was also down 42% from the same week a year ago. In fact, it’s the lowest volume of corn sales for this week in the past 5 years.


The EPA is Stirring the Pot

As Garrett mentioned in Grain Markets Todayone headline gaining some traction is whether or not the EPA (US Environmental Protection Agency) will change the ethanol mandate.

The change looks like It would favor the refiners, such as those owned by outspoken activist investor Carl Icahn. [4]

US President Donald Trump promised Iowa and other major corn-producing states that he would support them. [5However, Icahn is supposedly the one helping write recommendations as to how to update the Renewable Fuels Standard.

One proposed change would alter the annual biofuel mandate. This would intuitively increase the number of RINs in the market. (Renewable Identification Numbers, or RINs, are the credits are bought by refiners who do not blend renewable fuels into their fuel supply.)

With more RINs in the market, the price goes down. Just yesterday, credits dropped to their lowest since May at 66 cents.

Citigroup thinks that they could go as low as 30 cents. [6]

Adding exports to the biofuels mandate though would remove about 8% of the proposed 2018 quota.

All in all, the uncertainty is not helpful for corn prices but weighed moreso on soy oil yesterday as it dropped to levels not seen since June. Since canola tracks closely with soy oil, the Canadian oilseed turned down a bit as well.

Harvest speed in Western Canada is keeping canola prices propped up though. As per the most recent Saskatchewan crop report, the canola harvest is nearing the finish line in the south and central regions, but the north is still less than half done. [7]

With the threat of some snow flying next week (as discussed in yesterday’s Breakfast Brief), the market is closely watching the potential negative impact on production.

Another Grain Report Day

Today we’ll get the USDA’s quarterly stocks report.

We find out how much grain was left over in America going into the 2017/18 crop year.

The report also gives us an indication of demand over the last quarter of the marketing year.

Although I discussed it in Tuesday’s Breakfast Briefthe market is expecting a bigger carryout than last year for corn and soybeans, but a bit smaller for wheat. Nonetheless, the U.S. is not running out of grain anytime soon. [8]

For corn, the average guesstimate for analysts is for 2.353 Billion bushels of corn still available in America as of Sept. 1. This would be more than a third larger than the 1.737 Billion bushels available as of Sept. 1, 2016 (one year ago).

For soybeans, the market is anticipating 338 million bushels still left in the supply chain going into the 2017/18 crop year. That’s almost 72% more than the 197 million bushels that the USDA said was available by the start of the 2016/17 marketing year. Of note is that soybeans prices aren’t that much different than where they were at this time a year ago, hovering around that $9.50 USD / bushel handle on the Chicago Board of Trade.

For wheat, the market is expecting to see 2.2 billion bushels of wheat. This figure is down more than 13% from the September 1, 2016, number of 2.545 Billion bushels.

In addition to the quarterly stocks reports, we’ll also get the Small Grains Summary report from the USDA. This report only comes out once a year and reports on the production of rye, oats, barley, and wheat in America.

Pre-report expectations include 50 million bushels of durum wheat and 382 million bushels of spring wheat production in the US. This figure would be 52% and 40% lower than last year’s production, respectively.

The market has priced some of this in though. We’ll be watching the Minneapolis spring wheat futures board to see how traders react to the USDA’s numbers.

For our Canadian readers, some may be asking, “why does this matter to me”?

Well, the US-Canadian border isn’t that big when it comes to grain going across it. Thus, how much is produced in the U.S. can impact Canadian prices and how much is produced in Canada can impact American prices. This is especially true for durum and spring wheat.

On that note, I recently spent a few hours looking at Statistics Canada’s grain production estimates and subsequent revisions over the past 5 years.

Conclusion: StatsCan regularly underestimates the size of the Canadian crop. And not by a small percentage either. Read my analysis in the link above for further insight.

Ultimately though, I think that StatsCan and its grain production reporting needs to grow up.

Have a great weekend!

To growth,

StatsCan tends to miss the mark big time for their production estimates on a few major crops
StatsCan tends to miss the mark big time for their production estimates on a few major crops

 

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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