September 8 – Grain Markets Feeling Some Pressure

FarmLead Breakfast Brief 
Friday, September 8th, 2017

“When we long for life without difficulties, remind us that oaks grow strong in contrary winds & diamonds are made under pressure.”
-Peter Marshall (US actor)

Good Morning!

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 = $1.2107 CAD, $1 CAD = $0.826 USD)

Dec Corn: +1.5¢ (+0.4%) to $3.568 USD or $4.319 CAD
Nov Soybeans: +3.3¢ (+0.35%) to $9.72 USD or $11.768 CAD
Oct Soybean Meal (per short ton): +$1.10 (+0.35%) to $305.30 USD or $369.61 CAD
Oct Soybean Oil (cents per lbs): –$0.09 (-0.25%) to 35.09¢ USD or 42.48¢ CAD  
Dec Oats: +1.3¢ (+0.55%) to $2.35 USD or $2.845 CAD
Dec Wheat (Chicago): +0.5¢ (+0.1%) to $4.378 USD or $5.30 CAD
Dec Wheat (Kansas City): unchanged at $4.418 USD or $5.348 CAD
Dec Wheat (Minneapolis): +1.8¢ (+0.25%) to $6.515 USD or $7.887 CAD
Nov Canola (Winnipeg): -5.7¢/bu / -$2.50/MT (-0.5%) to $9.17/bu / $404.33/MT USD or $11.102/bu / $489.50/MT CAD

Yesterday’s Winnipeg ICE Close
Oct Barley: unchanged at $2.608 USD or $3.157 CAD
Oct Durum Wheat: unchanged at $6.542 USD or $7.92 CAD
Oct Milling Wheat: -2.7¢ (-0.45%) to $5.26 USD or $6.368 CAD

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Grain Markets Feel the Pressure

Grain markets this morning are slightly in the green.

The US Dollar continues to slip. Conversely, the Canadian Loonie is now sitting at levels not seen since May 2015 when one Canadian Dollar was nearly worth nearly 84 cents USD. To some analysts, a lower US Dollar and higher Loonie should be expected at least through the end of 2017.

Also grabbing headlines this morning is an 8.0 magnitude earthquake that hit just south of Mexico, prompting tsunami-wave warnings.[1]

Volatile weather continues to be on the mind of many as there are now 3 – yes, three – hurricanes drifting between the Gulf of Mexico, the Caribbean, and the Atlantic Ocean.[2]

The UN’s Food and Agriculture Organization’s bearish cereal forecast is the bearish news today for the grain markest .[3] The agency is expecting a record global cereal harvest of 2.61 billion tonnes.

Yes, “Billion.”

Soybeans Trade Flows Impacting Farmer Selling

Rapeseed/canola prices on the Paris futures board are in decline after a recent European Commission announcement.[4] After a WTO ruling last year, the EU will drop its tariffs on Argentinian biodiesel imports from “22% to 25.7%” to just “4.5% to 8.1%” at the end of September.

This decision puts pressure on the amount of European rapeseed that could go into the crush game as it gets substituted with Argentinian options (usually made from soybeans). It’s good for Argentinian soybean producers who are looking for secure markets after the US is going to start taxing biodiesel imports from the South American country.

Conversely, Brazil recently slapped a tariff on US ethanol imports.[5]

Dizzy yet?

I’m calling it the “Tariff Merry-Go-Round”: Everyone gets a ride, but your weight will depend on how long you can hold on for when things really get spinning.

Staying there, the Brazilian USDA, CONAB, says that the country will export 63 million tonnes of soybeans in 2017.[6]

Despite record exports, this past year’s record crop in Brazil will result in carryout of 5.42 million tonnes of beans. This figure is the largest their ending stocks have been in more than a decade.

That said, Brazilian farmers continue to hope for better prices.[7]

As a subtle reminder when it comes to selling grain, hope is not a good risk management strategy.

In the major-producing state of Mato Grosso, just 73% of corn has been sold by farmers. Last year by this time it was 95%. I’ll admit that part of the reason for the difference is pricing. This year’s Brazilian corn crop is 50% larger than last year’s, and so prices are sitting near two-year lows.

Given the larger volume of production, Brazilian corn exports have performed well. In August, 5.26 million tonnes got shipped out. That’s well above the 4.4 million tonnes/month the country needs to average to hit CONAB’s full-year corn export forecast.


Corn Prices Giving Back Gains

Yesterday, Garrett mentioned in Grain Markets Today that corn continues to give back its gains made since its reversal on August 31st.

Most market players that the seasonal low for corn prices on the Chicago futures board has been seen though. Next technicals that said players are watching are for on the December contract is support $3.44 USD / bushel while resistance is expected around $3.75.[8]

An interesting note is that a recent Bloomberg survey has 9 out of 18 analysts getting bullish again on corn. 5 are bearish. 4 are neutral.

Does this mean that fund money will get long again? We could think that considering the US Dollar’s subpar performance.[9] Funds and the Greenback are 2 of 9 fundamental factors that Naomi Blohm of Stewart-Peterson watches.[10]

Keep in mind that this is the same firm that said back in May that there was a 70% chance that corn would hit $4.40. Then in June, a 70% chance that soybeans would top $12 USD / bushel.

We said back in May and June that the likelihood of those numbers getting hit was closer to 20% (AKA unlikely). We certainly know $4.40 corn prices and $12 soybeans prices isn’t happening now, especially with harvest season upon us. As usual, some of the best yields are being seen in the first fields being combined.

From yesterday’s move lower though, you could suggest that the market is just preparing itself for Tuesday’s WASDE grain report from the USDA.

The mathematical whizzes in Washington don’t tend to change things too much in their September numbers. Nonetheless, the market is expecting the USDA to lower their August WASDE corn yield estimate of 169.5 bushels per acre.

If you’re already thinking into next crop year (2018/19) like we are, there are some contrarian indicators on the horizon, namely acreage. There’s more sentiment that less corn will get planted by American farmers next spring.[11] Soybeans are the obvious easy switch but in some fringe areas like the Northern Plains, spring wheat prices have turned attractive again.


Harvest 2017 Update

In Saskatchewan, harvest 2017 continues to roll faster than usual.[12]

45% of crops are now cut in the Canadian Prairie province, well above the 5-year average of 28% by this time of year. A week of relatively dry weather helped about 1/3 of all fields in Saskatchewan to be harvested.

That’s some serious crop progress.

Perhaps the more surprising data point though is that for all but lentils, farmers are reporting yields above long-term averages.

A few hundred miles to the south, the harvest in the US Northern Plains is nearing an end. For the South Dakota spring wheat harvest, this year’s haul will only bring in about 30 million bushels (or about 816,000 MT if you’re using GrainUnitConverter.com). [13]

That’s about 1/3 lower than where it was a year ago. Yields are also down about a third to just 32 bushels per acre. The upside is that there’s barely anything coming in below 12% protein.

With the smaller Canadian AND American crop, we continue to reiterate that there appears to be some upside opportunity for spring wheat prices. This includes durum (as many analysts agree). [14]

While you might understand why the price can go up, do you understand what the quality of your wheat is? Brian Cross of the Western Producer says to take charge and get your grain tested. [15]

Regardless of what lab you deal with, easily order said tests from GrainTests.com. If you’re looking for your wheat to make milling grade, complete both US and Canadian tests.

It’s an easy task considering that you shouldn’t be looking to sell much of your crop during harvest pressures (as discussed in Tuesday’s FarmLead Breakfast Brief).

Have a great weekend!

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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