February 12 – Soy Complex Pushes Grain Markets into the Green

Good Morning!

Grain markets are all in the green this morning, led by the soy complex (namely soymeal) as it’s been suggested that Argentina didn’t get enough of a weekend rain that it needed.

“The law of unintended consequences pushes us ceaselessly through the years, permitting no pause for perspective.” – Richard Schickel (American journalist)

graincents-trial

 

Grain markets are all in the green this morning, led by the soy complex (namely soymeal) as it’s been suggested that Argentina didn’t get enough of a weekend rain that it needed. Soymeal is currently trading at 18-month highs, or rather, near the prices seen when the last Argentine soybean production rumors were running rampant.

Canola prices are also supported by Malaysian palm oil prices climbing on larger-than-expected inventories. Specifically, January palm oil stocks in the southeast Asian country came in at 2.55 million tonnes, a 7% drop from December’s number, whereas the market was expecting a small increase. [1]

However, early data suggests that Malaysian palm oil exports were a bit stronger in January, mainly thanks to the export tax being suspended for three months. This makes Malaysian product more competitive than that coming out of Indonesia, who is maintaining an export tax of $50 USD /metric tonne.

Staying in Asia, China canceled four American corn cargoes recently and switched to Ukraine-origin product since GMO certs for the US corn couldn’t be obtained. [2] Last week, Garrett discussed the Ukraine corn crop and how there are diverging factors affect supply and exports. After all, they are pegged to be the #4 exporter of corn in the world in 2017/18.

On the trade policy front, Canadian Prime Minister Justin Trudeau said last week that Canada “might very well be better off” not signing up to an updated version of NAFTA rather than accepting a bad deal. [3]

Supportive Rains for Argentina’s Soybeans?

This past weekend, the grain market was pretty focused on the potential rainfall in Argentina. There were some rains before the weekend that would help the soybean crop there, but there were stronger amounts expected over the weekend. [4]

I agree with one market analysts’ assessment that this weekend’s weather in Argentina is like “a big weather weekend in the US during July or early August.” Both corn and soybean crop ins Argentina are in key growing phases and the recent heat has stressed the crop. While we know that a little stress on the crop never hurt yield potential, there needs to be some soil moisture to accommodate said stress.

So, what happened?

Temperatures in Argentina did drop over the weekend, but all of the forecasted rains did not fall. In the next week, only northern growing areas of Argentian are expected to see any significant moisture, maxing out at around 3/4s of an inch.

Separately, Carnival activities this week in Brazil and Argentina will likely limit farmer selling in South America. This means that there won’t be a lot of physical selling that from south of the equator that will limit rallies, although farmer sales here in North America could easily impede said rally.

International Wheat Trade Activity

On Friday, we looked at a couple of factors for wheat. Namely for winter wheat, how there’s a new wheat king in the international markets not named Russia, while the rise of Argentina’s wheat industry is making things industry. The same issue, but analysis for spring wheat can be found here and here respectively.

Russia is certainly still relevant, although, lately, Russian wheat has been in a bit of a slump. Looking forward though into 2018/19, there’s still a fair amount of bearish news coming out that relates to Russian wheat.

Egypt did buy another 240,000 tonnes of wheat from Russia last week, in addition to 120,000 tonnes from Romania.

Heading into the weekend, we saw Iraq put out a tender for some higher quality milling wheat. Australia, America, and Canada got into the mix with delivered prices offered up as follows (at today’s exchange rates):

• Australian source: $8.00 USD or $10.05 CAD / bushel
• Australian source: $8.40 USD or $10.55 CAD / bushel
• Australian source: $8.90 USD or $11.20 CAD / bushel
• American source: $8.75 USD or $11.00 CAD / bushel
• American source: $9.35 USD or $11.75 CAD / bushel
• Canadian source: $8.25 USD or $10.40 CAD / bushel

You can do the math and probably figure out who is overpriced and who isn’t. P.S. Iraq doesn’t have to buy at these prices if they don’t want to!

Ultimately, with the stronger futures prices as of late, and a stronger US Dollar, basis levels on wheat have started to widen in the US, limiting farmer sales. [5] Further, there’s just not enough known about the US winter wheat crop, which, while we know is in dry conditions, is still in dormancy. That said, winter wheat prices are up again this morning as the 10-days outlook for the US Southern Plains remains mostly dry.

Other Recent GrainCents Headlines from FarmLead

Over the weekend, in our weekly GrainCents digests sent out on each of the 12 crops we cover, we shared some interesting pricing data points that we’ve been seeing on the FarmLead Marketplace, including traded prices and spreads between bids and asks.

Here are a couple of recent articles that GrainCents subscribers are reading:

• How Does the Black Sea Peas Game Stack Up?
• Hummus Prices Are Going Up. What About Chickpeas?
• For International Barley Prices, It’s All About China
• 
With More Volatile Weather, Barley & Beer are on the Front Lines
• 
Are Global Wheat Stocks Declining More Than What the USDA Says?
• 
Is Global Demand for Durum Increasing?
• 
What’s the Impact of COPA Dropping Their Weekly Canola Crush Report
• 
COFCO is the Real King of Soybeans

Just a heads up – due to a ridiculous travel schedule that I have tonight and tomorrow morning, I won’t be sending out a Breakfast Brief tomorrow (Tuesday, February 13th). We will be publishing a healthy amount of content in GrainCents today though.

To growth,

Brennan Turner
President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

 

At 7:05 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2568 CAD, $1 CAD = $0.7957 USD)

Mar Corn: +2.8¢ (+0.75%) to $3.648 USD or $4.584 CAD
Mar Soybeans: +14¢ (+1.4%) to $9.97 USD or $12.53 CAD
Mar Soybean Meal (per short ton): +$7.60 (+2.2%) to $351.40 USD or $441.62 CAD
Mar Soybean Oil (cents per lbs): +0.15¢ (+0.45%) to 32.11¢ USD or 40.35¢ CAD  
Mar Oats: +6.3¢ (+2.35%) to $2.728 USD or $3.428 CAD
Mar Wheat (Chicago): +6.8¢ (+1.5%) to $4.558 USD or $5.728 CAD
Mar Wheat (Kansas City): +6.5¢ (+1.4%) to $4.72 USD or $5.932 CAD
Mar Wheat (Minneapolis): +4¢ (+0.65%) to $6.075 USD or $7.635 CAD
Mar Canola: +7.3¢/bu / +$3.20/MT (+0.65%) to $11.365/bu / $501.10/MT CAD or $9.043/bu / $398.73/MT USD

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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