Grain markets this morning are relatively mixed (but still driving by soybean prices) as the market slows down from some of the short-covering activity seen the last few trading sessions.
“Prudence is not hesitation, procrastination, or moderation. It is not driving in the middle of the road. It is not the way of ambivalence, indecision, or safety.” – John Ortberg (US Christian author)
Grain markets this morning are relatively mixed as the market slows down from some of the short-covering activity seen the last few trading sessions.
Oats are catching a bid this morning on the news of some new demand. However, later today we’ll be publishing the impact of China on the oats industry in GrainCents and our analysis holds nothing back, warranting the question if this morning’s rally is justified or not.
As Garrett mentioned yesterday in his regular Grain Markets Today column, soybean prices on the July contract pushed up above $10 USD / bushel at the Chicago Board of Trade yesterday. The May contract wasn’t far behind, closing at $9.96.
Canola prices dipped a bit yesterday as it was pressured by the strength of the Canadian Loonie.
The reason for the rally of soybean prices is clear though Argentina.
Argentina in Soybean Prices Driver’s Seat
Very little rain is in the forecast for Argentina in the next two weeks. Considering that Argentina’s soybean and corn crops are in key stages of development when moisture is required, the market is pricing in the potential for lower production.
And with no major change in the forecast likely until early February, La Nina is making its presence felt at a vulnerable time for the Argentine crop.
Also, worth noting is that the Argentinian peso has weakened. With inflation still high, grain sales by Argentine farmers have been slow.
Farmers in Argentina will try to wait as long as possible to sell grain as a hedge against inflation – it’s not a great feeling when you know cash you get for selling today will be worth 25% less a year from now (yes, Argentina’s inflation was last record to be around 25% annually, as of December 2017).
Moving to Brazil, northern regions of Brazil – including where most important soybean-producing stat Mato Grosso is – have been experiencing dry conditions for the past month. And it’s starting to worry producers.
Rain isn’t expected for another week or so in these regions, and it comes at a time when the Brazilian soybean harvest is about to ramp up.
“Planning and Praying for Rain”
There hasn’t been a whole lot of snowfall that’s come down across the regions to provide adequate cover from the usual howling winter winds. Without it, snowmelt is likely to remain limited, further impacting soil moisture reserves.
As such, we’re hearing more and more about farmers planning for another dry year, albeit praying that it’s not.
The likes of durum and spring wheat and even lentils can manage fairly well in drier conditions, but it certainly won’t make things a bumper crop.
As I mentioned in yesterday’s Breakfast Brief, there’s more buzz about planting less pulses and more canaryseed and mustard.
What we know is that Canadian production was down significantly from a year ago. Specififcally, Statistics Canada says that Canadian farmers producer 121,600 tonnes of mustard in the 2017/18 crop. That’s basically half of what was produced in 2016/17 a year previous, and 27% below the five-year average of 166,000 tonnes.
The situation across the border isn’t much brighter. Thanks to the drier conditions in the Northern Plains, mustard yields were down and US abandonment rates were up (specifically going from 4.8% in 2016 to 7.4% in 2017).
Keep in mind though that both Canada and the US produced monster mustard crops in 2016. However, 2017 was the still the second-largest year for American mustard production (with 2016 being the record).
All this adds up to is a relatively comfortable supply of mustard going into the 2018 crop year. With demand still decent and prices still in the 30 handles (i.e. above 30 cents CAD / pound) for oriental, brown, and yellow, mustard might not be a bad crop to consider.
Keep In mind however, how small the market really is: a large shift in production with the same demand could easily pull prices down by 20-50%.
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At 6:55 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2456 CAD, $1 CAD = $0.8028 USD)
Mar Corn: -1¢ (-0.3%) to $3.51 USD or $4.378 CAD
Mar Soybeans: +1.8¢ (+0.2%) to $9.86 USD or $12.299 CAD
Mar Soybean Meal (per short ton): unchanged at $338.60 USD or $422.35 CAD
Mar Soybean Oil (cents per lbs): +0.20¢ (+0.6%) to 32.36¢ USD or 40.35¢ CAD
Mar Oats: +2.5¢ (+0.95%) to $2.675 USD or $3.337 CAD
Mar Wheat (Chicago): -2.5¢ (-0.6%) to $4.233 USD or $5.279 CAD
Mar Wheat (Kansas City): -1.8¢ (-0.4%) to $4.268 USD or $5.323 CAD
Mar Wheat (Minneapolis): unchanged at $6.07 USD or $7.471 CAD
Mar Canola: +0.9¢/bu / +$0.40/MT (+0.1%) to $11.215/bu / $494.50/MT CAD or $8.991/bu / $396.44/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.