January 24 – Are the Grain Trade Winds Changing?

Good Morning!

Grain markets are trying to climb higher this morning with oil prices on a lower US Dollars. Trade winds are swirling though as NAFTA negotiations continue but the Trans-Pacific Partnership has been resurrected. 

“I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.” – Jimmy Dean (US television personality)

graincents-trial

Grain markets are trying to climb higher this morning on a lower US Dollar. Oil prices continue to track new highs with Brent hitting $70 USD per barrel yesterday, while WTI nearly hit $65.

There’s been some general refrain from further short-covering in the grain complex until more is known about the Argentine soybean crop and impact of snow cover on the US winter wheat crop.

As Garrett noted in Grain Markets Today, soybean prices ended higher again yesterday, making it the seventh straight trading session it’s done so.

The Canadian Loonie is now sitting above 81 cents USD, which intuitively puts pressure on Canadian grain prices (cue basis widening on your elevator grain price text messages…)

Trans-Pacific Partnership Resurrected

It was announced yesterday that Canada and ten other Pacific Rim countries had resurrected and finalized a free-trade deal that many thought were dead. [1]

With the US definitively out, technically it’s not the Trans-Pacific Partnership anymore – It’s being called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP for short. Everyone has their perspective, but the general view is that it’s good. [2]

For Canada, it might be interesting how this could affect current ongoing NAFTA renegotiations – the sixth round of talks are happening as we speak in Montreal. [3]

CPTPP deal will likely take about a decade for everything to get implemented but the first step is the signing ceremony, which is expected to take place in Chile on March 8th of this year.

Throughout the day, we’ll be publishing the potential impacts for all the 12 crops that we cover in GrainCents.

GrainCents Crop Analysis Updates

Yesterday in GrainCents, we toyed with the idea that North American flax acres could increase in 2018/19, digging into the major reasons why. This despite flax prices being at a bit of a crossroads regarding price direction.

Is demand for oats growing? Domestically-speaking, we’re near all-time tops as processing continues to keep the pipeline moving. But we continue to hear noises of China is the next oats frontier. Yesterday in GrainCents, Garrett dug into if the People’s Republic is indeed that next frontier, or if it’s just a black hole.

We also compared everyone else’s winter wheat prices outlook for 2018 to our own (everyone else being those on Wall Street getting paid the big bucks to say the price could move to $X.XX price on the Chicago or Kansas Board of Trade by a certain date.

One thing that’s certain is that Russia’s wheat exports are slowing thanks to the Russian Ruble’s recent appreciation. Yesterday in GrainCents, Garrett looked at the potential implications of less Russian wheat exports, especially as it relates to American hard red winter wheat exportability.

Similarly, we asked if demand for corn in the feed sector was growing or not.

If you look at the most recent January WASDE, you’ll see that the number is growing for the likes of both the US and the world. But Garrett took a deeper look at the countries who are making more of their meat or import more protein instead.

Soybean Prices Driven by Supply or Demand?

More and more data continue to suggest more soybean acres getting planted in 2018 in the U.S. For example, December corn futures at the Chicago Board of Trade are at $3.86 USD / bushel while November soybean futures are sitting at a cent under $10.

This ratio of nearly 2.6 is above the abstract 2.5 value, which suggests more soybeans should be getting planted in the US of A. While it’s still a few months before the USDA’s Prospective Planting report at the end of March, a GrainCents article looked into just how high US soybean acres could go in 2018 (and why).

This is a bit of a contrast to Argentina. The country is the largest exporter in the world of soymeal, but the unusual dryness is creating some buzz. Specifically, that of whether or not all of the possible acres that were intended to get seeded will indeed get planted.

It’s worth noting that the most bullish yield estimate we’ve seen thus far comes from Gro Intelligence. They are estimating the Argentine soybean yield to come in at 38.8 bushels per acre. Currently, the USDA is forecasting 44.5 bushels an acre for Argentina, a bit behind last year’s yield of 46.9 bushels per acre.

Keep in mind that the estimate is based off “machine-learning”, but some assumptions had to be made since Argentina doesn’t provide as much data as the algorithm likes. Further, Gro’s yield estimate of the US corn crop this past year started out about 14 bushels below – or about 8% – from the 176.4 bushel per acre number gave in January’s WASDE report. An 8% hike to this Argentine soybean estimate would suggest a 42 bushel acre average, which is still bullish, just not as bullish.

I mentioned in yesterday’s Breakfast Brief at how soybean prices are driving grain markets, and Argentina is driving the bus. In GrainCents yesterday though, Garrett dug deeper into exact dates that threaten the potential area of Argentine soybean crops and at what price we’re looking at for another sale of soybeans.

This brings up a better question though of which factor is having a stronger effect on soybean prices: supply or demand?

Production shocks surely help get a pop in the market, but we know that there’s a solid demand structure for soybeans, and many other oilseeds (including canola). One example is the vote by the European Parliament to ban palm oil-based biodiesel imports.

For our canola GrainCents readers, I dug into the impact of this EU vote against palm oil last week.

This week, Garrett took a look at whether or not soy oil might have a shot at taking palm oil’s place in the biodiesel industry of the European Union and the impact on soybean prices. After all, Europe is already a big importer of Argentine soymeal – what’s wrong with adding soy oil to the mix?

While the headlines suggest something, the articles in GrainCents you’re reading are digging into the who, what, why, etc., and when to make sales of your grain, oilseed, or pulse crop.

To growth,

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

 

At 7:55 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: +2.5¢ (+0.7%) to $3.538 USD or $4.363 CAD
Mar Soybeans: +0.8¢ (+0.1%) to $9.87 USD or $12.173 CAD
Mar Soybean Meal (per short ton): -$0.50 (-0.15%) to $338.10 USD or $417 CAD
Mar Soybean Oil (cents per lbs): +0.26¢ (+0.8%) to 32.78¢ USD or 40.43¢ CAD  
Mar Oats: +2.8¢ (+1%) to $2.728 USD or $3.364 CAD
Mar Wheat (Chicago): +3¢ (+0.7%) to $4.245 USD or $5.236 CAD
Mar Wheat (Kansas City): +2.3¢ (+0.55%) to $4.255 USD or $5.248 CAD
Mar Wheat (Minneapolis): +2.5¢ (+0.4%) to $6.07 USD or $7.486 CAD
Mar Canola: -3.9¢/bu / -$1.70/MT (-0.35%) to $11.215/bu / $494.50/MT CAD or $9.093/bu / $400.94/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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