July 19 – Taking Advantage!

In today’s Breakfast Brief, we’re looking at crop conditions across the board, pulses seeded in India and USDA results.

“Luck can often mean simply taking advantage of a situation at the right moment. It is possible to make your luck by being always prepared.”

– Michael Korda (British author)

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Good Morning!

Grains this morning are mostly in the red after pulling back on some good precipitation ahead of the stronger heat & another bearish crop progress report, but market participants are also cautious of how this forecast will play out as models are very inconsistent with one another. Right now, the market is pegging in a 14.5 billion bushel American corn crop off of a 168 bu/ac average, but one has to wonder with crop conditions remaining pretty deluxe, this coming heat may pull off some bushels but at a starting point of what? 170 bu/ac? 175? 180? Crop conditions in the Canadian Prairies have dropped a bit with the recent rains but many market players, including grain companies, are still optimistic that we’ll see an above-average Harvest 2016 if things continue like they do. Overall, traders are taking advantage of some of this volatility, but similarly, there’s opportunities for the farmer to latch onto as well and having a plan in place – i.e. “I’m going to sell X bushels and Y price – allows one to capture it (make sales when you can, not when you have to).

In India, monsoons rains continue to fall, but there’s been enough time in between the wet days/nights to see the karif seeding season accelerate. For a 2nd week in a row, more than 6.18 million acres of pulse acres got planted. This puts the total number of pulse crops acres seeded at 17.5M, well above last year’s pace of 13.8 million and an incredible 91% above the 5-year average of 9.2 million acres (and you thought a lot of pulse acres were planted in Canada….). With the significant uptick in acres as a result of significant domestic AND world shortages the past 2 years (hello record prices), the Indian government is launching “a new policy framework to rein in the inflationary impact and stabilize the supply of pulses.” Their goal is to be self-sufficient in pulses within the next 5-6 years (currently, there’s about 30-40% shortfall in domestic production versus domestic consumption, demanding on how the harvest goes) and could get their by looking at new MSPs (minimum support prices), more acres to irrigation, and/or the introduction of new varieties.

USDA Shows Crops Ahead of Schedule

The USDA’s crop progress report out yesterday continues to show what we’ve been thinking: the crop in the US is ahead if schedule and looking great. 56% of the US corn crop is silking (vs 47% last year at this time and 46% 5-year average) and 76% of fields are still rated in good-to-excellent condition, including Iowa, Illinois, and Minnesota all with G/E corn ratings above 80% (at 76% G/E, this is one of the highest ratings ever for the US corn crop for the 3rd week of July)! 59% of US soybean crops are blooming (51% a year ago, 49% 5-year average), 18% of fields are already setting pods (14% a year ago, 13% average), and 71% of the crop is rated G/E (same as last week and obviously above the 62% a year ago). For the cereals, 76% of the winter wheat crop has been harvested (72% last year, 73% 5-year average), 70% of the US spring wheat crop is rated 69% G/E, 66% of oats are considered in G/E shape, and 73% of barley is considered G/E as well, all down 1-point week-over-week.

Also out from the USDA, or rather their Ukraine attaché, was a recent report that Ukraine’s wheat stocks falling to a 4-year low, despite a new memorandum of understanding signed by the Ukraine Ag Ministry, farmers, and other grain trade representatives. The MOU is intended to slow exports to ensure enough domestic supplies are available but today, Ukrainian flour millers are running at about 30% capacity as they compete with the allure of exports. Given the surprising size of the Black Sea wheat crops, coupled with the large carryover of North American inventories, we may see lower wheat prices for quite some time. If corn were to see some upside because of this heat, wheat is likely to follow, and with no bullish demand story showing up, we’d take advantage and be a seller again of another block or two (10-20%).

Around the Ag In Motion outdoor farm show outside Saskatoon this week? Stop by the FarmLead booth in the FCC Ag Pavilion to chat with me about your grain marketing plan moving forward.

To growth,
Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
@FarmLead (on Twitter)

At 7:00 AM CDT in the North American futures markets:

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.2681 CAD, $1 CAD = $0.3018 USD)

July Corn: -5.5¢ (-1.55%) to $3.515 USD or $4.576 CAD
July Soybeans: -11.8¢ (-1.1%) to $10.633 USD or $13.841 CAD
July Soybean Meal (per short ton): -$4.50 (-1.2%) to $367.70 USD or $478.67 CAD 
July Soybean Oil (cents per lbs): -0.16¢ (-0.5%) to 30.90¢ USD or 40.23¢ CAD 
 Oats: unchanged at $2.07 USD or $2.695 CAD

July Wheat (Chicago): -4¢ (-0.95%) to $4.255 USD or $5.539 CAD
July Wheat (Kansas City): -4.3¢ (-1%) to $4.158 USD or $5.412 CAD
July Wheat (Minneapolis): -4¢ (-0.8%) to $4.94 USD or $6.431 CAD
July Canola: -0.7¢/bu / -$0.30/MT (-0.05%) to $8.194/bu / $361.31/MT USD or $10.668/bu / $470.40/MT CAD

Yesterday’s Winnipeg ICE Close

July Barley: -10.9¢ (-3.25%) to $2.509 USD or $3.266 CAD
July Durum Wheat: unchanged at $5.665 USD or $7.375 CAD
July Milling Wheat: 
unchanged at $4.369 USD or $5.688 CAD

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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