Today’s Breakfast Brief looks at some updated grain production numbers out from Europe and Australia, while wait for CONAB’s update in Brazil and the USDA’s new numbers from the world agricultural production supply and demand estimates (WASDE).
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Grain markets are mixed ahead of the December WASDE out at 12 noon EST. Wheat and oats prices on the futures board are trying to rebound of contract lows, but are facing some bearish headwinds.
North American trade negotiators are in Washington this week to continue discussing NAFTA. Goldman Sachs think that with each passing round of talks, the likelihood of a new deal being announced declines.
Malaysian palm oil stocks grew by more than 350,000 tonnes to 2.56 million tonnes in November, according to the Malaysian Palm Oil Board. That’s the largest number in nearly 2 years, 54% higher than last November, and the fastest year-over-year growth in nearly a decade. We’ll have more insight on this later today in our GrainCents canola factor of Vegetable Oil Substitution Effects.
What we do know is that canola prices for the January contract are hovering around $500 CAD / tonne on the Winnipeg ICE futures (a precarious position).
Bigger Crops Everywhere?
The Ukrainian Ag Ministry upgraded its country’s 2017/18 grain production by 300,000 tonnes to 62.3 million tonnes. This is down a bit from last year’s 66 million tonnes of total grain production in the eastern European country. Comparably, the USDA says that Ukraine will produce 61.5 million tonnes of grain this year.
In yesterday’s Breakfast Brief, we looked at some of the expectations for today’s WASDE report, out at 12 noon EST. In addition to that report, CONAB will also give us an update on the Brazilian corn and soybean crops. While it might updated later today, the USDA is currently forecasting 95 million tonnes of Brazilian corn and 108 million tonnes of soybeans.
As a comparison, AgRural is currently forecasting the Brazilian soybean crop at 112.9 million tonnes. Last year, Brazilian farmers produced a record 114.1 million tonnes of soybeans.
Where’s the Protein, Wheat Exports?
There are bread makers in the US that are complaining about having a lack of protein to make good bread with. The fact is that there is indeed a fair amount of protein out there, the bakers just aren’t willing to necessarily pay up for it because they suggest that the consumer won’t pay up for it. This is more of a problem with the US winter wheat crop though as
There is some impact on exports though as more price-sensitive countries like Mexico aren’t willing to pay up as much for quality – or potential substitute it with product from another country, say Russia.
This is notable as international freight is becoming more expensive. As Bloomberg described it for grain traders, “they’re having to pay more to transport crops at a time when they can least afford it.”
We do know, however, that one such country that did that was Venezuela. They started bringing in product from Russia, but they were unhappy with the quality so it’s undetermined if they or other low protein sources can continue said substitution.
Speaking of which, Russian wheat exports from January to October 2017 sat at 24.5 million tonnes. That’s 23% higher than the same period last year in which 19.9 million tonnes of Russian wheat were shipped out.
For the marketing-year-to-date, US wheat exports are more than one million tonnes behind last year’s pace. Just 13.1 million tonnes have been shipped out.
In Canada, total wheat (including durum) exports are sitting at just over 6.8 million tonnes through last week. That’s nearly 10% better than the pace of Canadian wheat exports a year ago.
Finally, ABARES says that Australian wheat exports in 2017/18 will drop 24% year-over-year to 16.8 million tonnes. This would be a seven-year low.
While it may get updated later today, the current USDA’s estimate of Aussie wheat exports is set at 17.5 million tonnes, while the International Grains Council is at 19 million tonnes.
Last week, I dug into the potential effects of the smaller Australian wheat crop, which is currently pegged by ABARES at 20.3 million tonnes.
I also looked at the effects of a smaller Australian canola crop last week. Another update from ABARES shows they expect just 1.9 million tonnes of canola to be exported out of Australia. This would be lowest since 2010/11. Their main customer, the European Union, has a fair amount of rapeseed / canola sourcing options though, as I indicated last week as well.
At 8:05 AM CDT in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2794 CAD, $1 CAD = $0.7816 USD)
Mar Corn: +0.8¢ (+0.2%) to $3.498 USD or $4.494 CAD
Jan Soybeans: -1.8¢ (-0.2%) to $9.808 USD or $12.601 CAD
Jan Soybean Meal (per short ton): -$1.60 (-0.5%) to $326.10 USD or $418.99 CAD
Jan Soybean Oil (cents per lbs): -0.05¢ (-0.15%) to 33.41¢ USD or 42.93¢ CAD
Mar Oats: +0.8¢ (+0.3%) to $2.445 USD or $3.141 CAD
Mar Wheat (Chicago): +0.8¢ (+0.2%) to $4.143 USD or $5.322 CAD
Mar Wheat (Kansas City): +1.3¢ (+0.3%) to $4.14 USD or $5.319 CAD
Mar Wheat (Minneapolis): -0.5¢ (-0.1%) to $6.083 USD or $7.815 CAD
Jan Canola: -4.3¢/bu / -$1.90/MT (-0.4%) to $11.353/bu / $500.60/MT CAD or $8.836/bu / $389.62/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.