January 18 – Hitting the Reset Button on Grain Sales

Good Morning!

Grain markets this morning are mixed again, with corn giving up some of yesterday’s gains while wheat tries to extend their gains. Canola prices are up on some political factors in Europe that we need to dig in to.

“The term we use on our team is ‘reset’: when you go through, whether it’s a negative play or a negative drive, and you get your next opportunity – not focusing on the past, but going back into your attack mode.” – Dan Quinn (NFL’s Atlanta Falcons head coach)


Grain markets this morning are mostly lower, except for wheat as it looks to go for a two-day gain and continue to make up for its losses seen last Friday after a bearish WASDE report.

Yesterday, the Bank of Canada raised interest rates in the Great White North for the third time since the summer. [1] The Canadian benchmark interest rate now sits at 1.25%. This is likely to put some pressure on Canadian grain prices as the Loonie strengthens, making things like wheat exports more expensive for interational buyers.

As Garrett mentioned in Grain Markets Today, some short-covering helped lift grain prices yesterday. Corn prices saw some healthy gains up 4 cents at the Chicago Board of Trade, while winter wheat prices added about 5 cents on the front-month contracts.

Weather in Argentina and possibly smaller safrinha/second-crop corn production in Brazil fueled some of the uptick in corn prices yesterday. Also, while US corn exports are down notably year-over-year, demand for DDGs remains strong. Prices for the ethanol by-product are up 50% year-over-year, now sitting at just over $200 USD /metric tonne as US Gulf of Mexico ports.

Canola prices are catching a bid this morning, thanks to a ruling by the European Union Parliament that the EU will cap crop-based biofuels at consumption levels seen in 2017. Further, it was voted that no more than 7% off all transport fuels will come from crop-based biofuels until 2030!

Palm oil is taking the biggest hit out of this. For GrainCents canola readers, I walked through why canola prices are higher this morning, but what it means in the long-run for biofuel demand in Europe.

As a side note, activity on the FarmLead Marketplace for feed grains, pulses, and canola has been robust this week. Farmer selling is creating some weakness in some crops though. Post some of your grain to get it moved before spring-time road bans (as well as some cash in your pocket before going full-title on seeding).


South America Event Risk (Weather or Otherwise)

As we noted in GrainCents yesterday, there continues to be the threat of more “event risk” in South America, especially with some of the political factors at play.

Nonetheless, much like the US stock market, Brazil’s stocks hit record highs yesterday on continued optimism about the Brazilian economy. Brazilian farmers aren’t necessarily in the same boat though, especially with the soybean harvest starting to ramp up.

The group IMEA says that forward contracting of the 2017/18 soybean crop in the Mato Grosso region is just above 50%. A year ago at this time, nearly 58% of what became a record crop of 114.1 million tonnes of soybeans was sold.

On the weather front, we continue to monitor things closely. Temperatures above 90 degrees Fahrenheit will be spreading across Brazil through the weekend. Rains are likely to start falling in the central and northern regions (including where Mato Grosso is) by late next week.

In Argentina and southern Brazil though, it’s expected to stay warm without much of any moisture events for the next ten days.

Hitting Reset on Free Trade Deals (and Wheat Exports)

In Tuesday’s and yesterday’s Breakfast Briefs, we talked a bit about the NAFTA trade deal renegotiations and how they’re going (or rather, not going). The trade deal that’s gone on to the backburner a bit though, as is the Trans-Pacific Partnership trade deal. It shouldn’t, however, because it’s a pretty big opportunity.

It’s been almost a year since US President Donald Trump pulled up stakes and said the US of A was not going to be involved in TPP. Between this, spats with China, and the NAFTA renegotiations, some are wondering if Trump has America’s back on trade? [2]

Nowhere is probably most evident than in wheat exports, especially with Japan.

The Land of the Rising Sun is in the process of liberalizing its rice industry, opening the door for more wheat demand. US wheat exports to Japan are flat compared to a year ago, but there is more 2017/18 spring wheat getting shipped there, whereas winter wheat exports are lower. Not being part of the TPP could make American wheat exports / sales less competitive in blossoming Japanese wheat market.

Conversely, Canadian spring wheat or Australian wheat would hold a distinct advantage for wheat exports. As noted in this previous GrainCents link provided, just because you sign a free trade deal, you should not expect business to show up!

Hey, the deal isn’t in the bag! Many talking pundits now see Canadian Prime Minister Justin Trudeau as the biggest obstacle to TPP closing. [3] To get this Pacific Rim trade deal across the finish line, some argue that Canada will need to hit the reset button on its relations with Japan. [4]

To growth,

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

At 7:50 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: -0.5¢ (-0.15%) to $3.525 USD or $4.391 CAD
Mar Soybeans: -0.8¢ (-0.1%) to $9.68 USD or $12.058 CAD
Mar Soybean Meal (per short ton): -$0.30 (-0.1%) to $324 USD or $403.59 CAD
Mar Soybean Oil (cents per lbs): +0.02¢ (+0.05%) to 32.72¢ USD or 40.76¢ CAD  
Mar Oats: +2¢ (+0.8%) to $2.563 USD or $3.192 CAD
Mar Wheat (Chicago): +2¢ (+0.45%) to $4.235 USD or $5.275 CAD
Mar Wheat (Kansas City): +0.8¢ (+0.2%) to $4.278 USD or $5.328 CAD
Mar Wheat (Minneapolis): +1¢ (+0.15%) to $6.128 USD or $7.633 CAD
Mar Canola: +4.3¢/bu / +$1.90/MT (+0.4%) to $11.149/bu / $491.60/MT CAD or $8.951/bu / $394.66/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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