April 16 – Wheat Prices Lead Grain Complex Lower

Good Morning!

Wheat prices are leading the grain markets lower this morning on ideas of rains helping the US crop emerging.

“There are many roads to prosperity, but one must be taken. Inaction leads nowhere.” – Robert Zoellick (former World Bank president)

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Wheat Prices Lead Grain Complex Lower

Wheat prices are leading the grain markets lower this morning on ideas of rains helping US winter wheat crop conditions. This comes as a winter system hit most of North America, limiting not only Plant 2018 activity, but also movement in general as blizzards and ice storms halted or slowed highway and air traffic pretty much everywhere.

Canola prices traded lower last week, with the July contract losing $11.30 CAD/metric tonne, or 2.1% for the week to close at $526. For new crop, canola prices dropped $8.10 CAD /metric tonne to finish the week at $514.20. The pressure was caused mainly by farmer selling and a stronger Canadian Loonie, which touched 79.5¢ USD last week. Also pressuring prices though is some slower exports, as well as crush margins being near their lowest of the crop year (albeit crush demand seems to be pretty strong.

Soybean demand in the US has also been pretty strong, highlighted by some recent sales to Argentina. There’s easily an argument here though that this has less to do with the affordability of American soybeans than it does the problems with the Argentine soybean crop.

We’ll also get the March NOPA crush number later today. Going into the report, the expectations are for 168.25 million bushels of US soybeans used by domestic processors in March. This would be a record for the month and nearly 10% higher than March 2017’s volume. It would also be a new monthly record outright, with the previous high set a few months ago in December.

Plant 2018 Concerns?

This past weekend brought plenty of snow to the US Northern Plains and Western Canada. It’s also continuing in Alberta today with a strong possibility that Calgary might see a month’s worth of snow (10 – 20 cm or roughly 4 – 8 inches) in just 24 hours. [1]

On Saturday, we put out a Twitter poll asking people if they were concerned about planting delays. [2] While 138 votes in 24 hours isn’t exactly statistically significant, here are the results:

• 47%: No, not worried
• 41%: Yes, worried.
• 12%: What planting delays?

Arguably, there are some geographical differences in here as the FarmLead Twitter following is quite broad and includes not only farmers but also grain buyers and market analysts. There’s also the fact that for some people, this poll through mid-April is pointless as they know they’re at least a few weeks away from even getting the air drills and planters rolling.

After the market close today, we’ll get the weekly installment of USDA crop progress report. For this time of year, the five-year average is that at least 5% of the US corn crop has been planted. The high was 13% of the US corn crop planted by mid-April back in 2016. Keep this in mind: there’s another snowstorm headed for Iowa this week.

On the winter wheat front, we knew that there was some tough winter weather that hit the US Southern Plains this weekend. [3] It’s unlikely that we’ll see the full impact of the below-freezing temperatures in today’s USDA crop progress report, but winter wheat prices are in a sell-off mode today anyways as this past weekend’s weather is being viewed as less important than the rains in the forecast for later this week.

That being said, through mid-April, the US winter wheat crop has had an average good-to-excellent (G/E) rating of 45% over the past five years. Last week, the crop was measured at 32% G/E, but pre-report expectations are for a few points lower.

Weather and Wheat Prices Suggesting More Oilseeds?

While we won’t get the USDA’s first look at US soybean acres until next week, there’s plenty of ideas that there could be more soybeans getting planted this spring in the US.

In today’s USDA crop progress report, we usually see an average of 15% of the US spring wheat crop planted by now. Given this past weekend’s weather (let alone, April’s weather in general), it’s quite unlikely that this number will be seen later this afternoon. After all, last Monday’s crop progress report showed that just 2% of the US spring wheat crop had been seeded.

For our spring wheat GrainCents readers, Garrett dug into the likelihood of more US farmers “tearing up” their spring wheat plans, and what that would mean for spring wheat prices. Conversely, he also looked into what it would mean for soybeans prices.

Also last week for our GrainCents readers, Adrian dug into to a couple of scenarios for durum prices and oat prices, depending on what happens in the US this growing season.

For durum prices, there are three different scenarios of US durum production that we’re looking at going into the Plant 2018 campaign. Also, we have to be cognizant of the impact of slightly higher Canadian durum acres will have (the StatsCan acreage estimate report comes out on Friday, April 27).

For oats, we set the goalposts with two different scenarios of how US oats production could look for the 2018/19 crop year. Of more interest will be the US demand of Canadian oats and corresponding price expectations. Keep in mind that Canadian oats exports are tracking fairly well, up nearly 25% year-over-year.

While these scenarios certainly account for some volatile weather, Mother Nature will always have the final say.

To growth,

Brennan Turner

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

At 7:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2607
 CAD, $1 CAD = $0.7932 USD)

Jul Corn: -1.5¢ (-0.38%) to $3.933 USD or $4.958 CAD
Jul Soybeans: +3.3¢ (+0.31%) to $10.683 USD or $13.467 CAD
Jul Soybean Meal (per short ton): +$1.00 (+0.26%) to $387.80 USD or $488.90 CAD
Jul Soybean Oil (cents per lbs): +0.12¢ (+0.38%) at 31.63¢ USD or 39.860¢ CAD  
Jul Oats: -3.8¢ (-1.55%) to $2.378 USD or $2.997 CAD
Jul Wheat (Chicago): -4.8¢ (-0.96%) to $4.893 USD or $6.168 CAD
Jul Wheat (Kansas City): -10.3¢ (-1.99%) to $5.048 USD or $6.363 CAD
Jul Wheat (Minneapolis): -3.8¢ (-0.60%) to $6.230 USD or $7.854 CAD
Jul Canola: -$1.60 (-0.30%) to $11.893/bu / $524.40/MT CAD or $9.434/bu / $415.959/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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