Sept 17 – Wheat Prices Finding a Bright Spot?

Good Morning!

Grain markets this morning are mixed with wheat prices in the green while corn, soybean, and canola prices all dip lower.

“Your attitude is like a box of crayons that color your world. Constantly color your picture gray, and your picture will always be bleak. Try adding some bright colors to the picture by including humor, and your picture begins to lighten up.” – Allen Klein (American author)

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Sept 17 – Wheat Prices Finding a Bright Spot?

Grain markets this morning are mixed with wheat prices in the green while corn, soybean, and canola prices all dip lower.

On Friday, grain markets were able to rebound from the September WASDE sell-off, led by wheat prices. This was mainly a result of wheat production concerns in Canada and Russia due to inclement weather that has impeded harvest progress (and likely crop quality).

Last week we saw managed money get more bearish on wheat prices, culling their net-long position by more than half in Chicago.

chicago wheat prices drop with fund positioning

For Kansas City hard red winter wheat prices, hedge funds dropped their bullish position by about 21%, while money managers went net short for the first time in a few months on Minneapolis hard red spring wheat prices.

On the geopolitical front, U.S. President Trump has instructed his people to start enforcing tariffs on another $200 Billion more of Chinese goods. [1] This will likely stifle some positive ideas of discussions between the two economic superpowers last week.

Also, there are rumours buzzing that Canada is willing to concede on a few diary / supply management issues. [2] For perspective, Wisconsin produces about 150% as much milk as all of Canada. [3]

Grain Reports to Watch For

Later today we’ll get two main reports out of the US: the NOPA soybean crush report for August and the weekly Crop Progress report from the USDA.

In the soybean crush report, grain markets are expecting to see a 163.87 million bushels of U.S. soybeans used in August. This would be a record for August but down from the 167.7 million bushels used in July. Oil stocks are expected to come in at 1.762 billion pounds, which would be down 2 million from July 2018, but a jump of 24% year-over-year.

Sidenote: U.S. soybean crush has been “crushing it” in 2018, up 9% – 15% over last year’s pace every month between February and July. In fact, March soybean crush volumes set a record for any previous month in any previous year. We dug into this issue for our canola and soybean GrainCents readers this weekend in the weekly digest emails in a bit more detail.

Second sidenote: Canadian canola crush margins are the tightest they’ve been in years. [4]

For the USDA’s crop progress report, expectations are that we’ll see 10% of the U.S. corn harvest and 3% of the U.S. soybean harvest completed, both in line with the 5-year average. However, you might expect to see a slowdown in next week’s crop progress report, as the impact of Hurricane Florence will certainly slow field activities this week on the American East Coast.

On Wednesday, September 19th, we’ll get another crop production estimate from Statistics Canada, but this time using their satellite methodology. For those watching spring wheat prices, in the last 3 years that this sort of report has come out, the Canadian spring wheat crop has been increased by an average of 656,300 MT from what StatsCan estimated spring wheat production would be in their August 31st report.

As it relates to those watching canola prices, the Canadian crop has been increased by an average of 1.279 MMT from StatsCan’s August 31st canola production estimate.

Wheat Prices Watching Argentina Too?

The USDA estimated Argentina’s 2018/19 wheat crop at 19.5 MMT this past week in the September WASDE. That figure is unchanged from last month, and higher than 2017/18 production at 18 MMT

However, the Rosario Board of Trade is estimating a 21 MMT crop, although it’s noted that rains are needed in the next week or so (especially in western areas) to confirm that projection.

That being said, the Buenos Aires Grain Exchange says that 81% of Argentina’s wheat is currently rated normal-to-excellent. As an indication of the lack of rain, this is down 4 point week-over-week. Northwestern areas of Argentina, which account for roughly one-third of wheat acres, have received very little moisture to date and are becoming an area to watch for (or else the production estimates will start dropping!).

The Argentina wheat figure is important given ongoing dryness in Australia. As we learned this week, Asian flour millers are turning to Argentina in order to obtain wheat that they traditionally pull from their nearby Australia.

Weather Stresses Grain Testing Need

Coming back to Harvest 2018 in North America, things have certainly slowed in Western Canada. [5] While quality doesn’t seem to be a concern in Manitoba, there is certainly a quality question mark on the spring wheat crop in central and northern Alberta as well as parts of northwestern Saskatchewan).

With the negative weather in mind, there’ll be a lot of buyers asking a lot more quality questions this year. We already know that there’ll be more scrutiny around moisture and disease in your spring wheat, even if it hasn’t been impacted by these late summer/early fall rains and snow showers.

Thus, I strongly advocate that you get ahead of the ball and get your cereals, pulses, and other grain tested ASAP, via GrainTests.com or your regular means. Even if you have crop left in the field, I strongly recommend ordering your tests today so you can send your samples off the field immediately into the lab.

This time of year, it’s about being proactive and trying to get ahead of as many things as possible.

To growth,

Brennan Turner

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

 

Due to travel, we are unable to list the futures prices this morning but you can find them here.

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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