February 20 – Weather Loosening Grip on Grain Markets?

“Sometimes nature guards her secrets with the unbreakable grip of physical law. Sometimes the true nature of reality beckons from just beyond the horizon.”

– Brian Green, US Theoretical Physicist

Weather Loosening Grip on Grain Markets?

After a three-day weekend, grain markets opened up in the green on Monday night. The gains are mostly attributed to the lack of weekend rains in Argentina again.

While we’re now more interested in the July 2018 contract, the March 2018 soybean contract hit 11-month highs overnight. Simply put, the market continues to focus on soil moisture shortages in Argentina and the potential impact on yield. Rains did fall over the weekend, but much like last weekend as discussed in last Monday’s Breakfast Brief, it wasn’t as much moisture as the market was pricing in.

Thinking More Long-Term for Grain Markets

While we see these gains in soybean prices as a generally positive, we also see the bearish contrast: slowing U.S. soybean exports to China. While China seemingly has an unlimited demand for soybeans, late last week, Garrett challenged the status quo thinking and choices of where US soybeans could go without China.

In the same vein, we looked at the USDA’s long-term forecast, and we asked where U.S. corn will be sold in 10 years (while being especially cognizant of the recent cancellation by China of a few boatloads of US corn)We did a similar assessment of the US oats markets.

For wheat, global trade will surely be impacted by supply out of the Black Sea and demand out of Asia (if you didn’t know, there’s a new wheat king in the market). What’s certain is that with the Trump administration not necessarily looking for free trade deals, US wheat farmers are missing out on deals like the Trans-Pacific Partnership. This intuitively has a negative impact on their wheat prices.

More barley and chickpeas and less canola seem to be the buzz in the Land Down Undaa. [1] Many Australia growers have had a canola-wheat rotation for the past few years, but now they’re thinking about a chickpea or field pea for agronomy reasons (the nitrogen-fixing legumes will help lessen the need for nitrogen fertilizer application). Over the weekend we discussed some of the genetic excellence of chickpeas, and how the door is just opening for its cropping future.

Future Weather, Grain Production Forecasts

In Europe, conditions are relatively okay with the EU wheat crop getting decent snow cover. That being said, some significantly lower wheat exports will force EU wheat ending stocks higher. This intuitively continues to weigh down European wheat prices.

Soil moisture in Europe is also in pretty good shape after a bit of a wet fall in a few places. This would suggest a pretty strong wheat crop that is a few weeks away from emerging from dormancy.

We’re cognizant of cashflow needs going into the 2018 growing campaign, not just in North America, but also in places like Russia and Europe. With some potential selling by those farmers in the next few weeks, coupled with decent weather in Europe, wheat prices may be pressured.

The NOAA says that there is likely going to be below-average precipitation for the Southern and Central Plains over the next 3 months. Less rain is in the mix the further south you go.

For the Northern Plains, decent precipitation and below-average temperatures are expected over the next month. The threat of drought is weighing on the minds of many though. [2] However, with some better soil moisture conditions, one could easily argue that more spring wheat and durum wheat could get planted this coming spring.

We know that with fewer pulse acres in Western Canada getting discussed for Plant 2018, durum is gaining more attention in Prairies, which gives rise to more conversation about price potential (the link covers it). We also must account for the negative impact that Italy is having on Canadian durum wheat prices.

We know that wheat prices tend to see a bit a seasonal push through the end of this month. The next weather premium market tends to return in April/May once more about the North American crop is known.

Over the weekend, we sent out new recommendations for our GrainCents subscribers in terms of price targets they should be looking for in the next few weeks. Leveraging both publicly available data and executed trades on the FarmLead Marketplace, we’re gaining stronger insight coverage by buyers, but also if we’re near the top of market or a rally is just getting started.

Start your free 3-week trial to GrainCents today.

To Growth,

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

 

At 7:05 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2594 CAD, $1 CAD = $0.7940 USD)

Mar Corn: +0.1¢ (+0.48%) to $3.678 USD or $4.63 CAD
Mar Soybeans: +0.15¢ (+1.57%) to $10.175 USD or $12.815 CAD
Mar Soybean Meal (per short ton): +$0.02 (+0.01%) to $370.80 USD or $466.99 CAD
Mar Soybean Oil (cents per lbs): +.002¢ (+0.002%) at 31.80¢ USD or 40.05¢ CAD  
Mar Oats: -1.8¢ (-0.65%) to $2.673 USD or $3.366 CAD
Mar Wheat (Chicago): +3.5¢ (+0.91%) to $4.568 USD or $5.752 CAD
Mar Wheat (Kansas City): +4.3¢ (+0.91%) to $4.725 USD or $5.951 CAD
Mar Wheat (Minneapolis): +0.5¢ (+0.08%) to $6.035 USD or $7.60 CAD
Mar Canola: 1¢/bu / $0.0/MT (0%) to $11.408/bu / $503/MT CAD or $9.058/bu / $399.39/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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