January 30 – Winter Wheat, South America Driving Nice Rally

Good Morning!

Grain markets this morning are mostly in the green as dryness in Argentina and negative winter wheat conditions US Plains region continue to pump up weather premium.

“With experience also comes the understanding that you have to beat the rally before you can beat the competition.” – Robby Gordon (US racecar driver)

graincents-trial

 

Grain markets this morning are mostly in the green as dryness in Argentina and the US Plains region continue to pump up weather premium.

This week I’m in Edmonton for the FarmTech conference (we’re at Booth #20!), chatting with a lot of other farmers and agtech companies about the state of where things are. Current grain prices and trade talks are also on the agenda, just as is the weather, which is expected to show -20 degrees Celsius and worse here (that’s below 0 for our Fahrenheit friends). This is roughly normal for this time of year though in Edmonton!

Temperatures in Argentina are quite the opposite right now. The hot weather is tracking anywhere from five to eight degrees above normal in major producing regions of the country. [1] And it’s expected to last for a least another week. This obviously adds fuel to the fire for more weather premium getting added to grain prices, as Garrett suggests in his regular Grain Markets Today recap posted yesterday afternoon.

With soybean prices heading higher, this always begs the question of how high can we go? Should I sell now? If you’re a soybeans GrainCents subscriber, you know the answer as I specifically addressed this question in our sales update last week.

Garrett also discussed the wrap up of the sixth round of talks in Montreal with no real progress. The next round will start in a month, on February 26th in Mexico City and it’s more than likely that we’ll be going to Round 8 after that, back in America.

Withering Winter Wheat Crop?

In yesterday’s FarmLead Breakfast Brief, I specifically asked the question of whether the spread between winter wheat and spring wheat prices would start to fade. Yesterday’s trading action suggests already starting.

Chicago and Kansas City-traded winter wheat prices headed higher while Minneapolis’ spring wheat barely moved.

Both soft red winter wheat in Chicago and Kansas City hard red winter wheat in Kansas City gained nearly a dime yesterday as the market prices in drier conditions in the US Southern Plains. For KC HRW wheat specifically, this is the highest price for a front-month contract since October!

The big reason is dryness in the US Plains, specifically in central and southern areas. The most recent Drought Monitor suggests that about 80% of the High Plains is experiencing drought conditions. Further, there isn’t much in the forecast regarding healthy doses of precipitation for the next two weeks in the region.

The USDA’s crop condition report, released after the market was closed yesterday, showed that conditions are still very dry, and as a result, the US winter wheat crop isn’t in that great of condition. We walk through all of the numbers for our winter/feed wheat GrainCents readers here, and our spring wheat subscribers here.

Also supporting wheat prices was strong export inspection numbers of 21.3 million bushels (or 579,875 tonnes if you’re converting bushels at GrainUnitConverter.com)

As we always try to look at both sides of the bearish and bullish arguments, it’s worth noting that the Russian Ag Ministry said that they expect wheat exports this crop year could reach as high as 47 million tonnes. Currently, the USDA’s estimate is for 43.5 million tonnes.

Oilseed Acreage Expanding

The US Canola Association is looking to increase the number of acres in America under a new proposal for the 2018 farm bill. While I don’t expect the 3-4 million acres they’re hoping for getting seeded in 2018, in GrainCents yesterday; I dug through this possibility and what it would potentially mean for the canola market/prices.

As for another oilseed, our good friend Chuck Penner from Left Field Commodities thinks that mustard acres could rebound by 40% in Western Canada. [2] The crop has seen ups and downs in acres the past few years, with prices ranging from – on a Canadian cent per pound basis = low 30s up to mid-40s. Those are certainly profitable numbers, but new crop bids are similar to what they were a year ago.

Yields dropped last year because of the dry conditions, and so production wasn’t as much as the market was pricing in a few months ago. With a 40 increase in acres, that would put Western Canadian area at nearly 540,000 acres. At more average yields, this would certainly bring prices back down from their spot values.

mustard-post-new-offer

Whether it’s old or new crop or both, post your next lot of mustard on the FarmLead Marketplace and capture these highs that haven’t come around too often.

To growth,

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

Due to travel constraints, there are no grain futures data in today’s FarmLead Breakfast Brief, but you can click here to review them yourself.

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.

Most Recent Posts
Dec. 14 – Soybean Prices Remember Supply, Competition, Trade War
December 14, 2018 Brennan Turner
Grain markets are lower as the complex follows yesterday’s selling, soybean prices failed to find support after the big splash by China.
October 4: Corn Prices Edge Higher With October WASDE in Focus
October 04, 2018 Garrett Baldwin
Corn prices ticked higher Thursday as traders and analysts began to speculate on next week’s release of the October WASDE report.