pThis is your grain markets recap for Oct. 18, 2017.
The Dow Jones isn’t slowing down.
The Index burst right through the 23,000 level, adding 154 points along the way.
We’re right in the heart of earnings season, and, so far, almost everyone is making money. I was reading a report from Reuters on Monday, and more than 84% of companies are beating Wall Street estimates.
So, there’s a lot of momentum, very little volatility, and just more and more optimism.
I’ve been saying for the last few months that there aren’t any major issues around the U.S. economy. The threats are coming from geopolitical hotspots around the globe. We’ve got the North Korea crisis. There’s talk about scraping the Iran nuclear deal. There are problems in northern Iraqi oil fields, and who knows what’s coming next with NAFTA and the Brexit.
Now, what does that have to do with corn and other grain in your backyard, right?
Well, you have to remember that the global economy is interconnected.
Every little thing impacts the other.
When you get it all together, that’s where the macroeconomic perspective and grain price expectations come into play.
So, let’s start with corn prices.
Corn Dips Despite Harvest Pace
There’s a view from some farmers that when analysts open up with conversation about the weather, then nothing is really happening. But you gotta pay attention to the dry spell across the Midwest. The USDA said last week that we’re way behind the 5-year average on the corn harvest.
So, we’re playing catch up right now heading into colder months. If there’s sunshine then you’re might be on the combine. But some farmers are choosing to cut soybeans instead and let their corn hang out a bit longer and save on drying costs.
The pick-up expected this week is slightly responsible for the pressure in prices. The December contract dropped 1.5 cents to a tick below $3.49. We didn’t see much movement in the cash price, which dipped a half penny and closed at $3.30.
Data wise, there wasn’t anything shocking today. In the ethanol markets, the EIA reported a slight uptick in daily production last week. But stocks declined. Producers added 52,000 barrels a day, while stocks were off 43,000.
We’re more concerned about the USDA export report on Thursday than the EIA report today. Analysts expect up to 1.1 million metric tonnes in sales for the 2017/2018 calendar.
Finally, China did sell a little more than 10,000 metric tonnes of the 130,000 metric tonnes it put up for auction.
As Brennan and I touched on in our Insights piece last week, China is awash in corn. There aren’t too many buyers looking for old corn, and their reserves are huge.
That’s why they’re likely to burn it. The country just added its own Ethanol Standard. We have a contrarian view on how the standard will affect corn prices heading into 2018, so be sure to check out our analysis when you get some time.
Soybean Prices Dip in Chicago
Over in the soybean complex, the action was in the cash price.
We had a 5-cent decline in cash prices, while November soybean contracts were off 0.5 cents. The November 2017 contract is a tick above $9.84, and we’re looking at tomorrow export report for some good news.
Overall analysts have pegged tomorrow’s export report to come in between 1.2 million and 1.3 million. That’s about where the number was last week.
On the weather side, farmers are still cutting beans and trying to play catch up as we remain behind the 5-year average by double digits. Rains down in South America are going to hit some of the dry areas in northern Brazil and give that region a needed drink.
Before we get to wheat prices, I want to tell you about a big announcement over at FarmLead.
Grain Testing Made Easy
Today, we launched GrainTests.com.
After a few months of hard work, the team in Ottawa has really created something special for farmers in the United States. We’ve made grain testing easier than ever.
You can get access to hundreds of grain testing facilties online, sign up, send in your tests. Once you get your results back via email, you can post your specs on the FarmLead marketplace and wait for buyers to come to you.
You may not know this, but different buyers have very different demands when it to quality. The more I’ve been talking to buyers, the more I find out how different specifications are needed in wheat, barley, oats and pulse crop markets.
Some grain buyers are seeking specific falling numbers.
Certain durum buyers want a higher HVK or DHV number.
Protein content is especially important to millers, but the demands are all over the place.
I just talked to a malt barley purchaser about what they’re looking for, and their specifications look like my wife’s grocery list.
So, it’s really important that you get your grain tested, and we hope that GrainTests.com helps you get everything you need to get the best price.
Okay, onto the wheat markets.
Russian Wheat Production Hits SRW and HRW Contracts
This is where it was a little choppy Wednesday.
Both SRW contracts in Chicago and HRW contracts in Kansas City were off more than 1%. That December SRW contract fell 4.75 cents to close at $4.30. Spring wheat prices were also down a penny in Minneapolis.
What’s happening: Analysts are upwardly revising Russian, European, and South American production numbers. Yesterday, IKAR projected a production range for Russian wheat that was above the country’s official forecast.
Yes, and once again, I’m going to talk about the weather.
Richard Feltes at RJ O’Brien said that farmers are catching up on hard red winter wheat planting. He also cited “improving weather” for drought stricken Australia.
Canola Prices Can’t Crack CAD $500
Finally, I don’t want to forget about our friends up in Canada. Canola prices were down on the day. We had seen a bit of an uptick at the start of the session. There was talk of stronger commercial buying and possible wind damage to western crops.
However, pressure in the soy oil and rapeseed markets didn’t help. Palm oil wasn’t trading today due to Diwali, the Festival of Lights of Malaysia.
Canola is stuck under that psychological $500 CAD level right now. We’re on the fifth straight day of dancing at this level, and boy is it boring.
On Tap Thursday
On the Insights Blog, two really interesting stories that are coming up that I think you’ll enjoy.
Tomorrow, we’re going to talk about feed prices.
Who gives a cow about that right?
Well, that’s the point.
We’re breaking down the impact of feed prices on U.S. corn contracts. It’s one small piece of the broader research model that we’re bringing to our audience later this year.
Brennan Turner and I really want to help you understand how all these various factors affect your crop prices.
The more you know, the more confidence you’ll have to start setting your price, and getting the best deal possible.
Second, and this is an amazing story out of Iowa. We’re going to dive into this one next week but I want to tell you about it. Iowa has the largest cereal producer in the country… but they don’t purchase any of their oats from any Iowa farmers.
Two questions that I want to answer next week.
First: Why is that happening?
Once we answer that, we’ll talk about a second question.
What can a company like FarmLead do to change that phenomenon in the future and give farmers the flexibility to grow any crop they want?
That’s all for today. Enjoy your Wednesday evening.