November 2017 Grain Prices Recap

As we head into the last month before 2018, grain prices will be impacted by two key reports in the first half of December On Wednesday, Dec. 6, StatsCan will release its next production report. The following week, the USDA will release the December WASDE report.

Before we kick off Monday’s trading session, let’s look back at November to see where grain prices moved. Then, we’ll give you some insight on how to capture the upside of the market and make sure that you’re getting the best price possible for your grain in the new year.

Corn Prices Dip in November

We’re a long way now from the bullish sentiment that we saw over the summer. There was a time that many were talking drought conditions and fewer acres due to dry spells in the Western Corn Belt and lots of rain in the Eastern Corn Belt.

Corn prices ended the week up 1.15% but did lose 1% in November.

Put another way, from where it started to where it finished, March corn futures only moved about a nickel.

The highlight of the month came from the USDA’s monthly Crop Production report. The U.S. agency hiked corn yield expectations by 3.6 bushels per acre to 175 bushels per acre, a figure that added 300 million bushels to total production. The agency expects that the U.S. will produce roughly 14.6 billion bushels in 2017/18. This puts carryout set at nearly 2.5 Billion bushels.

A few weeks later, the USDA put out their ten-year crop outlook estimates, which included a first look at 2018 acres, production, and carryout.

Productivity and efficiency remain high and the USDA isn’t changing its price outlook.

They’ve set the price at $3.20 per bushel, which isn’t good news for farmers looking for a reason to grow corn next year.

US average corn yields for 2018 came in at 173.5 bushels per acre. The USDA is expecting corn acres to come in at 91 million acres.

This means 2018/19 US corn production is expected to hit 14.5 Billion bushels and a carryout of 2.61 billion bushels.

That said, it is good news for livestock producers who are scooping up product thanks to low feed prices. Should feed prices remain lower for longer, we might see an expansion of the U.S. livestock herd, which is already hovering near records.

Looking ahead, strong production will require stronger demand, or elsewhere we’re going to be locked into these lower prices. Next year is starting to look closer to 2016 and 2017 than what we saw earlier this decade.

Soybean Prices Trade Sideways

January soybeans traded sideways this week and the month – it opened November at $9.848 USD/bushel and closed at $9.858.

In November, the USDA didn’t change much to the soybean balance sheet. It kept its yield expectations for soybeans at 49.5 bushels per acre. The agency said that acres would remain at 89.5 million acres. Production did take a small, hit down 6 million bushels to 4.425 billion bushels.

Everything else on the balance sheet basically stayed the same (including crush numbers), meaning 2017/18 ending stocks were only lowered slightly to 425 million bushels.

The USDA’s decision surprised a lot of people. Simply put, many analysts believed that production number from October was just too high. They expected that the agency would slash that number down significantly. When it didn’t come, we saw soybean prices react poorly.

The month was marked by stronger Chinese buying, a trend that was very welcome in the wake of the slow buying patterns that we saw earlier this summer. But we have to be careful when digging into why this uptick has happened. Following the record crop harvested down in Brazil, regional farmers have been slow to sell their crop due to low prices.

Those same farmers are going to have to start moving crop. 2018/19 soybean acres in Brazil are expected to increase a bit, albeit not at the pace we’ve seen the last few years. Regardless, the Brazilian crop in the new year is still going to be quite large.

The one factor that has emerged as a potential bullish trend has been La Nina. We just don’t know yet how much the cooling patterns are expected to impact South American production just yet. As we know, it’s difficult to wager on the weather.

If the weather holds, we could be looking at “lower for longer” prices through at least February. We’ll know more about the impact of the weather heading later this month.

The USDA is still bullish on U.S. exports for the year. “Soybean export volumes continue to set records, raising the soybean forecast [by] $200 million, to $24.1 billion, which offsets expected declines in soybean meal and oil,” the agency recently wrote in its outlook for 2018.

That may be reflective in the USDA’s recent estimate that the nation will see a record 91 million acres set for planting this year.

Canola Prices Remain “Blah”

Canola prices in November failed to drive much excitement, ending 1.6% lower than where they started. We did see a nice pop in the middle of November after we made the recommendation to make some sales on.

Putting pressure on canola prices on the second half of November was the Indian government effectively doubled import taxes on vegetable oils overnight. For palm oil, soy oil, canola oil, and others, India is now charging at least 25% to get the product into the country.

While it’s a better-than-expected crop was taken off in Western Canada, there’s been another surprising factor: demand. Canola crush and exports are running roughly in line, if not a bit above last year’s record pace. We do tend to see some softening for canola prices through Christmas with support on the Winnipeg ICE futures boards at CAD 500 / metric tonne and resistance closer to $520. In the next eight weeks, there are a few things that will dictate any bullish moves, including:

  • Stronger exports or crush numbers;
  • A weaker Canadian Loonie; or,
  • Issues with the South American soybean crop.

This week, we’re keeping an eye on the official report from StatsCan. Average pre-report guesstimates for canola were pegged at 20.2 million tonnes, compared StatsCan’s September estimate of 19.7 million and last year’s canola crop of 19.6 million tonnes.

The market is expecting production to stay flat or increase for pretty much all crops in Canada from the September forecast. Only corn and soybean production numbers are expected to come down a bit.

Keep in mind something that we noted back in September: StatsCan has a history of making Canadian crops bigger once they’re in the bin.

december-statscan-crop-production-estimates-farmlead
StatsCan has a bad habit of underestimating the Canadian grain crop


Wheat Prices Dip Ahead of StatsCan Report

Chicago soft red winter wheat prices lost 0.8% loss in November.

Kansas City hard red winter wheat prices posted a 0.5% loss.

Minneapolis hard red spring wheat prices lost 1% this November.

The USDA said in the last week of November that for the 2018/18 wheat crop, American farmers would plant just 45 million acres or the smallest in nearly 100 years. The International Grains Council is even more bullish, forecasting just 44.2 acres attributed to American wheat for the 2018/19 crop. This includes just 37.6 million acres of winter wheat, which would be the lowest since 1890!

The ability for Russia to export grain continues to impress. It’s expected that in the 2017/18 marketing year, over 45 million tonnes of grain will be shipped out of Russia. That’s up ninefold in the last 15 years. The Russian government is saying that they want to increase monthly grain export capacity in the next 3 years by 50%. This would mean going from 5 to 7.5 million tonnes a month. Or 90 million tonnes a year.

That seems aggressive. However, it was widely speculated that by the end of November that they’ll have exported 15 million tonnes of wheat for the 2017/18 marketing year.

In North America, through the end of November, we know that:

• US wheat exports are about 7% below last year’s pace at a little more than 11.6 million tonnes
• Canadian wheat (not including durum) is nearly 8% ahead of last year at 5.08 million tonnes.
• Canadian durum exports are tracking 11% ahead of 2016/17 at 1.3 million tonnes

We’ve seen cash wheat prices in the US improve a bit, but the protein premiums aren’t supporting sales of the best quality stuff on the cash market in Canada.

From a direction standpoint, check out what cash wheat prices around you are looking like on our new Price Discovery feature.

November was a Month to Forget for Pulses 

November 2017 will be a month that most pulse crop farmers want to forget.

On Nov. 8, we get a heads up from India that they’re going to start taxing the importation of peas by 50% and wheat by 20%. This is pretty crappy for Canada considering that it’s the number one destination for pea exports. And by a long shot.

In 2016/17, India imported 3.2 million metric tonnes of peas. This included 2.02 million tonnes from Canada and more than 127,000 MT from the U.S.

From a different perspective, Canada produced a little more than 4.8 million tonnes of peas in 2016/17. To all destinations, Canada exported nearly 3.35 million tonnes of peas in 2016/17.

Thus, India received 60% of all Canadian pea exports.

Put in even another way, India got 42% of all Canadian peas produced in 2016/17.

In the first two months of this marketing year, Canada has exported nearly 196,000 tonnes of peas to India. The three-year average over the same time is more than 465,000 tonnes. These two months usually end up accounting for nearly 1/3 of total-crop-year Canadian peas exports to India.

China seems to be the next legit option for the peas market. Over the past three years, Canada has shipped an average of just under 170,000 tonnes to the People’s Republic in the first two months of the crop year. This year, 421,000 tonnes of Canadian peas have been sent to China in the first two months of the crop year. To date, about a little more than 850,000 tonnes of Canadian peas have been exported versus the nearly 1.5 million tonnes shipped out by this time a year ago.

So while China is taking in more peas, is this the right move for India?

As respected Indian pulse market analyst G. Chandrashekhar puts it, “yellow peas provide the most economical vegetable protein for the protein-starved people of this country.” The negative effect is the removal of peas bids (especially yellows) from many buyers’ text messages, emails, and website. There’s also more rumors in India business journals that chickpeas and lentils import tax are next.

Our friend Chuck Penner of Left Field Commodity Research notes that record prices in the chickpeas market aren’t likely to stick around. Between the southern hemisphere chickpeas crop from Australia and Argentina hitting the market in a few weeks and bigger acreage In India and Mexico, high prices are helping find more production.

Who doesn’t like record prices? Those who didn’t sell when they were at a record, that’s who. Post a block of your chickpeas on the FarmLead Marketplace today.

Finally, on the lentils front, prices continue to slide as the Rabi crop in India gets planted. Simply put, supply has caught up to demand. Anyone hoping for prices similar to those from the past two years should end those ideas. Those who are thinking the price will come back in a few years should also be careful of that strategy.

How to Get the Best Possible Grain Prices in 2018

Grain marketing is quite a challenge. The harvest is coming to a close across the United States in the corn and soybean complex. Now the hard work starts. You need to know the best time to start selling your stored grain in blocks and capture price opportunities.

It’s very hard work to do on your own. There are hundreds of different factors affecting grain prices all around the globe, and thousands of stories and voices flying at you from all angles every week. That’s why we at FarmLead are going to simplify how you get information in the agricultural space.

We’re going to simplify the bullish and bearish factors and provide real value in helping you identify the best time to sell your grain.

Look for a major announcement this week at FarmLead.

 

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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