Nov 10 – Early Calls

FarmLead Breakfast Brief

Thursday, November 10th, 2016

“It is time for parents to teach young people early on that in diversity there is beauty and there is strength.”
– Maya Angelou
(US poet & civil rights activist)

Good Morning!
At 8:00 AM CDT in the North American futures markets (*not cash prices*):

(all prices in dollars per bushel unless otherwise indicated)

$1 USD = $1.3464 CAD, $1 CAD = $0.7427 USD)

Dec Corn: +3.3¢ (+0.95%) to $3.44 USD or $4.632 CAD
Jan Soybeans: +15.5¢ (+1.55%) to $10.065 USD or $13.552 CAD
Dec Soybean Meal (per short ton): +$3.60 (+1.15%) to $315 USD or $424.13 CAD 
Dec Soybean Oil (cents per lbs): +0.45¢ (+1.3%) to 34.76¢ USD or 46.80¢ CAD 
 Oats: +0.8¢ (+0.35%) to $2.233 USD or $3.006 CAD
Dec Wheat (Chicago): +3.3¢ (+0.8%) to $4.10 USD or $5.52 CAD
Dec Wheat (Kansas City): +3.3¢ (+0.8%) to $4.135 USD or $5.568 CAD
Dec Wheat (Minneapolis): +4.3¢ (+0.85%) to $5.188 USD or $6.985 CAD
Jan Canola: +11.3¢/bu / +$5/MT  (+1%) to $8.66/bu / $381.82/MT USD or $11.66/bu / $514.10/MT CAD

Yesterday’s Winnipeg ICE Close

Dec Barley: unchanged at $2.143 USD or $2.885 CAD
Dec Milling Wheat: +2.7¢ (+0.45%) to $4.568 USD or $6.151 CAD

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Early Calls

Grains this morning are all in the green this morning as the market is reversing its risk-off tune yesterday as the fall to new lows spurred some buying of the dip. Canola is up on a lower Canadian Loonie and palm oil production in Malaysia in October only coming in at 1.67M tonnes, a 17.6% decline year-over-year. The U.S.D.A.’s November W.A.S.D.E. out yesterday surprised the market with something more bearish than the market was expecting as yields for both corn and soybeans came in above expectations. This pressured the markets with soybeans leading the fall, down over 20 cents/bu at one point, with corn falling as well on some bearish pressures, whereas wheat just played follow-the-leader as it didn’t see really any changes to its supply and demand tables (Canadian and Australian production remain at 31.5M and 28.3M tonnes respectively). Overall, the market continues to try and understand what it means with Donald Trump in charge of the United States (including agriculture obviously!). However, without knowing exactly what he’ll pursue and what he won’t (he’s been known to flip-flop on issues…), it’s a bit early to forecast the long-term implications for the market.

Getting back to the W.A.S.D.E., American corn yields were pegged at 175.3 bu/ac by the U.S.D.A. this month, down 0.1 from last month but 0.1 bu/ac higher than the average pre-report guesstimate. This translates to a 15.226 Billion-bushel crop, 185M bushels more than what the market was expecting. The interesting thing on the demand front was that nothing was changed, despite exports soaring above where they were last year, paving the way for at least Jerry Gulke to suggest that we’ve seen the top of demand). One could argue though that the 2.225 Billion bushels that the U.S.D.A. already has earmarked for exports is already a 17`% jump year-over-year. All this equates to a 2016/17 carryout of 2.4 Billion bushels, 83M bushels higher than October’s number and a 38% climb from 2015/17’s ending stocks. Globally, worldwide production is seen at 1.03 Billion tonnes (+7.3% YoY) thanks to a bigger U.S. crop, Ukraine’s crop raised by 1.5M tonnes to 45.6M, and Brazilian and Argentinian crops making improvements over last year to 83.5M and 36.5M tonnes respectively (or 25% higher in Brazil versus 2015/16 and 26% better in Argentina).

For U.S. soybeans, national average yields were bumped up from October by 1.1 bu/ac to a whopping 52.5 bu/ac, a new record and a 9.4% increase from last year’s 48 bu/ac crop. This means total output was raised by 92M bushels to 4.36 Billion bushels (+11% YoY) but because the U.S.D.A. also kept soybean demand unchanged (including exports at a record 2.05 Billion bushels), 2016/17 ending stocks are seen at 480M bushels, an 85M bushels increase from October’s number and 283M bushels more than where we ended 2015/16 (or a 144% jump YoY). In South America, we think the U.S.D.A.’s numbers are a bit optimistic with a 102M-tonne crop in Brazil (+5.4% YoY) and 57M tonnes in Argentina (basically unchanged from last year), especially considering the acreage numbers being less than expected. China is still seen importing 86M tonnes of soybeans though, and overall, the global 2016/17 carryout is expected to come in at 81.5M tonnes (+5.8% YoY).

Coming back to Tuesday night’s sell-off, oil markets have bounced back a bit with eyes on O.P.E.C.’s next meeting, while the Keystone Pipeline seems to be back on the table (a good thing for the Canadian economy) as Goldman Sachs believes a Trump presidency will generously support investment in infrastructure (about $500 Billion was pledged by him over the next 5 years) meaning metals and oils are likely to get a boost, with even ethanol refiners seeing their share prices surge (meaning it’s good for ethanol too!). One thing that’s potentially back on the table is N.A.F.T.A. and while Canada would be open to re-negotiating a few things, it’s really Mexico that Trump has put a lot of negative focus on (keep in mind that Canada and Mexico are America’s 2nd and 3rd largest markets for farm/ag exports). There is some concern that Trump’s protectionist ideals could be tariff wars, but I think it’s too early to make that call as well.

As tomorrow is Remembrance Day, you will not be receiving a FarmLead Breakfast Brief, and instead I hope that you take the few minutes you do in the morning to read our commentary, to instead recognize the men and women who have battled abroad for our way of life, especially the fallen.

To growth,

Brennan Turner

President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
@FarmLead (on Twitter)

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.

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