This Week in Markets — Truth Behind the Numbers

As we close the month of August, the harvest itch was replaced in most areas with frustration as most of the U.S. Midwest and Canadian Prairies got hit with some untimely, heavy rains. The recent rains were seen as positive for both sides of the cornbelt with Iowa, Illinois, Indiana, & Nebraska all getting a drink that was overdue, hence the decrease in soybean prices over the course of the week. After their crop tour last week, ProFarmer pegged their overall U.S. corn yield at 169.3 bu/ac (U.S.D.A. at 169.3 in the last W.A.S.D.E.) and total production at 14.093 billion bushels (14.032 billion). As for soybeans, the group says 45.35 bu/ac will come off, on average, from American fields (U.S.D.A. at 45.4 bu/ac), creating an output of 3.812 billion bushels (U.S.D.A. at 3.816 billion). The questions that remain as the corn and soybean harvests start up now is just how much of a record will the crop be and where will it all go? To answer the second question, there’s definitely going to be more than a few grain piles on U.S. fields this year and if rail companies don’t improve service in some parts, said grain will continue to sit there. Frustration is certainly building in North Dakota, South Dakota, and Minnesota (tell us about it eh!).

That being said, the rains that fell in the northern U.S. and here in the Canadian Prairies aren’t helping much, as the cereals and pulses are trying to finish out and farmers are trying to get into the fields to cut down crops that are ready. Early indications are that green lentil prices and pea prices could see a climb over the next couple weeks but red lentils won’t match the move, and if you have the quality that’s been sought for wheat, you will likely be able to earn a premium. Already, reports are growing of disease issues across the earliest harvested winter and spring wheat crops, suggesting that knowing what quality you have this year will be important (one of the reasons that FarmLead partnered with S.G.S. so you could order grain tests from directly from the FarmLead.com website!). The numbers will be critical this year, in terms of potentially getting a bounce in market prices and also getting the best price for your grain if you’re looking to sell some. On the canola end of things, swathing is getting going, but it’s behind schedule almost everywhere, which isn’t necessarily a great thing. Further, risk of disease and weather effects could push the market higher and given the fact that we’ve dropped significantly from the $500/MT level in mid-May, canola prices may be due for a short-term correction.

In the wheat market, increasing geopolitical risk premium – nay, Putin Premium – was built in this week although the complex has retreated from its mid-week highs. Why? There are definitely Russian troops in Ukraine assisting the pro-Russian Ukrainian separatists. Russia is denying their military presence while everyone from the Ukrainian President, Petro Poroshenko, to N.A.T.O. is accusing Russia of entering Ukraine sovereign territory. Good ol’ Vlad is certainly playing his cards very sharply, especially given the fact that Poroshenko and him just met face-to-face on August 26th! Theoretically, that’s like having your ex telling you they’re not seeing anyone and then coming home to supper and seeing them at the dinner table with your sibling! Ultimately, Russia has many reasons why it wants control of more of Ukrainian territory than just Crimea, including manufacturing and natural resource extraction in the eastern part of the country.

Coming back to North America, there’s increasing buzz in the market about the sudden death syndrome (S.D.S.) hitting some soybean fields in parts of Illinois, Iowa, Missouri, & Indiana. In my opinion, there’s not a lot of bullish news out there right now, so to even out the playing field, this story is being pushed. If anything, the technical components of the market are what’s showing a possible short-term correction in soybean prices, not a few fields seeing yield potential drop from 50 to 10 bu/ac. That being said, S.D.S. is a disease that can overwinter and so re-planting those fields next year likely won’t happen. That being said, the earliest of Plant 2015 surveys from Farm Futures suggests U.S. farmers will  increase their soybean acres by 2.6 per cent in 2015 to a second consecutive record area of 86.6 million acres, while dropping corn acres again by 1.25 per cent to 90.5 million acres.

This week, ICE Canada put out some press on its “new” barley futures contract, saying that if additional participants join major Canadian grain industry players, liquidity will grow and the contract could a feed barley benchmark for price-discovery and risk-management. Ironically, ICE Canada President & CEO Brad Vannan went on to say that “futures markets do not create cash market” but rather it’s the other way around. Anyone know of an easily-available system that provides cash grains price discovery? I do! And the numbers don’t lie!

 

Brennan Turner

Brennan Turner is originally from Foam Lake, SK, where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, he spent some time working in finance before starting FarmLead.com, a risk-free, transparent online and mobile grain marketplace (app available for iOS & Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email ([email protected]) or phone (1-855-332-7653). @FarmLead

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Wheat prices jump into August — This week in the grain markets

This week, winter wheat prices touched a three-year high, but it didn’t last. Chicago SRW wheat prices for September 2018 gained 5 per cent or about 26 cents US/bushel to close at $5.56. While the December 2018 contract was up 5.4 percent — or nearly 30 cents — to finish a tad under $5.80. In…Read more »

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