Touching bottom?

This week's FarmLead looks at the pressures on grain prices for harvest 2016.

Grain prices continued to be pressured by the Harvest 2016 bears but stop-and-go progress have gotten the bulls a bit antsy to push higher.

I’ve been asked a lot lately by producers if we’ve touched a bottom yet and for corn and wheat we’re likely there. I’m not asking myself that question though because from a grain marketing standpoint, you shouldn’t be selling at the bottom anyways. If you’re now in a position where you have to make some sales because of cash flow reasons, please put a calendar alert in your phone for the July 30th, 2017 titled “Start considering locking in off-the combine sales so I’m not forced to make poor sales like I did last year.” Ultimately, I’m just trying to remind you that it’s important to make sales when can, not when we’re touching the bottom of a price pendulum.

We continue to see a strong spread between spring wheat and winter wheat futures as quality of the soft and hard winter, hard red spring, and durum wheat continues to vary as the crop comes off. Vomitoxin, fusarium, sprouting, low test weights, and low protein content are all affecting wheat quality this year. No grain buyer will bid you a price without knowing at least vomitoxin and fusarium levels this year. That being said, we’ve started to see feed wheat prices start to level out a bit as it’s now taking demand from other feedstuffs, with the U.S.D.A. recently stating that prices favour wheat over corn.

The N.O.A.A. (National Oceanic and Atmospheric Administration) is calling for above-average temperatures and precipitation over the next few months for most of the U.S., with the latter potentially being a catalyst to drive corn and soybean prices up as it would affect quality of the crop getting taken off during an obviously-slower Harvest 2016. With adequate moisture in August, the U.S. soybean crop is likely the dark horse this year in terms of production, and while demand has been strong, more than a few analysts believe beans could go lower before rebounding again. Should rains slow things down, we would think that traders are going to go the other way with their bets pretty quickly.

That in mind, Argentinian farmers may not plant as much corn as everyone’s expecting and there are soil moisture, seed supply, and credit availability concerns next door in Brazil, all issues we’ve been calling for a couple months now that would be one of the major bullish oilseed themes in 4Q-2016. Conversely, in India, they’re expecting a 270 million-tonne crop of grains, oilseeds, and pulses. This includes 8.22 million tonnes of pulse crops in just the current kharif season (+48% from last year’s 5.54 million tonnes, albeit it was a drought-ridden crop) and likely a lot more in the bigger rabi winter crop. As such, those not heeding our multiple calls in the past month to make some sales off the combine of lentils or peas are in store for a tough reality hoping for higher prices and not managing risk until values touch bottoms.

To growth,

Brennan Turner

President & CEO | FarmLead.com

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, Mr Turner spent time playing pro hockey and working in finance before starting FarmLead.com. FarmLead is North America’s grain marketplace a risk-free, transparent and mobile grain marketplace (available online and as an app) that has moved almost 350,000 MT in grain the last 2.5 years. His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (b.turner@farmlead.com) or phone (1-855-332-7653).

 

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