Summer Supply


Grain Navigator - Summer Supply_april 6
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Executive Summary

World Ag Stage:

· Politics is economics.

· Potential for a global financial meltdown is growing. Especially, since Russia is forcing trade to be done in either gold or Rubles & using blockchain.

· Northern Hemisphere is entering into the growing season.

· Even though the commodity market is bullish there are good reasons why farmers should still pre price. The global financial situation could easily throw a curve ball and cause massive market volatility regardless of the agricultural fundamentals.

Overall Market thoughts

The number one focus point this year will be supply chain issues. From now until October these supply issues will affect agriculture around the world. It seems that there will be some sort of fertilizer shortage in the coming months. Which may or may not affect North America. However, it will affect South America. All it takes is for yields to drop below trendline and prices will remain strong for another year.

Brazil relies on imports for 85% of the fertilizer it needs for its grain crops. More than one-fifth of its imports, totaling 9 million tonnes in 2021, comes from Russia. -Reuters


Russia is the number one exporter of fertilizer. Even though, many countries have sanctions on Russia the fertilizer will still find a home somewhere. What this means is that there is going to be a disruption somewhere. In reality, we can expect yields to go down somewhat, but not drastically.

Previous Thoughts

Canola: Neutral. Soybeans and vegetable oil are wild cards. Don’t expect canola to change direction until spring.

Wheat: Extreme Cautious Bull – Political tensions and weather.

Barley: Slight Bearish. Majority of feeding is now corn

NEW RECOMMENDATIONS

Overall: New crop is setting up for a bullish scenario. Dryness in Midwest & Canada, supply chain ramifications, political tensions around the world and inflation.

Canola: Neutral. Expect new crop and old crop to start coming together. World is worried about supply.

Wheat: Neutral – Political tensions and weather. La Nina is expected to remain longer than originally thought. Ie. Same weather as last year.

Barley: Old crop is Neutral. New Crop is neutral to slightly bullish. Depends on the Ukraine seeding situation.

Canola

World Stage:

· Nothing new to report with Canola in general. Next month will be a different story. As of right now the world needs a bumper crop to bring these prices back down. In reality, it will take a few years to rebuild stocks.

· March 31 USDA release the intended seeded acres: Soybean planted area for 2022 is estimated at a record 91.0 million acres, up 4 percent from last year.

· The chart below shows how important bio diesel has become in the last twenty years. As long as government officials are committed to “green” energy then one can expect this trend to continue.

· However, these bio-fuel mandates could get scrapped if it becomes too expensive.






Market Zoning and Timing:

The market is transitioning from old crop to new crop. Traditionally, this happened in early July and the elevators would start pricing off November futures. This year it is happening already. It seems that New Crop canola is rallying to meet old crop futures. This implies another strong year for canola pricing as the market thinks that supply will not recover this year.


Risk To Reward Management:

· 2021- Gambling stocks. Technically the market could rally up to 1260/mt or about 28/bu

· 2022- Stand aside.

Smart Contracting:

· 2021- Use targets.

· 2022- Stand aside.

Current Trend and Looking Ahead:

· The current trend is decidedly bullish as the war in Ukraine adds to a lot of uncertainty.

· Over the next 6 months the trends are neutral to bullish. As the market could very easily settle in at around these current prices. There is currently no evidence that oilseed supply is going to increase to previous levels – that will take years.

Moving Forward:

· At this particular time there is really no advantage to doing anything more when it comes to marketing.

· The market is setup for a potential rally in July. It is important to know what the technical indicators are and where to place your targets to take advantage of such things.

Canola - General Selling Thoughts

Wheat -

World Stage:

In recent weeks the world has become captivated with wheat. It is well known that between Russia and Ukraine over 30% of the world’s exports come from those two countries.

The elephant in the room is of course China. It was well known that last year’s flood would impact the winter wheat production which is absolutely huge. In 2021 China was the world’s biggest wheat producer at 137 MMT or about 20% of the worlds production. Canada for refence is only 37MMT or about 5%.

The floods [last summer] delayed planting on more than 18 million acres of land, about one-third of China’s total winter wheat acreage. (Bloomberg)

Back in North America the US winter Wheat Conditions as of April 4 were the worst in many decades. Only 30% of the crop was rated good to excellent a difference of 22% to the negative from the 5 year average.

It doesn’t take much of a stretch to conclude that Wheat is setting up to be a very bullish commodity in the next 6 to 12 months.






Market Zoning and Timing:

If this market turns bullish over the next 6 months or so we can expect wheat to rally. Most likely it will retest the highs of 12.47 and possibly the 2008 high of 14. Wheat will rally much higher if production decreases by more than 10%, that would mean that the global production must drop below 700 MMT. Then $30 wheat is on the table.

We really won’t know how bad things really are until July. At this point the data will start to trickle in.

Risk To Reward Management:

· 2021- Only Gambling stocks left.

· 2022- It is still wise to be booking some grain at these current levels. There is nothing wrong with taking a profit. We are in unprecedented times.

Smart Contracting:

· 2021- Throw some lofty targets in.

· 2022-Use targets to achieve a desirable pricing level. Use the upper prices as guides price level.

Current Trend and Looking Ahead:

As stated above wheat is decidedly bullish. Outside of a bumper crop there is really no reason for the fundamentals of wheat to change. However, when the “big” markets decide to move the fundamentals don’t matter.

Moving Forward:

· At this point there isn’t much to do when it comes to marketing. The prices should stay strong at least for another year. Right now it’s probably best to wait and see what the summer brings. The volatility could be huge with is a massive opportunity if you’re paying attention.

Wheat - General Selling Thoughts Kansas or CPS


Barley

World Stage:

The top 10 producers of both barley and corn are in countries which have some significant stress points regrading this year’s potential production. Ukraine and Russia have a war, Russia and Argentina import a lot of fertilizer and the US is dry and corn acres are down. In Canada, barley production will likely be down from trendline, yet above last year’s level.

Global feed production is most likely going to decrease this year.



Market Zoning and Timing:

Old crop barley is a done deal. Feedlot and other end users have switched to corn leaving only mandatory barley demand remaining.

New crop seems to be creeping up as feed buyers and elevators are starting to put some sales on the books.

Risk To Reward Management:

· 2021- Make sure everything is sold before July.

· 2022- Some good sales have been made. There doesn’t really seem to be any rush in booking more right now.

Smart Contracting:

· 2021- Must book 2 months in advance to get max price.

· 2022- Use targets to sell.

Current Trend and Looking Ahead:

Moving Forward:

The world feed production is likely to be reduced somewhat. This means that there is really no rush in booking more barley

Barley - General Selling Thoughts

Extra Reading

The warm ocean current that keeps northern Europe habitable is weaker than at any time in the previous thousand years,

https://www.iflscience.com/environment/the-gulf-stream-is-at-its-weakest-for-more-than-a-thousand-years/


Food consumption for soybean oil over the past 10 years has risen only 5 percent, compared to a whopping 126 percent growth in industrial use.

https://thecounter.org/ukraine-biden-oil-us-reserves-biofuel-rfs-ethanol-soybean/>


China Faces Worst Crop Conditions Ever Due to Climate Change

https://ca.finance.yahoo.com/news/china-faces-worst-crop-conditions-030025463.html


Russia Just Told Us The Ruble is Implicitly Backed by Gold and Bitcoin

https://www.zerohedge.com/news/2022-03-25/russia-just-told-us-ruble-implicitly-backed-gold-and-bitcoin


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