Jul 23, 2014
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Cash Grain Insights

RSS By: Kevin McNew, AgWeb.com

Kevin McNew is President of Grain Hedge and Geograin. McNew was raised on a farm in central Oklahoma and received his bachelor’s degree from Oklahoma State University, and master’s and Ph.D. degrees in Economics from North Carolina State University. For over a decade, he was a Professor of Economics at the University of Maryland and Montana State University, focusing on commodity markets. He has received numerous academic awards for his research and outreach work, and was (and still is) widely regarded for boiling down complex economic issues into easy-to-understand concepts for applied life.

 

Forecast Drier For Next 10 Days

Jul 23, 2014

 This morning the grain markets are mostly unchanged to slightly higher here with September corn up ½ a cent, September wheat up 2 cents and august soybeans up 2 ¾ cents.

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The weather forecast has turned drier in the western half of the grain belt with the next 10 days looking to bring more dry weather to that region.  Today should bring some showers to southeastern Minnesota, northeastern Iowa, Illinois and southern Ohio. Rains will be needed during August to maintain the crop quality in the western half of the grain belt. Soybeans and corn in Minnesota, North Dakota, South Dakota and Wisconsin which received significant precipitation during the earliest parts of the season will be most susceptible to moisture stress due to their shallow rooting. Despite the drier weather outlook, we continued to see selling pressure yesterday as soybeans broke through key support of $10.65.

Two military jets were shot down in Eastern Ukraine this morning, but at the moment wheat futures are not showing any buying interest as a result. The USDA’s attache in Ukraine released a report yesterday after the market close stating that harvest in Eastern Ukraine had been slowed by the military conflict but "Grain exports for the new marketing year are starting off well." U.S. wheat futures are showing very little interest in the Ukraine story following one day of buying last week. We will continue to monitor the situation for any changes in the export outlook.

Weekly ethanol production will be released at 9:30 central time and is expected to show another strong week of U.S. ethanol production. A collapsing corn market has helped to offset lower DDG prices and a sideways ethanol market. Ethanol facilities remain aggressive bidders of old crop corn. Anyone with remaining old crop bushels may find premium at ethanol facilities for late season sales.

String of Reportable Sales This Morning

Jul 22, 2014

 The grain markets moved a couple cents higher in the overnight after trading down for the better part of yesterday. September corn is up 1 ¼ cents September wheat is up 4 ½ cents and august soybeans is up 14 cents this morning.

Crop conditions were released yesterday after the market close, showing small changes week over week. Corn conditions were left unchanged at 76% good-to-excellent while soybean conditions improved a percent, now rated 73% good to excellent. Progress is moving along nicely, with 56% of corn now silking and 19% of soybeans setting pods. The next several weeks will be critical for final yield and the forecast for pollination is looking very favorable. The 6-10 day forecast from Planalytics shows above average precipitation and below average temperatures for the U.S. grain belt.

A string of export sales were reported this morning with exporters selling 225,000 metric tons of U.S new crop soymeal to unknown destinations, 180,000 metric tons of U.S new crop soymeal to Vietnam and 20,000 metric tons of U.S. new crop Soyoil to unknown destinations.

Also on the demand front, Taiwain flour millers association has released a tender overnight to purchase 80,900 tonnes of milling wheat from the United States. The tender will close on Friday, July 25th, and will give a better idea of demand following a three month price decline. Japan’s Ministry of Agriculture also issued a tender to buy 94,586 metric tons of food quality wheat from the United States, Canada and Australia. The tender should close Thursday.

Yesterday, new crop soybeans were able to hold the key support level of $10.65 after twice attempting to penetrate that price level. However, November soybeans were able to rally 6 cents off their lows to close out the day, giving hope that we have found a short term bottom. Today it will be important to watch the $10.65 price level again since another test of that level will likely yield lower prices.

This morning there was talk out of Argentina that grain shipments out of the port of Rosario started up again on Monday after several unions’ suspended strikes. The unions will continue to hold talks with the companies, but at least for now it seems that grain will once again be moving out of the country. We have seen these strikes end only to start back up again last week so we will keep a close watch on any further developments out of Argentina. The strikes out of Argentina have been a supporting factor for old crop U.S soybeans.    

 

 

 

Grain Gap Lower in the Overnight

Jul 21, 2014

 This morning all the grains are trading lower as ideal weather during pollination weighs heavily on the market. September corn is trading down 6 cents, September wheat is down 3 ¾ cents and August soybeans is trading 4 ¾ cents lower.

This afternoon’s crop progress report should show unchanged conditions ratings and nearly 50% of the corn and soybean crop entering the reproductive phases. Weather looks to remain very favorable for the remainder of the week with NOAA and private analysts both expecting cool temperatures across much of the grain belt. Showers should be light and intermixed, continuing to support soil moisture.

 

The longer term outlook remains favorable, with the 8-14 day forecast from Planalytics projecting below average temperatures and above average precipitation for the majority of the grain belt. This is confirmation of NOAA’s projections from last week for a cool, wet, August for the U.S. grain belt.

 

New crop soybeans are now 6 cents away from the low printed at $10.65 per bushel following the last USDA supply and demand report. Since then new crop soybeans rallied to $11.18 ¾ last Thursday, helped to its high on Thursday by the Malaysian airlines incident over eastern Ukraine. The geopolitical event was used as a selling opportunity after the initial reaction sent soybean prices higher. Keep a close watch on new crop soybeans around $10.65 which should act as a strong support level during today’s trade.

 

Over the weekend France and Germany both received precipitation that stopped fieldwork during harvest. The moisture throughout Europe during harvest has caused quality concerns for the wheat in that region. This is has been an ongoing story this year for European wheat and the U.S markets are unlikely to respond to it in any kind of meaningful way. 

 

On the demand side this morning we have some action. Export sales of 135,000 metric tons of soybean cake and meal to unknown destinations for new crop delivery and 120,000 metric tons of old crop soybeans to China. On the global front, Turkey’s state grain agency issued an international tender to import 165,000 metric tons of milling wheat and 65,000 metric tons of animal feed barley. 

 

Markets Mixed on Geopolitical Uncertainty

Jul 18, 2014

 Grains traded a quiet overnight session following yesterday’s volatile trade day. Corn is down a penny, soybeans up 3 cents, and Chicago wheat is of a penny. The situation in Ukraine has done very little to move the grains or outside markets in the overnight session as we see crude oil and the S&P 500 trading unchanged. Facts are still being sorted out as to who fired the missile that downed the Malaysian Airline flight yesterday morning and, for the moment, this story has not greatly impacting U.S. grain prices. Escalation in the conflict would support U.S. grain futures, especially wheat which traded up nearly 3% yesterday.

This morning there was another reportable sale for new crop soybeans to unknown destinations for 464,000 MT. This is the second large new crop sale in two days showing demand for soybeans at $11 is picking up. Soybean is the only grain that traded higher in the overnight session.

This week’s AMS grain transportation report showed that all locks north of St Louis are open along the Mississippi river following the temporary closures caused by flooding from this springs heavy precipitation.  The reopening of the locks in the northern Mississippi has increased the demand for barge traffic which has lifted the rates from Minneapolis-St. Paul to the Gulf 18% higher than rates before the flooding disrupted grain transportation three weeks ago.

 

The Ukrainian situation and weather will be the major driver into next week’s trade. We now have a sizeable portion of the US corn crop silking and, for the moment, weather conditions look near ideal entering August. NOAA released their updated weather projection and their models indicate average precipitation with slightly below average temperatures through August. The next major weather event for this market could be towards the end of September as an early freeze becomes a concern. We continue to feel that producers who find themselves under-sold on the new crop should price grain on any rallies and use a call strategy if they are still bullish the longer term outlook. If you would like to discuss your specific marketing situation please feel free to call our office. Our number is 877-472-4607 and we are available between 8AM and 4PM central time.

 

Strong New Crop Bean Sale!

Jul 17, 2014

 The grains shed a couple pennies in the overnight session with old crop corn down 2 cents, Chicago wheat down 1 cent, and august soybeans down ¾ of a cent. Expectations at the office here are for a continuation of yesterday’s bounce, but we are concerned that the upside potential will be limited as strong selling pressure will likely meet any sharp rally. A strong new crop soybean sale to china should also help support the market this morning.  

 

Corn had great export sales this week beating expectations for both old and new crop. Old crop sales came in at 573,700 MT which was well over expectations of 250,000 to 350,000. Old crop corn still ahead of pace to meet USDA expectations by about 43 million bushels.

 

Soybeans met analyst expectations for both old and new crop. Old crop sales were small, but at least they were positive which kept soybean sales well ahead of pace to meet analyst expectations. This weeks 37,700 MT pushed old crop sales now 38.7 million bushels ahead of existing export projections which indicates that net cancellations must occur between now and August 31st to meet USDA projections. New crop sales were slightly lower than expected with only 495,000 MT booked, compared to expectations between 500,000-700,000 MT. However, a reportable sale announced this morning of 708,000 MT of U.S soybeans to China should help lift the market. Wheat sales missed expectations to the low side only booking 320,700 MT compared to expectations of 400,000-550,000 MT.

 

The European Union will begin taxing corn imports at a rate of $7.2 per metric ton. This was announced following U.S. export prices at the gulf moving below levels required by the European commission. Imports of corn have not been taxed since August 2010 and this is viewed as negative news for U.S. corn prices.

 

Port worker strikes in Argentina have continued on Thursday. The key export facility of Rosario has come to a stand-still as port workers and grain inspectors are demanding higher wages. Argentina is a major exporter of soymeal and soyoil, and the strike has worked to underpin the soy complex in the last two days.

 
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