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December 2013 Archive for 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.

 

Overnight Trade Shows Little Bounce Back

Dec 31, 2013

 Grains found little to pull it back from Monday’s selloff in the overnight session, with wheat and soybeans posting modest advances while corn slipped further on a fractional loss.

News from South America continues to be adding to bearish sentiment. Crop-friendly rain fell over much of Argentina's corn and soybean growing region over the weekend and more rain is expected in the northern two-thirds of the country. There was rain over the weekend of 0.50 inch to 1.50 inches in the north and less than 0.50 inch in the south. It remained rather dry in the La Pampa and Buenos Aires growing region, but other areas of Argentina received welcome showers. Dry weather is expected to return to Argentina at the end of the week. Rains are expected to continue in nearly all areas of Brazil. On Monday the Rosario Grain Exchange put its estimate of the Argentinean soy crop at 55 MMT, slightly above USDA’s estimate of 54.5 MMT. In Brazil's top-producing state of Mato Grosso, reports of harvested soybeans in the state have come from three regions where farmers were able to plant soy just after the season began on Sept. 15.   

In corn, export inspections on Monday were a disappointing 25 MB after traders had been looking for exports of 28 to 35 MB. Export basis levels continue to hold strong with booked sales likely to lead to more export movements in the coming weeks. Interior basis levels continue to show no definitive trend with most end-users keeping bids steady as of the last few weeks. However, this year producers should have their eyes focused on river terminals as basis levels are generally 8 cents a bushel better than last year at river markets, while ethanol plants are running about 17 cents less than last year’s basis for this time of year.

2013 12 31

For wheat, the psychological $6 level on Chicago March wheat was tested overnight but managed to bounce above $6 in the night session.  Wheat speculator trimmed their net short position by 892 contracts according to the CFTC latest report, but still hold a large position of 102,429 contracts as of the week ending Dec 24. The Rosario Grain Exchange raised their Argentina wheat crop forecast to 9.5 MMT from a previous estimate of 9.1 MMT.  India's State Trading Corp issued a global tender to export 160,000 MT of wheat for shipment between Jan. 18 and Feb. 18, a company statement showed on Monday.  Earlier, another state-run trader, PEC, offered 190,000 MT of wheat in two global tenders, underscoring the global competitiveness of the wheat market right now.

Rains Deflate Bean Rally

Dec 30, 2013

Grains were lower overnight, but pared losses by the end of the night session.

Rains in Argentina over the weekend helped push bean prices lower. Widespread thunderstorms eased the threat of yield damage for both crops after prolonged hot, dry weather had supported global prices. Also, China announced it would eliminate its cotton and soybean stockpiling program and replace it with direct subsidies to farmers. This could lead to stocks being put on the domestic market, although this will not hurt China's soy purchases as a majority of crushers in the coastal regions are already dependent on imports. In the US cash market, basis levels are coming under pressure as buyers roll to the March contract and take some spread out of the market. Friday saw another move lower in the March-Jan spread on futures, but cash traders continue to trade at a high level than the futures.

2013 12 30

In corn, markets were lower as large supplies continue to keep prices on the defensive. Friday after the close USDA’s Quarterly Hogs & Pigs report showed slightly lower hog inventory than expected. The report showed the U.S. hog herd as of Dec. 1 at 99 percent of a year ago, or 65.940 million head. Analysts, on average, expected 66.307 million head, or 99.9 percent of a year earlier. The U.S. hog herd for the same period last year was 66.374 million head. The quarterly report was the first to show a noticeable drop in hog numbers, which analysts attributed to Porcine Epidemic Diarrhea virus (PEDv), reinforcing expectations that herds will shrink as the industry struggles to develop vaccines to treat the virus that has killed thousands of young pigs across 20 states.

In wheat, Russia projected its 2013 wheat crop as 37% higher as compared to the bad-harvest year of 2012 (39.7 MMT), with their 2013 estimate at 54.4 MMT. This is quite a bit higher than the USDA estimate which puts the crop at 51.5 MMT.

 

Corn Exports Bring Holiday Cheer

Dec 27, 2013

 Grains found modest support following Thursday’s sell-off. Corn was up 1 cent with wheat fractionally higher. Beans came back with a 7-cent advance.

The corn market got another round of negative news on Thursday when it was announced that China rejected 2,000 MT of U.S. dried distillers grains, a corn by-product.  More rejections are expected in coming weeks as Beijing imposes strict checks over an unapproved genetically-modified (GMO) strain. China, the world's top buyer of U.S. DDGs, accounted for about 40% of U.S. exports during the 2012/13 marketing season. Unlike corn, exporters fear cargoes will be difficult to switch to other destinations as the substitute for corn and meal in animal feed is not widely used in the rest of Asia. This morning's USDA export sales report was way above expectations with nearly 2 MMT sold for old-crop and new-crop combined.

For soybeans, weather continues to favor crop growth in South America. Thundershowers have been scattered across the northern half of the corn/soy areas over the past two days. Rains will continue to favor northern Brazil this week, but flooding concerns will be limited to Goias. The main showers begin to shift south this weekend, favoring central areas and providing timely rains for drier areas of Parana. In the US, spot basis continue to be on the defense, losing 7-cents a bushel for the month of December, now on par with the 3-year US average. Meanwhile corn continues to trade at about a 4-cent premium to the US average but seems destined to fall further as export woes continue.

2013 12 27

In wheat, the market has found modest support as a cold snap in the Midwest has the potential for winterkill. Some areas of central Illinois and Indiana, where snow cover is lacking, may see some damage to dormant soft red winter wheat during a cold snap early next week. But overall, temperatures are not expected to drop enough to cause winterkill in major wheat producing areas such as Kansas. Jordan's state grains buyer said on Thursday it had made no purchase in a tender to buy 100,000 MT of wheat and that it was seeking the same quantity again in a new tender.

WEEKLY EXPORT SALES (in thousand metric tons)

 

Actual

Expected

Corn

1,987.7

550-750

Soybeans

788.3

500-700

Wheat

656.9

350-550

 

Morning Markets: Beans Advance

Dec 20, 2013

 Grains were mostly lower in overnight trade with corn and wheat posting 2 cent losses while beans were bucking the trend with a 3-cent advance in the front-month January contract.

Wheat continues to sink to new lows, adding to its 7th day in a row of lower trade. All tolled prices have given up about 10% in the last 3 weeks as global surpluses continue to pressure the market. Overnight, Germany, the EU’s second largest producer and exporter, was projected to see higher production in 2014 as plantings are up 2.5% from last year. On the bullish side, Brazil flour millers are looking to the US for HRW wheat supplies as Argentina was unable to deliver on contracted supplies for January. Argentina's 2013/14 wheat crop should come in at 9 MMT, up from a previous forecast of 8.5 MMT, the Agriculture Ministry said on Thursday in its monthly crop report.

In corn, the China export cancellations continue to weigh on the market, but at the same time export business for the US continues to be brisk.  Weekly sales totaled 872,000 MT, above analysts’ expectations and announced sales in the last three days have totaled 575,000 MT. However, there is some belief in the trade that some of this business is not really new deals, but just re-signing old Chinese purchases to South Korea.

2013 12 20

For soybeans, exports were disappointing at 495,000 MT well off from the range of 700 to 900,000 MT expected by analysts.  India is expected to see a decline in soybean production according to an industry trade group there. Production last year in India was 11 MMT, with the trade group looking for a decline to 9.5 MMT, which will also lead to lower soymeal exports into the world market. In the US cash market, basis levels are mostly flat, with end users seeing high deliveries on contracted bushels. Some dump lines at processors in the Midwest are as long as 4 hours. 

Soy Sales Slump, Corn/Wheat Beat Expectations

Dec 19, 2013

 Beans posted a modest 2 cent recovery following Wednesday’s 20 cent selloff with wheat and corn also advancing modestly in overnight trade.

Soybeans took a hit on Wednesday thanks to technical selling and a sharp move lower in soymeal. Basis bids continue to hold firm at most export points as strong near-term demand keeps cash buyers in the market. Load out capacity at the Gulf continues to be a problem. Gulf export loading capacity is effectively sold out for December and nearly all of January. Some exporters have offers for late January, but they are at a steep premium to more distant months when capacity is more readily available. Gulf bids continue to hold at elevated levels.

 2013 12 19

In South America, corn and soybean growing conditions currently are favorable in Argentina but a turn to drier and warmer conditions into January could stress crops. High temperatures in the upper 90s are expected to persist there for the coming week. In Brazil, showers and moderate temperatures continue to benefit corn and soybean crops in Brazil.  

In corn, ethanol production for the past week was slightly lower by 16,000 barrels per day at 928,000 barrels per day. However, year-to-date production continues to outstrip last year’s pace by 10%, while USDA looks for only a 5% jump in corn used for ethanol in the current marketing year.

For wheat, prices continue to slump on large global supplies and foreign competition in the export market. Iraq bought 350,000 MT of Australian wheat overnight. French Analyst Strategie Grains sees the  2014/15 EU-28 wheat crop at 138.0 MMT, up 2% on the year due to higher plantings. Argentine exporters are still awaiting the government's green light to ship 1.6 MMT of 2013/2014 wheat that has already been sold. Brazilian mills bought 50,000 MT of US HRW wheat, and are thought to be in the market for more as their shipments purchased from Argentina are not moving out of ports.

WEEKLY EXPORT SALES (in thousand metric tons)

 

Actual

Expected

Corn

872

550-750

Soybeans

495

700-900

Wheat

659

300-400

Beans Gain in Overnight

Dec 18, 2013

 Beans added to the Wednesday’s gains overnight, improving two cents a bushel, while wheat continued to slump giving up 2 cents in the night trade. Corn traded in a narrow range with a fractional move lower towards the end of night trading.

Wheat continues to be on a downhill slide as ample world stocks continue to put pressure on global prices. The USDA pegged world wheat ending stocks at 182.8 MMT, a two-year high. On Tuesday, Egypt bought 120,000 MT of Romanian and Russian wheat for shipment Jan. 21-31.

For soybeans, the market continues to struggle with rampant near-term demand and expectations of large South American production. Satisfactory crop weather continues in South America with the few dry areas likely to receive showers soon. Dry areas in Argentina were in small crop-growing regions and that corn and soybeans are not mature enough at this time to be harmed by heat or drought. Overall satisfactory crop weather continues in Brazil. Barge rates have come under pressure in recent days which have helped give a modest lift in soybean basis along the river, and looking over a longer term, up 30 cents in the past month.

2013 12 18

In the corn market, bullish fundamental news has been in short supply of late. Continued concerns about the ramifications of Chinese GMO corn cancellations and the long-term implications of EPA’s proposed rule to the ethanol mandate. China has rejected more than 10 corn cargoes from the United States since mid-November, after tests showed an unapproved gene-modified strain, an influential agricultural consultancy said overnight. That figure, equivalent to about 600,000 MT, was six cargoes more than the number confirmed by China's quarantine authorities last week, private firm JC Intelligence Co. Ltd (JCI) said in a report seen on Wednesday.

Weaker Beans Overnight

Dec 17, 2013

On Monday, corn inspections were below trade expectations at 25.1 MB. But 34%, or 8.6 MB, were headed to China despite Chinese quarantine officials rejecting several cargoes of U.S. corn that tested positive for an unapproved GMO corn variety since mid November. Also hindering the corn market is a weaker export basis as river water levels fall. At St. Louis, water gauge levels were at a minus 2.27 feet on Monday afternoon. It was forecast to remain around minus 2.1 feet for the next week then recede to a minus 4.1 feet a week later, according to the National Weather Service. Several barges hit ground in the St. Louis area over the weekend due to the low water, the U.S. Coast Guard said.

For soybean’s, Monday’s NOPA crush for November came in below expectations at 160.1 MB, but was still the largest in nearly 4 years. Although it fell 1 MB short of expectations, soymeal exports bested expectations and helped put a bid under the soy complex on Monday. Also, USDA reported another week of big soybean export inspections - 62.5 MB for the week ending Dec 12.

In wheat, Egypt’s GASC announced a snap tender to buy wheat for late January delivery, as prices continue to sink lower. It is unlikely that US concerns will win the business with much of the export capacity into January devoted to corn and bean exports. Weekly export inspections were reasonably strong at 17.5 MB. Year to date exports for wheat are still running over a 100 MB ahead of the pace needed to reach USDA’s export forecast of 1,100 MB.

2013 12 17

Markets Continue to Drift Lower Overnight

Dec 16, 2013

 Grains were lower overnight with corn hitting a two-week low, giving up 4 cents. Beans and wheat were also lower, losing 6 and 4-cents respectively.

Corn continues to be pressured by concerns that China will continue to shun US corn imports after blocking three US cargoes found to have non-approved GMO traits. On Friday, it was announced Secretary of Agriculture Tom Vilsack will lead a team of senior U.S. officials and farm industry leaders attending annual trade talks with Chinese officials next week in Beijing, with recent rejections of U.S. corn shipments to be among the topics discussed.

For beans, Monday brings fresh demand data with NOPA’s November crush report. Analysts look for a crush number of 161.3 MB with a range of 157.5 to 170 MB. If realized, the trade estimate of 161.3 MB would represent the biggest November crush on record and the third largest for any month in NOPA records dating to the start of 2002. The record high was 164.377 MB from Dec 2009. On the export front, US export business continues to hold a healthy lead over the pace needed to reach USDA’s annual forecast.  But, whether it can persist with a record-huge South American crop seems unlikely.

2013 12 16

Overnight, Australian wheat was offered at the lowest price of $339.70 a MT in Iraq’s tender to purchase a minimum 50,000 MT of milling wheat . The lowest offer for U.S. wheat was $358.87 and Canadian wheat at $361.05 a MT. On the other end of the wheat quality spectrum, India sold wheat at $281.5 MT, higher than the government's new floor price of $260. The latest tender is part of the Indian government's plan to sell 2 MMT of the grain overseas until March to cut its large stockpiles. Russia’s Ag Minister is looking to target a 2014 grain crop of 95 MMT, up from a previous target of 90 MMT. The new forecast includes 55 MMT of wheat for 2014, higher than USDA’s 2013 forecast of 51.5 MMT.

Beans Get Spooked By China

Dec 13, 2013

 Grains continued to selloff in the overnight session with soybeans once again posting the biggest losses giving up 5 cents following Thursday’s 20-cent slide. Corn and wheat were down 3 cents in night trading.

A strong weekly export sales report on Thursday morning was muted by concerns over China potentially cancelling US bean business following more cancelled corn cargoes. Although it is speculative at this point in time, with a looming record crop from South America on the horizon, it could be a possibility that China will play the GMO card to keep prices in check. Domestically, soybean deliveries to crushing facilities continue to be strong with dump lines at several key plants in the WCB reported to have 3 or more hours of wait time. Not surprising, basis levels at crush plants on the whole have been weaker in recent days, while river elevators continue to bolster strong premiums for immediate shipments.

2013 12 13

In South America, recent showers in Argentina's farm belt helped growers seed their 2013/14 soybean crop on what is expected to be a record 20.45 million hectares, the Buenos Aires Grains Exchange said on Thursday. Western areas of the Pampas agricultural belt that had been in need of moisture received rain earlier this week and farmers there are reported to be 66% planted, up 8% over the last week.

In corn, a bill introduced by Senator Diane Feinstein calls to eliminate the corn ethanol mandate by the EPA. Ethanol experts said the EPA's proposed cuts, and backing for ethanol among many lawmakers, discounts chances that the bill would move forward anytime soon. Traders expect China to continue their strict checks for an unapproved strain of GMO corn into early next year as Beijing seeks to curb cheap imports and support domestic corn prices. Trade flows are being disrupted as exported look to move cargoes to countries that will not turn them away.

For wheat, price continue to be pressured by sluggish US export sales and more pressure from India who is reported to be putting 2 MMT of supplies on the world market in coming months.

 

Markets Take Lower Turn Overnight

Dec 12, 2013

 Grain markets were weaker overnight with soybeans leading the complex lower, down 7 cents towards the end of night trade. Corn and wheat drifted down by 2 cents in relatively quiet trade.

China announced another load of US corn was rejected after it found strains of GM traits not approved by the government. This load of 59,000 MT brings the total rejected by China to 180,000 MT in the past month. Overnight Taiwan bought a small load (23,000 MT) of US origin corn and 12,000 MT of US soybeans. On the domestic front, ethanol continues to be a bright spot with production surging last week to 944,000 BPD, the largest weekly figure since January 2011. Crush margins were $4.04 per bushel, the highest crush margin going back to January 2007. As a result, ethanol plants continue to aggressively bid spot corn. Since 12/3, ethanol plant basis is up + 1.2 cents compared to the national average of gain of + 0.5 cents.

2013 12 12

In wheat, Egypt’s GASC announced it had bought 300,000 MT of French and Romanian wheat. French farm office FranceAgriMer raised its estimate of soft wheat exports leading to a cut in projected 2013/14 ending stocks. FranceAgriMer pegged wheat stocks on June 30 at 2.4 MMT, down 500,000 MT from its November forecast. Overnight, the US did a deal with a Japan trading house that acquired 132,780 MT of food quality wheat.

For beans, the market continues to be choppy as near-term demand for US soybeans is at a blistering pace, but expectations of another record-large South American crop keep prices in check.  Overall soybean planting is moving along at a good pace and under ideal weather. As of early December 60% of the SA crop had been planted and heavy rains for Argentina in November with drier weather in December helped aid planting and development. The latest crop estimate for Brazil puts it at 90.7 MMT estimated by Confab, as compared to USDA’s forecast of 88.8 MMT.

Crop Report does little to Sway Markets

Dec 11, 2013

 On Tuesday, bulls and bears each got a sliver of hope in the latest round of USDA data, with corn bulls finding a silver lining in lower stocks, while wheat bears saw higher carryout than had been anticipated. But, the net result was not much in the way of strong conviction in terms of price direction. Overnight, trading was mostly sideways with soybeans picking up a few cents while corn and wheat were mostly unchanged.

The brightest news on Tuesday came from corn where ending stocks were below 1,800 MB thanks to improved usage forecast for ethanol and higher exports. Soybeans were modestly lower at a 150 MB as compared to expectations of q152 MB. USDA bumped export projections by a modest 25 MB, waiting to see if the exports will be able to sustain their lofty levels or whether deals will be canceled later this year. Wheat stocks bucked the trend showing higher than expected stocks on higher US imports from Canada.

Following Tuesday’s report, several key Western Corn Belt soy plants reduced their continuing a trend of softening spot basis levels over the past 3 weeks. However, with a negative carry beyond the next month, cash buyers are starting to bid up basis levels for March delivery with the overall cash market spread between January and March at a -14.8 cent discount across all cash buyers on average, as compared to the futures which is trading at a -16.25 discount between Jan & Mar futures.   

2013 12 11

Overnight tender business was fairly active with a Taiwan company seeking 23,000 MT of US corn and 12,000 MT of US soybeans. Bangladesh bought 50,000 MT of optional origin wheat. Egypt’s GASC is seeking wheat from a tender issued on Tuesday, but overnight they amended the tender to only source Russian wheat.

Markets Await USDA Report

Dec 10, 2013

 Grains gave up some of Monday’s gains as traders await new supply and demand data from USDA to be released at 11 am CST later today. Wheat was the leader to the downside giving up 4 cents while corn was off 2 cents a bushel.  Front-month January beans were holding on to a 2-cent gain towards the end of overnight trading.

Traders look for demand-side data on US crops to show improvement, especially with soybeans as 1.4 MB of booked sales have been made already as compared to USDA’s annual forecast of 1.45 MB.  Even corn and wheat have seen hefty export business of late, which is garnering support for lower ending stocks estimates.

2013/14 US Ending Stocks (in Million Bushels)

 

Dec Expected

Range

Nov Actual

Corn

1,864

1,737-2,013

1,877

Soybeans

153

118-170

170

Wheat

547

404-575

565


In overnight news, Brazil’s crop reporting service Confab raised their soybean production estimate to 90.03 MMT versus their November range estimate of 87.9 to 90.2 MMT.  The agency also pegged corn crop at 78.8 MMT, in line with the 78.5 to 79.8 MMT forecast last month.   The current wheat crop forecast was raised 11% to 5.36 MMT, up from 4.81 MMT in November, due to favorable weather in top producing state Rio Grande do Sul.  

Cash grain markets in the US continue to be relatively quiet with slow farmer sales and declining barge rates help give modest support to interior basis levels. In corn, basis levels continue to trade at elevated levels with basis levels in Iowa still mostly positive for key buyers. But, carry into 2014 seems slim as price spreads narrow offering farmers few incentives to store.

 chart 2013 12 10

Markets Shakeoff China Rejections

Dec 04, 2013

While the markets have been relatively strong in recent days, the news has been mostly negative. South American weather continues to be benign at the start of the growing season helping bolster thoughts of a record-large bean crop there. Abiove, a Brazilian oilseed group, projected a record 86.6 MMT of soybeans will be produced in Brazil this season, up from its previous forecast from 86 MMT. They also look for exports to come in at 44 MMT, outperforming US exports of 39.5 MMT expected this year.

In corn, China announced it has rejected 120,642 MT of U.S. corn after detecting a genetically-modified strain that has not been approved by Beijing. That is in addition to 60,000 MT blocked last month. On the domestic front, ethanol margins continue to be favorable which combined with slow farmer sales is managing to keep basis levels at high historical values. Even with a record-large crop much of the Midwest still sees positive basis values for corn, and spot basis values are running about 10 to 20 cents above historical norms for this time of year.  

For wheat, international wheat prices continue to head higher with Paris wheat futures hitting a 6-month high overnight. Egypt bought 60,000 MT of Romanian wheat on Tuesday for shipment between Dec. 20 and Dec. 31. The wheat was purchased at $304.89 per MMT. GASC has bought only EU and Black Sea region wheat since returning to the international market in July following a 4-1/2 month absence. In the US Plains, temperatures are expected to drop below zero (Fahrenheit) Friday and Saturday, and the wheat crop in northwest Kansas and west-central Nebraska could be harmed by the bitter cold.

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