Aug 29, 2014
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May 2014 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.

 

Positive Export Sales for Corn and Beans

May 30, 2014

In the overnight grains were mostly unchanged with corn up 1 ½ cents, soybeans  up ½ a cent and wheat down 2 cents.

Old crop soybean sales were reported at 60,030 MT this morning, at the high end of expectations. Accumulated export sales for the year now sit at 1.681 billion bushels, well above the 1.600 projected by the USDA for the marketing year. Many traders look for export sale revisions in the June 11th, USDA report. Considering old crop ending stocks are already just 130 million bushels, it could be a volatile day for old crop beans. New crop soybeans saw large sales of 821,100 MT in this morning’s report with China the largest reported buyer. Meal and soy oil sales came out in-line with expectations.

It was a very large week for old crop corn sales, with the USDA reporting 621,300 MT sold. This was well above trade expectations and should work to firm July corn futures. With July futures 50 cents off their highs and technically oversold, end users should view this as a buying opportunity.


Net cancellations of 52,400 MT were reported for old crop wheat, well below trade expectations for the week. This will only work to firm trade opinions that U.S. wheat has priced itself out of the world market. Just this morning a Ukrainian private analyst expected the 2014/15 Ukrainian wheat harvest to grow 1.2 million tonnes from last year’s harvest.  

China had a state corn auction Thursday the 29th to help ease their tight domestic supply situation. In the auction the government sold 1,848,558 tonnes for an average price of $350 per tonne. Of the 3.5 million tonnes offered 52.6 percent of the corn was sold.

This morning it was announced that China will lower their reserve requirement to free up more cash for banks to make loans. This reserve requirement is targeted toward certain banks that will be able to qualify if the proportion of loans to smaller-sized firms and the farming sector compared to their total lending meets certain levels. On April 16th China lowered the reserve ratio which only applied to rural banks to help lift the agricultural industry. The lowering reserve requirements should help the agricultural industry to access capital, which has been more difficult for crush facilities recently.    

Corn Basis Firms at Key Markets

May 29, 2014

Corn is trading down 2 ¼ cents this morning with soybeans up 5 1/2 cents continuing yesterday’s move. Wheat is also trading marginally higher up 3 3/4 cents after finding some support in yesterdays session.

Israeli private buyers purchased just over 108,000 tonnes of corn and 40,000 tonnes of feed wheat which closed yesterday. The grain was to be sourced from the United States and the Black Sea. Also across the news wires yesterday was a 110,000 tonne sale of U.S. Soybeans to China for the 14/15 marketing year and an additional sale of 172,000 tonnes of U.S. Soymeal to the Philippines for the same delivery period.  

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As corn futures continue to grind lower, basis levels are improving at a number of key facilities. Yesterday we saw spot corn basis improve 7 cents in Columbus, NE, now trading 2 cents above the July contract. This looks to be part of a larger trend in basis which has improved 2 cents on average across the country in just the last week. The river system has led the charge higher, averaging basis improvements of 4 cents over the week. With old crop ending stocks projected at just 1,146 million bushels basis may need to do the work in the summer months to pull remaining grain stocks from farmers. Contact the Grain Hedge office today to start taking advantage of our basis tools available free to trading clients. A Grain Hedge broker would be happy to discuss your best markets and help make the most of any remaining old crop sales.

On the weather front, today should be a nice window of planting for producers in North Dakota, South Dakota and Minnesota where planting pace continues to lag. However, tomorrow should usher in more rains for them which should continue until Tuesday next week. That weather system should track toward the east providing moisture throughout the grain belt. For the most part the market has shifted its focus away from planting pace concerns as planting pace is sufficient compared to the average pace. Traders focus is shifting more toward precipitation and emergence.

EIA ethanol numbers will be released later today and export sales will be released on Friday. Both reports were delayed one day in recognition of Memorial Day.  

Soybean Plantings Surge

May 28, 2014

This morning corn and wheat are both trading lower, down 3 cents and 4 cents respectively. Soybeans however has jumped 8 ¼ cents on light overnight volume. Traders should be cautious of soybeans volatility in the last month as it has become quite common to have a sharp loss one day followed by a rebound the next. Yesterday we saw selling pressure as a result of Chinese soybean auctions, but keep in mind the last time we saw selling due to auctions in China the following day ushered in a sharp rebound.

 

Soybean planting progress surged last week, now 59% complete across the country. The largest gains were seen in the North Dakota, South Dakota, and Minnesota where planting pace is now 31%, 64%, and 49% complete, respectively. Good planting conditions for much of the week helped farmers plant around 30% of the crop in each state, mitigating fears that northern states would struggle getting corn and soybean acres sown. Soybean planting pace is now 3% ahead of the five year average, with emergence off to a good start in the southern and central Corn Belt.

 

Corn planting pace was reported at 88% complete, up 15% on the week. Similar to soybeans, the largest gains were seen in the northern grain belt with North Dakota reporting 50% of the corn crop planted last week. Minnesota saw similar progress with 28% of the crop planted in just one week. Corn planting continues to be in-line with the 5 year average for this week in spring. Emergence and crop conditions will be the driving force in the weeks to come as planting wraps up across northern states.

 

Corn and Wheat inspections were positive yesterday, while soybeans inspections was reported on the lower half of expectations. Corn beat analyst expectations soundly with 1.16 million metric tonnes while wheat was reported at a strong 507 thousand metric tonnes. Soybean inspections were reported on the low side of expectations with 89 thousand metric tonnes last week.  

Grains Lower After Long Weekend

May 27, 2014

The grains traded lower in the night session following the long Memorial Day weekend. Corn is down 5 ¾ cents, Soybeans is down 11 ¾ cents and Chicago Wheat is down 9 cents going into the morning pause in trade. The USDA will be delivering the crop progress and the grain inspections report today which was delayed from its normal Monday release in observance of Memorial Day.

Chicago wheat is down in the overnight session falling below its 100 day moving average following moisture in the plains and a successful presidential election in Ukraine. Rainfall in the moisture deficient parts of the plains spurred on selling despite the fact that coverage was below expectations in some of the driest parts of central and southern Kansas. Texas got the better part of the deal over the weekend receiving 1-3 inches.

The Ukrainian presidential election held over the weekend resulted in an overwhelming win for the 48 year old billionaire Petro Poroshenko. Following the election Ukrainian forces mounted a strong offensive against the Rebels in the east that resulted in more than 50 pro-Russian casualties and no government casualties. With Petro Poroshenko winning more than 54% of votes compared to the 13% received by his closest challenger it would appear that a single voice of Ukraine has been elected. This could be the start to a resolution, barring any major Russian intervention.

Moisture across ND today should move toward the central and eastern parts of the Midwest opening up another planting window for the next couple days for the northern states. The next significant planting delays should arrive between Friday and Tuesday throughout ND and MN.

Soybeans are down sharply this morning, with another 300,000 tonnes of soybeans sold from China’s state reserves. The government sold 81.5 percent of soybeans offered, slightly higher than last week’s. The soybeans were sold for an average price of $660 per tonne. The Chinese government is scheduled to auction off 3.5 million tonnes of corn from its state reserves on the 29th.

Soybeans Soybeans Soybeans!

May 23, 2014

This morning the grains are trading higher with July corn up 2 ¼ cents, July soybeans up 4 ¾ and July Chicago wheat up 3 1/2.

Soybeans are continuing their move higher this morning, up 4 ¾ cents for July and 2 ¼ cents on November. Thursday’s export sales report confirmed that international demand remains strong for old crop U.S. soybeans even with prices near $15.00 per bushel. Net old crop sales were reported at 73,600 metric tonnes, well above the 100 – 150,000 tonne cancellations traders were expecting. Weekly cancellations are needed for the USDA’s current export projection to hold, with accumulated exports now above the 1.60 billion bushels in exports projected for the entire marketing year in the May USDA report. Demand rationing will signal the top of this market, and many soybean bulls feel that this week’s export figure and current crush data point to a market that still has some legs as we enter the summer months. New crop futures continue to follow the July contract higher, with November 14 soybeans futures up 4% so far this week. With large carryout expected for the 2014/15 marketing year we still feel this is a good pricing opportunity for a portion of new new crop bushels.

Chicago wheat is up 3 ½ cents in the overnight session after finding some support at the 200 day moving average around $6.58. The wheat trade has continued to focus on the ample global ending stocks in the recent weeks, with wheat pulling back more than 8 percent in the last few weeks. There seems to be strong demand globally with a tender this morning from Turkey for 70,000 metric tonnes and yesterday’s announcement that Jordan issued a tender for 100,000 tonnes. The business however, seems to be going to Russia with U.S wheat still uncompetitive on the global market. Yesterday, wheat export sales were reported at 142,200 for 14/15 delivery which was within analyst expectations, but even those numbers are still lackluster.   

Recent China Auctions Move Markets

May 21, 2014

Corn futures were positive for most of the night before sliding lower into the morning trade break. At the moment July 14 corn is unchanged and December 14 is down just a penny. Selling has subsided in the corn market for largely technical reasons as the July 14 contract approaches the 50% Fibonacci retracement at $4.75. Fundamental factors remain negative, with rumors circulating yesterday that China is planning to cancel all outstanding old crop corn purchases from the U.S. Outstanding export sales to China currently stand at 32 million bushels, or about 4% of total corn exports projected for 2013/14. China has been a net canceller of old crop U.S. corn on a weekly basis since March and considering the state corn auction scheduled for tomorrow it appears China is in a position to cancel a large portion of old crop sales still left to ship. This information should be priced into the market given recent price action so any confirmation of these cancellations would not be overly bearish in our opinion.

November Soybeans traded out near the lows of the day yesterday after failing to break out of the highs set on April 29th. The failed breakout is typically a very strong warning signal that a change in trend could be near, but the recent volatility in the soybean market needs to be taken into consideration. One possible explanation for the selling was the China state reserve auction which was scheduled for May 20th. In the sale China’s government sold 80.9 percent of the soybeans offered compared to 92% sold in last weeks auction. The average price was reported at $690 per metric ton which was up $10 a ton from last week’s sale. Despite the negative price action we observed yesterday in the soybean complex, many traders still believe that we need to see more evidence of demand destruction for crushing plants before prices can break in a meaningful way.  In the overnight session November soybeans rebounded 8 ½ cents. 

Soymeal Demand Lifts Beans

May 20, 2014

The grains traded higher in the overnight with July corn trading up 2 cents bouncing off its 100 day moving average, soybeans up 6 ¼ cents on strength out of soymeal and Chicago wheat rebounding 7 cents off of technical support.

July and new crop soybeans both traded higher in the overnight supported by the strength in soymeal which has maintained a strong up-trend since February, recently making fresh contract highs. Adding to the soymeal strength has been talk that crushing plants around the Midwest are running low on soybean stocks. In the last week the average U.S soybean basis has jumped 4 ¼ cents supported by strength at processing plants and along the river.

Yesterday’s crop progress report showed 73% of corn now planted, up 14% on the week and slightly below trade expectations. This puts planting pace now 3% behind the 5 year average for this week in May. Key states to watch moving forward are North Dakota, Minnesota, and Wisconsin where a cold rainy spring has put planting pace well behind schedule.

Soybean planting is now 33% complete, up just 13% on the week. Following last week’s rain, soybean planting progress is now 5% behind the 5 year average and giving some traders concerns about planting progress. North Dakota, Minnesota, and Wisconsin will also be important to watch in terms of soybean sowings. This week’s report showed just 16% of Minnesota, 5% of North Dakota, and 8% of Wisconsin soybean acres planted.

Looking ahead, rain is likely over the next several days across northern tier states but the 6-10 forecast looks favorable for planting. Friday and into the weekend we should see a warming trend develop that will extend from Montana into northern Illinois and help keep planters rolling as insurance deadlines approach.

 

 

Will Chinese Grain Auctions Hurt Soybeans?

May 19, 2014

Wheat is trading lower this morning after shedding 45 ½ cents last week. In the overnight, Wheat traded as low as 6.65 ½ which is around the 38% retracement measured from the February lows to the recent highs. This price area should also serve as support from the previous low of $6.63 which was tested twice back on April 10th and April 11th. Despite the positive technical factors this morning, it does look like there will be moisture moving through the southern plains the early part of next week. Although this would usually be very positive for the ailing crops many worry that it’s too late for the rains to help the wheat crop significantly in that region of TX, OK and Southern Kansas. Seeding delays for spring wheat in ND and MN will likely be slowed by some precipitation early this week, and also in the 6-10 day outlook.

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Last Friday it was reported that Egypt bought 60k Tonnes of wheat from Ukraine which again shows the confidence in Ukrainian ability to continue delivering on their obligations, but also highlights that U.S. grain has lost its competitiveness in the global market after the run-up in prices triggered by drought in the southern plains.This morning there was also talk of dryness expanding in the former Soviet Union during over the next 10 days which could have a supportive effect on prices.

Crop progress and condition ratings will be released this afternoon at 3:00 pm. Last week’s report showed 59%, 20% of soybeans, and 34% of spring wheat planted. This put corn and soybeans on track with the 5 year average while spring wheat lags behind following a cold and wet spring across the northern Plains. Expectations are for this afternoons report to show corn 70-75% complete while soybean sowing at 30-35%.

At the moment, corn July corn is down 3 while July soybeans is off 2. New crop beans are trading 4 cents higher as the old crop / new crop spread continues to unwind and some soybean planting concerns remain in the market given weather. This may be a story supporting November soybeans in the short term but longer term we expect the crop to be planted and acreage numbers to weigh on U.S. soybean futures.

Chinese grain auctions will continue to be a trade topic this week. Tuesday the Chinese will auction 300,000 tonnes of soybeans from state reserves followed by a 1.0 million tonne corn auction on Thursday, May 22nd. Chinese auctions are typically bearish U.S. prices, as fresh grain supplies in mainland China should weaken demand for U.S. grain. Last’s week’s soybean auction actually had a positive impact on U.S. grain futures as the average price and quantity sold was much higher than trade expectations. This week’s grain auctions will be an important indicator of Chinese demand moving forward.

Grains Traded Lower in the Overnight

May 16, 2014

Corn futures are trading 1-2 cents lower this morning on light news. New crop corn futures are technically oversold but the rapid pace of planting across the heart of the grain belt has worked to pressure prices this week. Expectations are for Monday’s crop progress report to show another strong week of corn planting in the western corn belt, with the eastern corn belt showing some weather delays. Moving forward, emergence and crop conditions will drive prices as planting pace is slightly ahead of the 5 year average.

Soybeans are down 2 cents on the July contract while trading unchanged on the new crop November contract. Yesterday’s NOPA crush report showed the largest April crush in five years but given the trade reaction this is being  viewed as confirmation of strong crush rather than fresh bullish news for the soy complex. The  Chinese will hold more state soybean auctions next week, with 1.3 million tonnes to be offered in two separate auctions. Typically these Chinese auctions have a negative impact on U.S. prices, but the auction held earlier this week actually seemed to support old crop soybean futures. In that auction, 92% of the soybeans offered were sold and at a much higher average price than the trade was expecting. This has worked to quell some trade concerns about domestic Chinese demand for soybeans.

 

Wheat traders will be watching a tender by the Egyptians for 55,000 – 60,000 that will be closing this afternoon. That tender is for wheat delivered June 20 – 30 and will be an important gauge of export demand for U.S. wheat. Yesterday’s export sales report showed just 55,000 tonnes of old crop U.S. wheat sold, the second lowest weekly quantity since January. Considering large world ending stocks the U.S. wheat market may need to see lower prices before international demand returns. The next area of technical support sits at $6.70 - $6.75 for July Chicago wheat futures.

Traders Eyes NOPA Numbers Released at 11 CST Today

May 15, 2014

• Soybean export sales beat expectations

• Chinese Soymeal futures hit all-time high

• NOPA Crush numbers out at 11:00 AM central time

Coming into the morning trade break corn is down 3 cents, soybeans up 3 cents, and Chicago wheat off 3 cents. Soybeans has been showing relative strength in the last couple trade sessions on anticipation for strong NOPA crush numbers being released at 11 AM CST today. Expectations in this NOPA report fell within a relatively wide range from 124.7 million bushels to 141 million bushels but the average analyst guess was 132.26 million bushels crush, and soy oil stocks of 1.990 billion. If realized this would be largest April crush in 5 years.

September 2014 Dalian Soymeal contract in China hit an all-time high today. This should help soy plants in that country which have been suffering from negative margins for quite some time. Also, another positive story for Soybeans, which was reported yesterday, is that Shendong Sunrise Group which is China’s largest soy buyer said it wouldn't default on soybean contracts despite facing large losses.

Informa Economics will release their updated 2014 acreage expectation this morning at 10:30 AM central time. These estimates will be based on their survey completed in early May and will be compared to the 81.5 million acres of soybeans, 91.7 million acres of corn, and 55.8 million acres of wheat projected by the USDA in their May 9th report.

Old Crop Export Sales

 

 

Expected

Reported

Corn

200k to 400k

343,00

Soybeans

-100k to -50k

73,600

Wheat

100k to 300k

54,900

 

Exports sales were released this morning at 7:30 central time, showing a surprisingly strong week of U.S. sales for old crop soybeans. Sales were reported at 73,600 tonnes, well above the 50-100 tonne net cancellations expected. Corn export sales came in line with trade expectations while old crop wheat sales disappointed at just 54,900 tonnes.

There was also two reportable export sales announced this morning by the Foreign Ag Service. Exporters sold 120,000 tonnes of new crop U.S soybeans to China, and exporters sold 104,000 tonnes of old crop U.S corn to Mexico. 

 

Chinese Soybean Auction Supports the Market

May 14, 2014

Corn futures had a very quiet overnight session, trading unchanged to a penny lower. Ethanol crush numbers will be out today and it will be important to see how a falling ethanol crush margin is impacting weekly production. Since April 4th ethanol crush margins in Iowa have collapsed nearly 50%, driven lower by falling ethanol and DDG prices. Last week the ethanol crush margin averaged $2.91 per bushel which was the lowest figure since February.

The Chinese government sold 92% of soybeans offered in a state auction on Tuesday. The average price was $680 per tonne and well above the floor price established by the government for the sale. Old crop prices may find support from this sale during the day session as Chinese demand has been a concern given negative crush margins and a huge quantity of soybeans imported during the month of April. Old crop soybean traders will be looking towards NOPA crush numbers, released Thursday at 11AM central time. This report will show crushings during April and be closely watched following the USDA raising their crush expectation by 10 million bushels in the May USDA report.

The wheat complex moved a bit lower in the overnight session with Chicago Wheat declining 5 ½ cents and Minneapolis Wheat shedding 2 ¾ cents. Despite some selling in the overnight session, concerns about the planting pace for spring wheat will continue to keep the market on edge. Weather in North Dakota and Minnesota has spring wheat well behind pace only showing 34% planted compared to the five year average of 58 percent planted. Although we have a three day window of planting, which producers are currently taking advantage of, the 6-10 day forecast is showing more moisture for the Spring Wheat areas which could slow the pace even further as we approach crop insurance deadlines at the end of May and beginning of June.

Big Gains In Planting Progress

May 13, 2014

U.S export inspections were released during the trade session yesterday showing that corn, soybeans and wheat all outperformed analyst expectations. For wheat, 623,157 MT was inspected for export which beat the high side of analyst expectations by 48 thousand MT. Corn inspections came in on the high side of analyst expectations with 1,199,447 MT and soybeans beat expectations with a reported 239,955 MT inspected for export.

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The weather outlook seems to favor planting in the western Midwest for the next week following the recent round of precipitation. The eastern Midwest is forecast to receive more moisture over the next three days, but following that, a 4-5 day period of dryness should open a window of opportunity for eastern producer. In winter wheat country it looks as if the 6-10 day forecast shows a drier outlook with the next chance of moisture over a week away. The dryness in the plains should continue to support the wheat market which has faced a recent pullback in prices.  

Monday’s crop progress numbers showed that last week was a busy one for U.S. farmers, with corn planting now 59% complete across the U.S. This was a 30% improvement from the previous week and puts this year’s planting pace 1% ahead of the 5 year average. Iowa saw an astonishing 47% of the crop (6.6 million acres) planted last week alone. This report should ease most market concerns about getting the 2014 corn crop planted in a timely manner.

Soybean planting pace was up 15% on the week, now 20% complete across the country. This puts planting pace 1% behind the five year average. Northern states are still lagging in terms of pace; Michigan 10% planted, Minnesota 4% planted, North Dakota 0%. From talking with farmers across Minnesota and North Dakota cold weather and rain have both hampered planting efforts this week.

Soybean Resistance in Sight

May 12, 2014

Wheat futures gapped lower in the overnight session, largely driven by precipitation across the Southern Plains over the weekend. Colorado, Nebraska, eastern Texas, and eastern Kansas all saw between ½ and ¾ inch of much needed precipitation. This rain event was generally in line with weather forecasts for the weekend but traders will be quick to sell KC wheat futures on rain following a 93 cent move higher since mid – April. This afternoon’s crop condition report, released at 3PM central time, will drive wheat prices into the overnight session. Last week’s report showed 31% of winter wheat rated good to excellent but key producers, like Kansas and Oklahoma remain well below the national average in terms of crop conditions.

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Corn futures drifted lower in the overnight trade on very little news. Taiwan issued a tender for 60,000 tonnes of old crop corn to be sourced from the United States, South America or South Africa. The Taiwanese issued the same tender on March 25th but rejected all offers citing high prices. Following last week’s very disappointing export sales report for corn, this tender will be an important gauge of international demand for old crop U.S. corn.

Soybeans pushed as high as 14.96 in the overnight session before selling back down to the 14.87 ½ level going into the morning trade break. Be wary of soybeans at this level if we approach the overnight highs as there is significant overhead resistance at the $14.95-15.00 price level. Resistance from a previous low on April 28th combined with the up-trend line that was broken on May 1st could provide enough selling pressure to reverse the latest move higher that started the day before the USDA WASDE report.   

This week’s crop progress will be released at 3 PM CST today. Expectations are for the report to show corn 60-65 percent planted and soybeans 30 percent planted throughout the U.S.  Weather in the first half of this week is not expected to favor planting as significant moisture is forecast to move across the Midwest through Wednesday. 

WASDE Report- Corn Trades Lower

May 09, 2014

 2014/15 U.S. Ending Stocks (Million Bushels)

 

2014/15
Expected  

2014/15

Reported

Corn

1,672

1,726

Soybeans

307

330

Wheat

559

540

 

Corn

New crop corn is trading down 12 cents after the report was released with larger than expected ending stocks forecast by the USDA. USDA’s forecast ending stocks of 1,726 million bushels was over the average analyst guess of 1,672 million bushels. In this forecast the USDA used a yield forecast of 165.3 bushels per acre based on "weather adjusted trend model and assumes normal mid-May planting progress and summer weather." Although this number is smaller than last year’s May WASDE forecast of 2,004 million bushels ending stocks, todays surprise is enough to put some negative pressure on the contract immediately following the report.

 

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Old crop corn ending stocks were projected at 1.146 billion bushels, well below trade expectations and 185 million bushels lower than the April report. Ethanol usage was raised 50 million bushels and exports were increased by 150 million bushels following exceptional export sales and inspections during April.

 

Soybeans

New crop soybean ending stocks came in well above trade expectations, projected at 330 million bushels for the 2014/15 marketing year. Production is expected to increase 346 million bushels from 2013/14, with only 60 million bushels added to total usage. These production and use figures will pressure the November soybean contract, especially considering the weak technical environment. In the USDA report, average on-farm prices for 2014/15 are projected between $9.75 and $11.75 per bushel. World ending stocks is also bearish longer term, with a record 82.23 million tons projected for world carryout in 2014/15

 

Old crop soybean saw a 5 million bushel revision from the April report, with ending stocks for 2013/14 projected at 130 million bushels. Imports were raised by 25 million bushels, crushings raised 10 million bushels, exports raised 20 million bushels. On net, usage was raised 30 million bushels from the April report. This report should be supportive for the July contract but at the moment old crop soybeans looks to be getting dragged lower by the very large new crop carryout projection.

 

 

Wheat

2014/15 wheat ending stocks were projected at 540 million bushels, well below the 559 million bushels projected by traders coming into the report. Yield was projected at 42.7 bushels per acre, nearly 5 bushels per acre lower than reported for the old crop. This may support wheat longer term, but at the moment we see Chicago wheat trading down 5 cents and Kansas City wheat off 3 cents. After moving 60 cents higher since mid-April on production concerns, traders seem reluctant to buy wheat futures on today’s news.

WASDE Pre-Report Expectations

May 09, 2014

 USDA REPORT OUT AT 11:00 AM CENTRAL TIME

Reach us at 877-472-4607 with questions or for assistance on report day

 

Corn and soybeans had a quiet overnight session coming into today's USDA report. Corn is down 2 cents while soybeans is up a penny. The wheat complex is trading lower after a strong week of price action. At the moment, Chicago wheat is down 7 cents, Kansas City off 8 cents, and Minneapolis down 6 cents.

 

The May USDA report will be the big driver of today's trade action. This report will be released at 11:00 AM Central Time and will be the first report to show both old and new crop ending stock projections. Below are trade expectations and our bias on the numbers. Tune in to GrainTV this afternoon for a full breakdown of USDA numbers and what this could mean for prices moving forward.  

 

  2014/15 U.S. Ending Stocks (Million Bushels)

 

2013/14
Projected

2014/15
Expected  

Corn

1,331

1,672

Soybeans

135

307

Wheat

583

559

 

Assuming normal growing conditions, 2014/15 should be a very different marketing year for corn and soybeans. Analysts expect soybeans to see the largest year-over-year stock increase, with carryout expected to climb to 307 million bushels from the 135 million bushels projected for 2013/14. Acreage will be the driver of larger new crop soybean ending stocks, with a record 81.5 million acres expected to be planted this spring by U.S. farmers. Considering the recent technical break in the November 14 soybean contract, and large ending stock expectations in today's report, it is a good time to consider pricing a portion of 2014/15 production.

 

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Corn ending stocks are expected to surge as well, although not to the same degree as soybeans. On average analysts expect the USDA to project 1.672 billion bushels in new crop carryout, roughly 300 million bushels higher than current marketing year figures. Ending stock projections for the new crop are quiet varied with some analysts actually expecting a lower carryout in the new marketing year. Considering concerns over U.S. corn planting and the strong technical picture for December 14 futures, we would expect new crop corn to show relative strength into the report with respect to soybeans. 

 

Wheat stocks are expected to be slightly lower for the 2014/15 marketing year, largely driven by smaller planted acreage and poor growing conditions across the southern Plains. In Kansas alone wheat production is expected to fall by 68 million bushels in 2014/15 to just 260 million bushels. If realized, this would be the smallest Kansas harvest since 1996 with similar crop conditions seen in Oklahoma, Texas, and Nebraska. Further limiting overall production is a wheat acreage figure which is expected to be 1% lower than 2013.

2013/14 U.S. Ending Stocks (Million Bushels)

 

April
Projected

May
Expected  

Corn

1331

1314

Soybeans

135

134

Wheat

583

588

 

Old crop ending stocks are expected to be relatively unchanged from April estimates, with old crop corn being the one exception. Analysts expect ending stocks to be lowered by 17 million bushels as export sales and inspections have remained strong during the month of April. Our models show corn export sales 179 million bushels ahead of pace to meet the projections from the April USDA report. Ethanol usage is another demand side number that could be revised in Friday's report, with ethanol crush margins averaging $4.94 per bushel during the month of April. This is up sharply from the $3.27 average seen during the months of February and March.

 

Have questions or need assistance on report day? We are in the office between 8AM and 5PM central time and would be happy to discuss the markets.

 

877-472-4607

 

Corn Sales Disappoint

May 08, 2014

Coming into the morning trade break corn is down 5 cents, wheat is down 6 cents and front month soybeans are up 4 cents. Some bull spreading looks to be taking place in soybeans, as the November contract is trading unchanged. Early driver in today’s action will be the export sales report just released.

The export sales report showed very weak corn exports, a change in the recent trend of exceptional corn sales and inspections. Corn disappointed expectations with 161k MT of old crop sales compared to the markets expectations of between 500-800k MT. This week’s corn sales were down 83% from last weeks reported number and will likely weigh on corn prices in the early part of the trade today. Wheat beat analyst expectations by booking 320k MT but wasn’t far off from the high side of the trade guess at 300k MT. Soybeans avoided cancellations today with 40k MT booked for old crop which was the best old crop sale in three weeks.

Showers will be scattered throughout central and western corn-belt for the next few days, with the eastern corn-belt avoiding precipitation until Tuesday next week. These showers should slow the pace of planting corn and soybeans which was lagging the five year average in Mondays report by 13% and 6% respectively.

Soybeans were supported in the overnight session by better than expected Chinese imports during the month of April. The 6.5 million tonnes imported during April was better than trade expectations, which looked for imports to decline from March. This should be a short term boost to soybean prices, as just next week the Chinese government will begin selling soybeans from state reserves.In this morning’s export sales report China was a net canceler of U.S. soybeans by 200 tonnes.

New crop soybean prices will be focused on tomorrow’s USDA report which will project 2014/15 carryout for the first time. Analysts expect the USDA to project ending stocks at 307 million bushels for the 2014/15 marketing year, up sharply from current marketing year stocks of just 135 million bushels. Domestic soybean acres will be the largest factor driving a larger carryout, but the Brazilian crop could pose a threat to U.S. demand into the new marketing year. This morning the Brazilian government raised their estimate for the recently harvested crop to 86.57 million tonnes, up 500,000 tonnes from their previous estimate. Although this figure is still well below the 90 million tonnes projected coming into South American planting, it shows that Brazil will remain a competitive exporter into the 2014/15 marketing year.

Wheat Tender Activity in the Overnight

May 07, 2014

Grains are trading lower across the board on light news in the overnight session. KC Wheat is leading to the downside, giving back some of yesterday’s strong positive move. Coming into the morning trade break corn is down 2, soybeans down 6, Chicago wheat down 6, and KC Wheat down 11. The dollar index has stabilized from yesterday’s sharp declines but remains week technically, further losses in the dollar index should support US grain futures.

Corn futures are down 2 cents across the board on light overnight news. Expect relatively light weekly ethanol crush figures in today’s EIA report. Ethanol crush margins in eastern Iowa averaged $3.37 per bushel last week. This is still strong relative to history but down substantially from the $5.00 per bushel crush margins seen just a month ago. A rallying corn market and declining ethanol prices have both contributed to the decline in crush margins. Looking at corn technicals, this week’s move confirmed that both July and December corn futures are still in strong uptrends. Support lies around $4.95 on December and $5.02 on the July contract. Need help adding these trend lines and other technical indicators to your desktop trading software? Call the office at 877-472-4607, we’d be happy to help.

There was some tender activity in the overnight with the Taiwan Flour Millers' Association issuing a tender to buy 110,450 tonnes of U.S. wheat and Iraq issuing a tender to buy at least 50,000 tonnes of wheat from U.S, Canada, Australia, Ukraine or Russia. Heat continues to scorch the Southern Plains for another day, with little to no precipitation relief in sight.  

Ukraine has been discussed a lot in recently and has definitely added a premium to this wheat market in in the past week. However, it is important to note that there have been reports that wheat shipments out of Ukraine are actually running ahead last year’s pace. This is a very important metric to monitor as much of the risk premium is made up of the POSSIBILITY for disruption.  Although I don’t expect the Ukrainian situation to resolve itself completely any time soon, if tensions do not continue to escalate we could see some of that premium evaporate from the market.

Selling Continues in the Overnight

May 06, 2014

Update- Significant old crop corn cancelations were reported across the news wires during the morning trade break. Cancelations of 120,000 tonnes of U.S corn to unknown destinations, and another 100,000 tonnes of U.S corn to Spain will likely pressure the corn market on the open at 8:30 CST.  

Grains are red across the board this morning, with corn down 4 ½, soybeans off 15 1/4, and Chicago wheat down 3 ¼. New crop contracts are showing relative strength following yesterday’s crop progress report which showed corn, soybean, and spring wheat seeding well behind expectations for the week.

The USDA reported corn planting 29% complete, 4% below expectations for the week and 18% below the five year average. Soybean planting is off to a similar start with 5% planted, well below the 8% expected and 11% five year average. Spring wheat planting was right in line with expectations for the week with 26% planted, but below the 41% planted we have seen over the last five years. Not surprisingly, corn planting in the northern grain belt is well behind the national average with Minnesota 9% planted, Wisconsin 2% planted, and Michigan 3% planted.

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The wheat complex is showing relative strength this morning as unrest in Ukraine’s largest port city and domestic wheat conditions continue to support prices. Yesterday’s crop progress reported showed 31% of the winter wheat crop now rated good to excellent, down 2% on the week. The Kansas City wheat crop remains of particular concern, with just 17% of Kansas winter reported good to excellent.

In soybeans, bull spreading is unwinding again this morning as Informa Economics estimated Brazil’s 13/14 crop to be around 87.4 million tonnes, up from its previous forecast at 86.75 million tonnes. Brazil has for the most part wrapped up harvest which puts pressure on the nearby futures month. Disappointing export inspections is also weighing on the front month for soybeans, as inspection numbers showed only 99,502 tonnes to be shipped for export this week.  With a the possibility for a larger than expected crop out of Brazil and near term demand waning the front month has been showing relative weakness compared to the November contract which was supported by a slower than expected planting pace.

 

Corn drifted lower in the overnight session on light news. Ukraine government statistics showed month-over-month corn exports nearly cut in half during April. Traders reported this as a "normal seasonal slowdown" for the world’s third largest corn exporter and not cause for major concern. With the conflict in Ukraine spreading west into the key port of Odessa, any further violence could work to support corn and wheat futures. From a technical aspect, long term trend line support remains intact on both the July and December daily chart.  

Ukraine is Heating Up

May 05, 2014

Corn, soybeans and wheat all moved higher this morning with corn up 4 1/2, soybeans up 1 ½ , wheat up 14 and Kansas City Wheat up 14.

Soybeans continued its bounce early in this morning’s session on technical buying after prices stabilized on Friday around the $14.60. Soy oil and meal also traded higher in the early part of the session, but have backed off into the morning break.

Weather continues to be a stark contrast throughout the U.S with the Midwest continuing to get showers while the Southern Plains desperately needs moisture to salvage the remainder of this year’s wheat crop. Triple digit temperatures in the southern plains pushed wheat prices higher this morning as crops were stressed from Central Kansas to Northwest Texas. Temperatures have backed off today in that region but another hot blast is expected on Tuesday before more normal temperatures return to the area.

In the Midwest some spotty showers occurred over the weekend near the great lakes and around MN and IA. However, warmer weather possibly into the 80’s this week will keep planters moving at a robust pace and will most likely continue to cap the gains in the corn market.  The market will be watching last week’s planting progress very closely in the Crop Progress report released at 3 PM CST later today.

Chicago wheat futures gapped 5 cents higher to start the overnight session as the poor state of the domestic crop and violence in Ukraine’s largest port city both worked to bring buyers into the market. This weekend’s violence in Odessa, Ukraine is some of the worst violence seen in western Ukraine and represents a shift in a conflict that has largely been focused around the Crimean Peninsula in eastern Ukraine. While Ukrainian traders report few disruptions in the port city of Odessa following the unrest, this type of headline that will make some traders question whether or not Ukraine can export the 9.5 million tonnes in the current marketing year projected in the April USDA report.

Traders will be closely watching this afternoon’s crop progress and condition ratings. Last week’s report showed 37% of Kansas wheat and 65% of Oklahoma wheat rated poor to very poor. Little improvement is expected in national wheat ratings after a week of limited moisture and high temperatures across the southern Plains.

Corn futures are drifting higher, up 2 – 4 cents across the board this morning on light news and technical buying. Both the July and December 14 contracts are finding technical support on the daily chart from long term trend line support. If you have questions or need assistance adding trend line support to your trading platform please contact the office, 877-472-4607, and we would be happy to assist.

Grains Stop the Bleeding in the Overnight Session

May 02, 2014

 Grain prices are drifting higher overnight in Chicago following Thursday’s free fall. Coming into the morning trade break corn is up a penny, soybeans up 5 cents, and Chicago wheat up 5 ½ cents.

Yesterday, the 49 ¾ cent July Soybean sell off was not triggered by any landslide event, but rather gathered momentum as the prices ticked lower. Sell stops were triggered as soybean prices fell through 15.00 and the selling continued into the close.  After the dust settled, funds sold an estimated 12,000 soybean contracts and 10,000 corn contracts yesterday. The hard selling in July Soybeans has damaged the chart substantially, breaking the uptrend that started in late January. However, despite the broken uptrend there is still support under soybeans around 14.60 from the previous low made on April 23rd. With the severity of the selloff seen yesterday, be mindful of a rebound in today’s session.

Yesterday, weather models pointed at improved planting conditions throughout the Midwest. Funds began evening out positions as the forecast turned drier throughout the Midwest, giving farmers an opportunity to catch up on planting in the coming weeks. This morning, it was announced that an Israeli group bought 108,000 tonnes of corn which is likely to be source from the U.S or South Africa. They also purchased 60,000 tonnes of Feed Wheat most likely to be drawn from the Black Sea region.

Kansas wheat tour projections, released yesterday after the bell, supported wheat futures into the overnight session. Crop scouts project a 2014 yield of 33.2 bushels per acre and final production of 260.7 million bushels. The state of this crop has largely been factored into prices but yesterday’s yield number may be lower than what many traders currently have penciled in. A crop yielding 33.2 bushels would be 5 bushels per acres smaller than even the poor 2013 crop.

Ukraine’s defense ministry reported that two helicopters were shot down in eastern Ukraine overnight. Traders report "business as usual" at port cities but further escalation in the conflict has the potential to hamper export logistics from the Black Sea. Following last week’s rally in US wheat futures, US export prices sit $10 - $15 higher than currently offered for Black Sea wheat. Egypt’s state grain buyer, GASC, issued a tender for 120,000 tonnes soft and milling wheat for June delivery. Considering the premium carried by US export wheat, it is expected that most sales will go to Black Sea exporters.

Corn Export Sales Surpass Trade Estimates

May 01, 2014

 Grains were lower overnight with soybeans leading the complex to the downside on a 9 cent slide. Wheat and corn had more modest losses of 3 cents a bushel in the night trade.

News from the Kansas Wheat Tour continues to point to a poor crop in the state. Day 2 of the crop tour was based in the SW part of Kansas where the drought has been the most severe, and the tour findings supported that. The Day Two average for southwestern Kansas was 30.8 bushels per acre, down from 37.1 in 2013 and a five-year average of 38.8. The tour's Day 2 figure of 30.8 is the lowest in tour records dating back through 2000.  The tour's cumulative two-day average yield is 32.8 as compared to last year's two-day cumulative tour average of 40.5. Mark Hodges of Plains Grains said that a crop tour organized by the Oklahoma Grain and Feed Association this week projected the Oklahoma wheat yield at 18.52 bushels per acre and production at 66.5 million bushels, based on 3.59 million acres harvested. Last year, USDA put the Oklahoma wheat yield at 31 bushels per acre and production at 105.4 million bushels, based on 3.4 million acres harvested.

In corn, EIA weekly ethanol production showed another decline with weekly output off 12,000 barrels per day to 898,000 barrels per day. Weekly stocks were higher by 694,000 barrels to 17.21 million. Slowing gasoline demand is putting a crimp on the ethanol market, with inventories of ethanol reaching their highest level since July. There were no major changes in the 1-5 day forecast for the Midwest with light rains seen through Friday favoring the north and east with things turning quiet for the weekend. The 6-10 day forecast looks dry early in the week with moderate to heavy rains in all areas by the middle to end of the week. Old-crop corn export sales this morning were 937,900 MT, well above trade expectations of 450,000 to 675,000.

For soybeans, prices have turned more defensive in recent sessions. First Notice Day brought larger than expected soyoil deliveries with an increase in overnight registrations. There were no strong stoppers. There were also no surprises in the monthly biodiesel report from the EIA in regards to soyoil usage. On the flip side, soymeal was the star of complex closing higher for the session while scoring new contract highs in flat price and versus the soyoil on a spread.

WEEKLY EXPORT SALES (in thousand metric tons)

 

OC Actual

OC Expected

NC Actual

NC Expected

Corn

937.9

450-675

13.8

200-500

Soybeans

-16.4

-250 - +100

78.9

250-450

Wheat

214.9

150-350

219.6

250-450

 

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