Aug 30, 2014
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July 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.

 

Export Sales Strong

Jul 31, 2014

 Grains traded sideways to lower overnight, with corn down 2 cents, soybeans off 3 cents, and wheat trading a penny lower. November soybeans were trending lower before finding some strength on concerns about Argentine exports in the new crop year.

Export sales this morning were very strong for wheat, which reported sales of 801,000 metric tons up 81 percent from the week before. The large buyers included Nigeria, Panama and Brazil. Old crop corn sales slipped 40 percent from the week before reporting 173,000 metric tons sold which was also well below analyst expectations of 300,000 to 450,000 metric tons. New crop sales beat analyst expectations with 1,093,200 metric tons. Nearly half of the new crop sales were two Mexico. Old crop soybean sales were strong again with 187,400 metric tons which was on the high side of analyst expectations. New crop soybean sales were also strong booking 1,268,700 metric tons which beat analyst expectations. Soymeal reported strong export sales with both old and new crop on the high side of analyst expectations.

Argentina defaulted for the second time in twelve years last night, as the country was unable to resolve a legal battle with creditors following their last default in 2001. Standard and Poor’s labeled Argentina in default on some of their debt obligations early this morning and the move will impact the countries borrowing costs moving forward. As far as grain markets are concerned, inflation in the country is the largest issue as the Argentine Peso continues to devalue with respect to the Dollar. Argentine producers have been hoarding grain in recent months as an inflation hedge and this will only further inflame the issue. For the year inflation is expected to hit 40% in the country.

Overnight the southern plains received much needed precipitation with Northern Texas, Oklahoma, Kansas all receiving rain. Dryness remains a concern in Eastern Nebraska and Western Iowa as the soybean crop enters pod fill. Cool temperatures of limited loss in dry areas as temperatures across the entire grain belt remain below average. The 6-10 day outlook does look more promising for seeing above average precipitation in areas that need it most.

 

U.S Announces More Russia Sanctions

Jul 30, 2014

 This morning the grains are mostly lower with September corn trading down 2 ½ cents, September wheat trading up ½ a cent and soybeans pulling back another 7 ¾ cents in the overnight. In the overnight session, November soybeans was able to fill a gap that it printed on Monday’s open and it will be interesting to see if that support area will hold.

Rain fall was light and spotty overnight, with the majority of rain hitting areas of the northern grain belt. The 6-15 day forecast has turned slightly wetter, but continues to look dryer than average. The soybean crop in the western corn belt has come under some stress as a result of light rains, but cooler than average temperatures have helped limit yield loss.

The Federal Reserve will release a policy statement at 1:00 PM central time which could signal a change in interest rate policies in the months to come. This report will be after the grain markets close and are not expected to have a major impact on U.S. grain prices in the near term. Equity markets and energies will watch this report closely. 

Ethanol numbers will be released today and we are expecting another strong week of production. Crush margins remain around $3.18 per bushel as cheap corn spurs demand from the ethanol sector. We typically see a decline in weekly production during July and August, but this year production has remained strong on a weekly basis. The USDA is currently projecting a 25 million bushel decline in ethanol usage in 2014/15 from 2013, and this is one balance sheet item that may need to be adjusted if strong weekly figures carry into the new marketing year.

Russia’s harvest is now 28 percent complete as a heatwave settles over the region. According to the Russian state weather forecasts, some areas in the North Caucasus and Southern federal district even face the possibility of fires.  The heat wave looks to cover a large swath of Eastern Europe, Ukraine and South Western Russia with high temperatures around 96-100 degrees fahrenheit for the next seven days.   

 Yesterday, Europe and the U.S significantly expanded sanctions on Russia due to their political stance on the Eastern Ukrainian conflict. The sanctions were expanded onto banks, energy, arms and shipping sectors. Russia is a key supplier of Europe’s natural gas and oil which makes sweeping sanctions very difficult for the fragile European economy. More details on the sanctions will be published Thursday, but one thing is certain, new sanctions would severely curb major Russian banks ability to access global capital markets including VTB Bank, Russian Agricultural Bank and Bank of Moscow.

 

 

Crop Conditions Slip

Jul 29, 2014

 Alert: First Notice for August Soybeans is on Thursday, July 31st 


Grains are trading lower in Chicago, with corn down 3 cents, soybeans off 10 and wheat unchanged to lower. This morning there were reportable sales of 135,000 metric tons of new crop Soymeal to unknown destinations and another 147,000 metric tons of corn to columbia for new crop delivery. 

 

Crop conditions were released yesterday after the market close, with good-to-excellent ratings falling for both corn and soybeans. Corn is now rated 75% G/E, down a percent from the previous week. Soybean conditions fell 2% and is now rated 71% G/E. Soybeans have found some strength on weather concerns in recent sessions as the western corn belt has been dry as we enter pod fill. Looking at progress - 38% of soybeans are now filling pods and corn is 78% silking. 83% of winter wheat is now harvested. 

 

Weather outlook seems to be supportive of a substantial rain event starting around the middle of next week and peaking during the weekend. The weather outlook favors the southwestern part of the grain belt which would eliminate any concerns for soybean yield in that area. Areas which could continue seeing dryness are parts of ND, SD, MN, WI, southern MI and northern OH. 

 

This morning Ukragroconsult raised its 2014 corn and wheat harvest forecasts for Ukraine. The wheat forecast was raised to 21 million tons from 20.5 million tons and the corn forecast was lifted to 27 million tons from 25.5 million tons, both of which are now in line with the estimates released in the July WASDE report. As of July 28th, Ukrainian farmers have harvested over 17.04 million acres and gathered a total of 23.6 million metric tons of grain. Of the grain harvested, the agricultural ministry said 16.3 million metric tons of it was wheat and 6.8 million metric tons of it was barley.  

Soybeans Higher in the Overnight

Jul 28, 2014

 The grains are mixed this morning with corn trading 3 cents higher, wheat 3 ¾ cents lower and August soybeans 12 cents higher this morning.  The August soybean contract is trading at $12.24 ½ cents and has first notice on Thursday the 31st. Currently, the spread between Augusts and September Soybeans is 96 ½ cents, down from over $1.40 at the beginning of July.

There were some reportable export sales this morning with China buying 486,000 tons of new crop soybeans and Nigeria buying 101,000 metric tons of wheat for the 14/15 marketing year. Of the wheat sold this morning 61,000 MT is hard red winter wheat and 40,000 tons is soft red winter wheat. 

Over the weekend rains were scattered, but there are still areas of dryness in the western parts of the grain belt. This morning, the 6-10 day forecasts is showing a drier than normal trend throughout most of the grain belt, but 8-14 day forecast looks to bring in more precipitation in the eastern and southern parts of the corn belt. Dryness in some parts of the Midwest has been a concern, but the lack of heat stress has limited its damaging effects.  

Europe’s wheat harvest has been interrupted again by more precipitation helping perpetuate the quality concerns for this year’s wheat crop. Currently there is a large gap of up to 40 dollars a ton depending on the quality of the wheat. In Germany, the showers should delay harvest only temporarily as hot weather allows producers to get back into the field following the rain event.

Australia which is currently struggling with dryness looks to see another three months without much relief. The Bureau of Meteorology said Thursday that dry weather is likely to persist across eastern Australia for the next three months. There’s around 60% chance of below median rainfall in northern Queensland, Southern New South Wales and most of Victoria. If these forecasts were to actualize we would see a drag on yield from the world’s 3rd largest wheat exporter. 

 

Rain Showers More Than Expected

Jul 25, 2014

 This morning we have the markets trading lower here with September corn down 3 cents, September wheat unchanged, and September soybeans down 8 ¾ cents as better than expected precipitation covered a good portion of the Midwest last night.

This morning we did have a number of export sales reported including 269,084 metric tons of corn to Mexico with 91% of it for new crop delivery. Exporters also sold 134,700 metric tons of soymeal to Mexico for new crop delivery and 360,000 tons of U.S soybeans to China for 14/15 delivery.

Showers over the Midwest were better than expected over the last 24 hours, helping to alleviate some concern over dryness in the northern and eastern Iowa, overall 30% of the Midwest received timely rains. Planalytics is looking for a dramatic cooling trend to begin this week and into next week that will have temperatures in the Northern and Central Plains into the 70’s and 80’s.   

Ukraine ag minister said the country could lose between 500,000 and 550,000 tonnes of grain in Eastern Ukraine due to the ongoing war. This would represent 1.5% of total production expected by the USDA in the July WASDE report. Wheat futures have continued to find limited buying as traders seem comfortable with the state of Ukraine grain exports. Several export sales from Ukraine to Egypt were booked last week, indicating the world’s largest wheat buyer is confident in Ukraine’s ability to supply grain through the fall.

The weather doesn’t appear to be cooperating with European wheat harvest this year as more rain is expected over the next 10 days. The wetter than normal harvest has many grain buyers concerned about quality and has caused the spread between feed wheat and milling wheat to widen. Talks that feed wheat is trading at a $40 per ton discount to milling wheat has analyst thinking about the implications of this on corn imports from other countries. With cheaper feed wheat, corn imports into Europe will likely decline.  

 

Soybean Sales Surge

Jul 24, 2014

 Grains are moving higher across the board in Chicago with corn up 5 cents, soybeans up 22 cents, and Chicago wheat up 7 cents.

Export sales this morning were very positive for soybeans which had sales of 226,700 MT for old crop which was on the high side of expectations and new crop sales of 2,451,100 MT which beat the high side of analyst expectations by about one million bushels. China was a large buyer this week, accounting for 70% of old crop sales and 52% of new crop sales. Unknown destinations made up another 37% of new crop soybean sales. Old crop sales are now 63 million bushels ahead of pace to meet USDA expectations and if no sales were reported from now until the end of the marketing year would finish out 44 million bushels above USDA forecasts.

 

Corn export sales came in below analyst expectations at 291,500 MT compared to 300,000-500,000 expected. Sales for old crop corn were down 49 percent from the week before. New crop sales met analyst expectations at 1,143,400 MT. Old crop corn is now 42 million bushels ahead of pace to meet USDA expectations.

 

Wheat sales this morning met expectations reporting 443,200 MT of sales compared to expectations of 350,000-550,000 MT. 

 

Even before this morning’s export sales report, November soybean futures were trading 21 cents higher on some concerns about final yield. Concerns are starting to circulate through the trade that a cooler / dryer August leaves questions about final yield as we enter the pod setting stage for much of the crop. Non-commercial traders held a near record short soybean position – making the market ripe for a short covering rally.

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.

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.

 

Markets Higher in the Overnight

Jul 16, 2014

 Grains are moving higher in Chicago, with corn up 6 cents, soybeans up 9 cents and Chicago wheat up 5. The corn and soybean market are oversold technically and this could be the start of a "bounce back" traders have been waiting for. Considering the long run fundamentals we feel any bounce should be used as a pricing opportunity as many producers are still very "long" this market with their cash position. The market should be supported by large exportable sales which included: 120,000 MT of old crop soybeans to China, 240,000 MT of new crop soybeans to unknown destinations and 210,448 tons of new crop corn to unknown destinations.  

Argentinian port workers will begin an indefinite strike on Wednesday, demanding higher salaries to compensate for inflation nearing 30%. This comes at the peak of Argentina’s corn and soybean harvest and is expected to impact ports across the country. Argentina is the world’s largest soyoil and soymeal exporter and this morning we are seeing September soymeal futures trade up 1.3% in Chicago.

For wheat, the market is ticking higher here this morning but is relatively weak within the grain complex. Large global ending stocks triggered the decline that started following the May 9th USDA supply and demand report. Harvest pressure has also been weighing on the market with the USDA reporting that U.S winter wheat harvest was 69 percent complete, up 1% from the five year average. The spring wheat crop condition rating held steady as well with a 70% good to excellent rating which is just 2 points lower than last year’s spring wheat rating at this time.

In a recent tender from the Iraqi State, U.S wheat was still priced to high at $362.96 per metric ton compared to the Russian wheat offered at $308.58 and the Ukrainian wheat offered at $311.15 per metric ton.

 

Crop Conditions Climb

Jul 15, 2014

 Alert: NOPA soybean crush numbers out at 11:00 AM central time

Grain futures are trading lower in Chicago this morning following yesterday’s bounce. Corn is off 3 cent, soybeans down 5 cents and Chicago wheat is down 2. Crop condition numbers released after the close have weighed on new crop futures. This morning there was a reportable sale released showing 120,000 metric tons of soybeans sold to China for the 14/15 crop year. 

The USDA reported 76% of the corn crop rated good-to-excellent, up a percent from last week. 34% of the crop is now silking which is slightly ahead of the five year average. Cooler temperatures across the grain belt during pollination will be a concern for some southern producers, but this should not be a long term bullish story. Growing degree days may be an issue as we approach harvest. Soybean conditions are still rated 72% good-to-excellent but we saw one percentage point moved from the good to the excellent category. 41% of the crop is now blooming which is four percentage points ahead of the five years average.

NOPA crush numbers will be out at 11:00 AM central time this morning. Traders expect NOPA to report 119.486 million bushels crushed during June. This would be down roughly 8 million bushels from May’s crush. Now the question is if near term demand has been met or will we find stronger crush in July following an old crop sell off following the June 30th reports. On the international demand front, Chinese officials held another state auction of soybeans on Tuesday. Buying interest in main land China is starting to fade with just 59,000 of the 352,000 metric tons offered sold. This was down from nearly 100,000 sold the week before and much larger sales earlier in the summer.

Moisture across Europe has the wheat harvest on hold and some analysts are beginning to get concerned about quality problems of this years crop. At the moment there is still time to correct the issue, but the recent rains in Germany and France has merchandisers concerned.

Yesterday export inspections were released within analyst expectations for corn and wheat, while soybeans beat the average analyst guess by reporting 115,280 metric tons inspected for export.  For soybeans, the forecast ranged between 30,000-75,000 metric tons.

 

Keep an Eye on Soybean Spreads

Jul 14, 2014

The grain markets appear to have a little overnight strength carrying them into this morning with soybeans trading up 9 ¼ cents, wheat trading 1 ¾ cents higher and corn down 2 ¼ cents.

 

Friday's USDA supply and demand report left many traders scratching their heads last week as old crop soybean ending stocks was lifted 15 million bushels primarily due to negative residual use, which surprised analysts, while new crop ending stocks came in a couple million bushels shy of analyst expectations. The result was a sharply lower trade, and a rapid unwinding of the bullish calendar spread between the August and November contract. On Friday morning that spread opened at 139 ¼ cents and printed a low of 94 ¼ cents before rebounding back close at 120 3/4. This morning that spread has gained another 6 cents and now hovers around its 200 day moving average. Keep a close watch on tomorrows NOPA crush numbers which will be released tomorrow at 11 AM CST. 

Corn futures have continued lower in the overnight session following Friday’s negative report. 2014/15 ending stocks were reported 25 million bushels higher than expected and we saw global ending stocks raised 3% for the upcoming marketing year. Demand side numbers will indicate the bottom on this market and over the weekend we have Israeli tendering for 108,000 metric tons of optional origin corn. Considering the recent price slide U.S. corn will be very competitive in any tenders moving forward. $3.80 is the next area of technical support looking at the weekly chart. This is from trend line support looking back to September 2012. If you’d like help adding this trend-line to your trading software just call the office, 877-472-4607

 

USDA REPORT REACTION

Jul 11, 2014

Grains are continuing lower after this morning’s USDA report. Corn is down 9 cents and soybeans is trading 20 cents lower for the new crop contracts. This report was generally in-line with expectations for soybeans, but 2014/15 corn ending stocks were roughly 25 million bushels above trade expectations.

Old crop corn carryout was raised 100 million bushels, bringing 2013/14 carryout to 1.246 billion bushels. 2014/15 production was lower 75 million bushels as planted acres and harvested acres were lowered from the June report slightly. Yield was left unchanged at 165.3 bushels per acre. On net, supply for 2014/15 was raised 25 million bushels as a result of larger old crop carryout. Feed and residual use was down 50 million bushels and all other demand side numbers were left unchanged. On net, 2014/15 ending stocks were raised 75 million bushels to 1801 million bushels – 25 million bushels above trade expectations coming into the report. The USDA did not aggressively increase demand numbers for 2014/15 as some traders had expected coming into the report. Overall negative report for corn and we are now testing technical support at $3.80. Adding to the bearish sentiment was world corn ending stocks which were raised 5.4 million metric tons (3%) from the June report.

 

 The old crop balance sheet was one of the items that fueled soybean selling in the wake of the USDA supply and demand report. Ending stocks jumping 15 million bushels from last month’s report catching some traders off guard and triggering selling throughout the soybean complex. The ending stocks increase was primarily driven by a negative residual number of -69 million bushels. In the last 21 growing seasons and most likely further back than that we have only seen one year with a negative residual number and that was the 2011/12 growing season when we recorded a -2 million bushel residual. We did have an increase in both crushing’s and exports by 25 million bushels and 20 million bushels respectively to eat through some of the beans but ending stocks were raised to 140 million bushels in the end. This has weighed heavily on the bull spread between August and November futures.

New crop soybean ending stocks missed analyst expectations, showing 415 million bushels instead of the anticipated 418 million bushels. The difference was not significant enough to cause any kind of bullish move and the market quickly sold into the report. The USDA revised total supply up 180 million bushels over the June report and increased demand a bit over 4% adding 40 million bushels to crushing and 50 million bushels to export sales. Overall this is a report met trade expectations for 2014/15 ending stocks. World soybean ending stocks were raised by 2.43 million metric tons, but this was almost entirely made up of increases to US ending stocks. Overall a neutral report for soybeans but the argument can still be made that $10.70 futures will not hold through harvest with ending stocks at 415 million bushels for the upcoming marketing season.

 

Pre-WASDE Report

Jul 11, 2014

 Alert: USDA Report out at 11:00 AM Central Time today


Markets are trading sideways coming into today’s USDA report. At the moment we see corn up a penny, soybeans up a penny and wheat unchanged.  

 

With the crop good-to-excellent ratings on soybeans at a 20 year highs, yield will likely be left alone from the June report. This means 14/15 soybean supply is likely to come out 169 million bushels over last month's WASDE report and up 425 million bushels from last year. The average analyst expects ending stocks to be reported at 418 million bushels which would imply that demand would increase nearly 76 million bushels from June's report, less than half the expected supply increase. Looking back over the last 14 years we would expect the majority of the demand gains to come from exports which responds more readily to large changes in supply and price. In 2006/07 when supply increased 10% year-over-year, export sales made up nearly 3⁄4 of the demand response to the increased production. In 2009/10, another year with a 10% increase in supply, we saw export sales account for 70% of the demand response year-over-year. 

 

Trade estimates for 14/15 U.S. soybean ending stocks do not factor in a robust response from the demand side as seen in 2009/10 or 2006/07. This sets up the soybean market to possibly miss demand expectations in the report report today in a way that could provide some strength to the market following weeks of sharp selling. However, we feel any bounce should be used as a pricing opportunity as the long term fundamentals look undoubtedly bearish. During the 2006/07 marketing year prices approached $9.00 per bushel and looking back to 1975 soybean prices have found support around the $9.00 per bushel level. These historical benchmarks are important as we enter a very different marketing year from what traders have become accustomed to in recent growing seasons.

 

Traders expect the USDA to add 48 million bushels to new crop corn ending stocks, bringing the total for 2014/15 to 1.774 billion bushels. This would be the largest carryout since the 2005/06 growing season as yield is expected to make up for a relatively small acreage figure. 75% of the crop remains good-to-excellent and with each passing week of near ideal weather the "pollination weather premium" is leaving the market. Trend-line supports sits at $3.80 looking at the daily December 14 corn chart. Looking longer-term we would expect support around $3.25 on December futures based on price action from 1975 to present. This market has already sold off substantially but it is important to look at the big picture when pricing grain coming into today’s USDA report. This month's sell-off has been dramatic on the daily corn chart but is a relatively small move when looking over a longer time frame.

Market Higher in the Overnight

Jul 10, 2014

 Alert: USDA report out at 11:00 central time tomorrow

 

Grains markets are finding some strength in the overnight session. Corn is up a penny, soybeans up 6 cents, and Chicago wheat moving 4 cents higher. This move higher looks largely technical, as this morning’s export sales report largely met trade expectations. 

 

 

Yesterday’s ethanol production report showed that production was down week-over-week at 927,000 barrels per day. Stocks continued to grow and are once again at levels seen in early 2013. Seasonally we would expect ethanol crush to slow from July moving forward, but crush margins remain very strong relative to the last 5 years. Basis opportunities continue to exist at ethanol facilities across the grain belt, even as corn basis has sagged in recent days.

 

September corn has now been trading below four dollars for two full sessions. Bearish sentiments continue to weigh on the market in recent weeks as open interest continues expanded in Tuesdays down day, indicating that new short positions are being added. Forecasts continue to show ideal weather looking out two weeks as the crop enters a critical yield determining phase of pollination. Also weighing on corn was the announcement out of Brazil yesterday that it’s better than expected corn yields are expected to produce 78.2 million metric tons compared to last month’s estimates of 77.89 million metric tons.  


Fridays report is will be focused on soybean demand revisions for the 2014/15 crop after the June 30th report showed acreage 3.6 million acres higher than last year. With the crop conditions for soybeans at a 20 year high it is expected that 169 million bushels could be added to total supply since just last month’s WASDE report and up 425 million bushels from last year.  Traders will be watching how the demand numbers are adjusted with surge of supply hitting the market this fall. The average analyst expects ending stocks to be reported at 418 million bushels which would imply a demand increase of nearly 76 million bushels from June’s report. Much of the demand increase is expected to be seen in the export column which seems to be more responsive to large supply increases.  


Export sales this morning came in slightly below trade expectations for wheat only booking 338,100 compared to expectations of 400-635 thousand metric tons. Corn met expectations booking 363,000 metric tons of old crop corn and soybeans met expectations adding 56,300 metric tons of soybeans to old crop sales. This morning the USDA announced that 60,000 metric tons of old crop soybeans was sold to unknown destinations which was part of a larger 126,000 metric ton reportable sale which also included new crop soybeans. China also purchased 118,000 metric tons of new crop soybeans in the same announcement this morning. Prices for old crop soybeans have fallen nearly $1.33 in the last week and a half which should start to trigger some buying interest from importers. 

 

Export Sales Reported as Prices Slide

Jul 09, 2014

 Grain futures drifted lower in very light overnight news. No change in the 6-10 day forecast and little demand side numbers to report. Corn is down 3 cents, soybeans are down 6 cents, and Chicago wheat is off 3 cents.

Friday, July 11th, will bring the July USDA report. This will be the first report to use planted acreage expectations from the June 30th Planted Acreage report. That report shocked the soy complex, with 2014 acres projected at 84.8 million acres. Traders expect soybean carryout to be projected at 418 million bushels in the coming marketing year. This market has sold off significantly since June 30th, but a 400+ million bushel carryout implies there is still great downside risk in this market. Next area of technical support lies at $10.95 on the November 14 soybean contract.

 

Grain export sales have been being reported on a relatively regular basis as prices continue to ratchet lower. This morning two reportable U.S corn sales were sold to Japan (101,600 MT) and unknown destinations (107,696 MT) for new crop delivery. Also, Egypt’s GASC issued a tender yesterday for 55,000-60,000 metric tons of U.S wheat, Ukrainian milling wheat, Russian milling wheat and Australian standard white wheat. The price of Chicago wheat has dropped sharply since May 9th when the local U.S supply concerns were eventually trumped by growing global stocks. Since the open of trade on that Friday, the September wheat contract has fallen $1.89 cents.

 

Crop Conditions Weigh on Market

Jul 08, 2014

 Grain futures are trading mixed following Monday’s sharp selling. Corn is unchanged, soybeans down a penny, and Chicago wheat off 2 cents. News in the overnight session was very light following yesterday afternoon’s crop conditions report. 

 

The USDA released crop conditions yesterday afternoon which showed little changes from the previous week. Corn is still rated 72% good to excellent while soybeans held steady at 72% good to excellent. At this week in the growing season this is the highest rated corn crop in 15 years and the highest rated soybean crop in 20 years. Winter wheat is now 57% harvested and the spring wheat crop is rated 70% good to excellent. The 6-10 day forecast from Planalytics is showing wet conditions across the eastern corn belt and dryer conditions in Iowa, Minnesota, and North Dakota. Mean temperatures should be cooler than normal beginning July 13th, just as a large portion of the corn crop will be silking. In yesterday’s report the USDA showed 15% of the corn crop in the silking stage.

 

Saskatchewan and Manitoba farmers incurred damage to both newly planted fields and stockpiled grain as heavy rains of up to 10 inches soaked and flooded Canada’s main growing region last week. Estimates on the total damage ranged significantly with some analyst guessing 1 million acres ruined while others suggested up to 6 million acres of crops were ruined across Canada due to the excessive rain this season. Much of the Eastern Saskatchewan and Western Manitoba recorded record amounts of precipitation since April 1st leaving many farmers with flooded and damaged crops. This year Canadian wheat crops are well behind their normal development due to the cool and excessively wet weather this year.  

 

Active International Tenders

Jul 07, 2014

 Alert: Grain markets open at 8:30 central time this morning

Rain over 4th of July holiday was mixed, with majority of the grain belt receiving small amounts of precipitation. Michigan, Missouri, and Nebraska saw the heaviest rain with some areas receiving 1-3 inches.  The 6-10 day out look projects a drying pattern developing over the central and northern grain belt, while Indiana and Ohio will continue to see precipitation. Crop progress and conditions will be updated this afternoon by the USDA and few changes are expected following a week of good growing conditions. Last week the USDA projected 75% of corn and 72% of soybeans rated good to excellent.

There were three notable tenders on the international market this morning with Jordan issuing a tender to buy 100,000 metric tons of optional origin hard milling wheat, Turkey issuing a tender to purchase up to 235,000 metric tons of milling wheat as well as 200,000 metric tons of feed barley and the United Arab Emirates issuing a tender to purchase 100,000 metric tons of corn along with 30,000 metric tons of feed barley and 15,000 tons of soymeal.

There has been some talk over the weekend that U.S crushing facilities have been looking for South American soybeans for August and September delivery. Last week we did observe basis at river terminals and crushing facilities outperformed the rest of the market significantly, increasing 6 cents from June 25th- July 2nd

Markets Stabilize in Light Volume

Jul 03, 2014

 ALERT: Grain Markets close at noon central today, markets re-open at 8:30 AM on 7/7/2014

Corn and soybeans have finally found bottom after 2 days of follow-through selling. Overnight corn futures are up ½ cent, soybeans up 3, and Chicago wheat up 3.

 

Export sales were released this morning showing that old crop corn and soybean sales met expectations while wheat sales came in better than expected. Despite meeting analyst expectations this week the 290,000 MT of 13/14 corn sales and 40,600 MT of 13/14 soybean sales wasn’t enough to move either grain any further ahead of pace to meet USDA forecasts. According to our models, corn slipped to 137 million bushels ahead of pace, down 7 million bushels from last week’s projections. Our soybean models also slid 6 million bushels to 102 million bushels ahead of pace to meet USDA expectations. New crop sales for both corn and soybeans were adequate with both grains recording sales within expectations. Wheat sales of 567,500 MT beat analyst expectations with a significant amount of sales going to Brazil. Strong wheat sales may provide some support to the market which has experienced hard directional selling since the beginning of May. 

 

Port workers in Argentina have begun an indefinite strike at the key grain terminal of Rosario. Argentina is the world’s number 1 exporter of soymeal livestock feed and third biggest supplier of corn.  U.S. soymeal prices are currently leading the soy complex higher, helped out by the Argentinian news. South American port strikes are typically short lived and will not provide lasting support to the soy complex.  

 

Yesterday, we saw some international tenders announced from a corn processing association out of Korea for 55,000 metric tons of food grade corn and a Taiwan sugar corporation looking to buy 20,000 metric tons of U.S. corn and 15,000 tons of soybeans to be sourced from either the United States or South America. 

Grains Steady in the Overnight

Jul 02, 2014

 Alert: Grain Markets close at noon central time on July 3rd, 2014. 


U.S. grain markets are trying to find bottom today, two days after the June USDA report sent markets sharply lower. Coming into the morning trade break we have corn down 2 cents, soybeans off a penny, and Chicago wheat down a cent. Old-crop soybeans are again taking ground on the new crop, with August up 4 cents.

 

Corn traders will be watching today’s ethanol crush report, out at 9:30 central time. Helped out by surging crude oil prices, ethanol production reached record levels in mid-June and has been a supportive story for the old crop corn market. Overnight tenders were issued from both the South Koreans and the Taiwanese for U.S. origin corn. Considering a corn crop now rated 75% good to excellent, any strength moving toward pollination will need to be helped out by export sales and domestic usage numbers.

Yesterday Egypt's state grain buyer bought 240,000 tonnes of Romanian and Russian wheat on an international tender, providing little support for U.S wheat. U.S wheat was offered on the high side of the price range at $259 per metric ton while Romanian and Russian wheat was offered nearly $7 dollars cents cheaper. Of the reported offers, the French wheat was the most expensive, at $262.37 per metric ton.

 

August soybeans found some technical support after it touched briefly on its 200 day moving average at 1304. August, which is now the front month for soybeans sold off 48 ¼  cents on Monday following the report as stocks showed 27 million more bushels on hand June 1st than analysts were expecting.

Follow Through Selling In the Overnight

Jul 01, 2014

 In the overnight session corn traded down 4 ½ cents on the December contract, wheat fell ½ a penny and soybeans dropped 14 cents for November. Today’s session will likely continue the movement that we saw yesterday with selling being the major theme.  

Yesterday morning the planted acreage numbers shocked the market, with soybeans adding over 2.6 million acres more than the trade was expecting. Soybean acreage was reported at 84.839 million acres, which is a record by over 7.4 million acres. States such as Michigan, Minnesota, Wisconsin, North Dakota, South Dakota, Nebraska and Ohio all recorded record high soybean acreage in Mondays report. In response to the shockingly high soybean acres the November soybean contract sold off more than 70 cents, dragging down corn and wheat as well. Stocks numbers also had a bearish story to tell for both corn and soybeans with both commodities having more 13/14 grain on hand than traders were expecting. 

 

Acreage Numbers:

U.S. Soybean acres at 84.839 million acres (82.154 Million Acres Expected)

U.S. Corn acres at 91.641 million acres (91.725 Million Acres Expected)

U.S. Wheat acres at 56.474 million acres (55.818 Million Acres Expected)

 

Stocks Numbers:

June 1 Soybean stocks 27 million bushels above expectations (405 Million Bushels)

June 1 Corn stocks 132 million bushels above expectations (3,854 Million Bushels)

June 1 Wheat stocks 8 million bushels below expectations (590 Million Bushels)

 

Crop conditions were released yesterday after the market close, showing corn conditions now rated 75% good to excellent. This was up a percent from the previous week and shows that a large portion of the corn crop benefited from heavy rains over the last 2 weeks. Soybean conditions were unchanged at 72% good to excellent. While many areas received more rain than needed, we continue to feel that the rains from the later portion of May should not be viewed as a long term bullish factor for the US grain market.

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