Jul 30, 2014
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Cash Grain Insights

RSS By: Kevin McNew, AgWeb.com

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


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.

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