The Grain Hedge Team provides a macro-focused daily view of the world’s grain markets. Kevin McNew received a bachelor’s degree from Oklahoma State University and his master’s and Ph.D. degrees in Economics from North Carolina State University. He spent 10 years as a Professor of Economics with the University of Maryland and Montana State University focusing on commodity markets and is widely regarded for his ability to boil-down complex economic situations into easy-to-understand concepts for applied life.
China Bean Cancelations Could Escelate
Mar 13, 2014
Grain prices found modest support overnight with wheat continuing to lead the complex to the upside. In the night trade, May wheat posted a 6 cent advance while corn was up 3 cents. Soybeans were modestly higher following Wednesday’s sharp selloff, gaining 1 cent a bushel in overnight trading.
In wheat, prices continue to be supported by unrest in Ukraine as well as logistics problems in Canada. International grain traders are looking at French wheat as a possible replacement for Ukrainian supplies should shipments from one of the world's top exporters get held up by political turmoil over Russia's moves in Crimea. The Western Canadian Elevator Association reports that there is currently a 55,000 rail car shortfall, with half of it destined to the U.S. and domestic markets. The USDA attache says the Canadian milling industry in Eastern Canada is reporting delays of three to four weeks which have resulted in some mill locations in Canada to shut down. Exports out of the Vancouver port are also constrained. There are reportedly a record 50 ships waiting for grain on the West coast. Lost sales, contract penalties and demurrage costs continue to escalate according to the attache.
On Wednesday, Brazil's government crop supply agency slashed its forecast for the 2013/14 soybean harvest by 5% to 85.44 MMT, citing an adverse climate late in the growing period. The agency, Conab, also reduced its estimate for the season's corn crop to 75.18 MMT from 75.47 MMT. However, beans have been under pressure from talk of China canceling bean cargos as a result of weakening crush margins. Chinese soybean importers have cancelled up to 600,000 MT of soybean cargoes they booked from Brazil and Argentina for shipments between March and May, two trade sources said. Buyers are negotiating with suppliers to delay or cancel more shipments amid poor demand and negative crush margins. They have canceled 10 panamax cargoes and want to cancel 30 more cargoes according to traders.
In corn, weekly ethanol crush was off 25,000 BPD to the lowest production levels since January 10th. A strengthening DDG market helped to support the ethanol crush margin, now sitting at $3.09 per bushel in Eastern Iowa. Considering the seasonality of ethanol production and a crush margin once again above $3.00 per bushel, we would expect weekly production figures to improve moving into April.