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.
Overnight Trade Shows Little Bounce Back
Dec 31, 2013
Grains found little to pull it back from Monday’s selloff in the overnight session, with wheat and soybeans posting modest advances while corn slipped further on a fractional loss.
News from South America continues to be adding to bearish sentiment. Crop-friendly rain fell over much of Argentina's corn and soybean growing region over the weekend and more rain is expected in the northern two-thirds of the country. There was rain over the weekend of 0.50 inch to 1.50 inches in the north and less than 0.50 inch in the south. It remained rather dry in the La Pampa and Buenos Aires growing region, but other areas of Argentina received welcome showers. Dry weather is expected to return to Argentina at the end of the week. Rains are expected to continue in nearly all areas of Brazil. On Monday the Rosario Grain Exchange put its estimate of the Argentinean soy crop at 55 MMT, slightly above USDA’s estimate of 54.5 MMT. In Brazil's top-producing state of Mato Grosso, reports of harvested soybeans in the state have come from three regions where farmers were able to plant soy just after the season began on Sept. 15.
In corn, export inspections on Monday were a disappointing 25 MB after traders had been looking for exports of 28 to 35 MB. Export basis levels continue to hold strong with booked sales likely to lead to more export movements in the coming weeks. Interior basis levels continue to show no definitive trend with most end-users keeping bids steady as of the last few weeks. However, this year producers should have their eyes focused on river terminals as basis levels are generally 8 cents a bushel better than last year at river markets, while ethanol plants are running about 17 cents less than last year’s basis for this time of year.
For wheat, the psychological $6 level on Chicago March wheat was tested overnight but managed to bounce above $6 in the night session. Wheat speculator trimmed their net short position by 892 contracts according to the CFTC latest report, but still hold a large position of 102,429 contracts as of the week ending Dec 24. The Rosario Grain Exchange raised their Argentina wheat crop forecast to 9.5 MMT from a previous estimate of 9.1 MMT. India's State Trading Corp issued a global tender to export 160,000 MT of wheat for shipment between Jan. 18 and Feb. 18, a company statement showed on Monday. Earlier, another state-run trader, PEC, offered 190,000 MT of wheat in two global tenders, underscoring the global competitiveness of the wheat market right now.