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.
Soybean Rout Continues
Feb 11, 2013
Soybean futures pushed lower overnight giving up 20 cents a bushel adding to the losses from Friday’s sell-off. Corn and wheat prices were off 3 cents a bushel.
Although Friday’s USDA report was hardly bearish on the data alone, the soybean market turned decisively bearish following its release as conditions in South America continue to improve. The latest forecasts show Brazil having drier weather in the 6- to 10-day day outlook which should help early harvest beans. Furthermore, Argentina, which has been persistently hot and dry in recent weeks, is expected to see widespread rains. With China on holiday for the week, it will be interesting to see whether they are a big buyer of US beans or South American beans on their return to business.
In corn, prices continue to grind lower as demand side prospects seem grim even with tight old-crop ending stocks. The Renewable Fuels Association reported 20 of the nation's 211 ethanol plants have ceased production over the past year, including five in January. Most remain open, with workers spending time performing maintenance-type tasks. But ethanol production won't likely resume until after 2013 corn is harvested in late August or September. On Friday, USDA left their corn used for ethanol unchanged at 4,500 MB even though it appears overall production is lagging the number needed to reach USDA’s projection.
Nearby wheat continues to hold above the $7.50 area of support even as other grains have taken out their key support of recent weeks. USDA cut US ending stocks thanks to an improvement in feed use numbers. But, export numbers were left unchanged which could lead to future revisions as poor exports are showing limited signs of improving. In the Plains, weekend moisture in Oklahoma and Kansas was disappointing as a storm system produced only about a 0.10 inch of precipitation in key growing areas. The next chance for precipitation is on Tuesday as snow and sleet are expected over the region.