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.
Swan Song for Bean Market?
Feb 28, 2014
Soybean prices were fairly quiet overnight following Thursday’s 60-cent trade range, which ended with the bean market to the downside. In the night session, beans were off 1 cent while corn gained 2 cents. Wheat futures recovered 6 cents from Thursday’s sharp selloff.
In beans, the market continues to see-saw between the near-term strength in export demand and prospects of large supplies from South America. Thursday’s export sales report again showed net gains to sales of over 300,000 MT for old-crop beans. Year-to-date total commitments of US soybeans are at 43.4 MMT with over half of the marketing year remaining, which is far higher than the 41.1 MMT USDA export forecast for the entire marketing year. In Brazil, 9-inches of rain in the soy regions there have caused massive flooding and stalled crop harvests. However, longer term the prospect of large supplies should keep deferred prices on the defensive. Yesterday’s early morning bean rally saw fairly hefty farmer sales for new-crop November beans, which eclipsed the day ay $11.82 before falling back to the $11.50 area. Technically, the market showings signs of a reversal to the downside following Thursday’s move.
For corn, the market continues to be relatively quiet, although export business has been robust of late. Year-to-date export commitments are at 89% of the annual forecast for USDA, which is substantially higher than the 5-year average of 65% for this time of year. Furthermore, corn outstanding sales – which is the quantity committed for but not shipped yet – is a staggering 18.8 MMT but in the last 5 years the average outstanding sales for this time of year is 10.3 MMT, and the highest year in 2011 was 13.3 MMT. Without cancellations, it seems likely that the market will have to work hard to get that sizable quantity moved to the export market, either by basis or futures. Overnight, an Israeli buyer bought 60,000 MT of corn believed to be sourced from the Black Sea.
In wheat, as expected Egypt’s GASC bought non-US wheat in its latest tender, acquiring 295,000 MT from Russia and Romania. Japan will raise the price of imported wheat to domestic millers from April by an average of 2.3 percent from the previous six-month period after higher import costs of Canadian wheat and a sales tax rise, a farm ministry official said on Friday. Japan, the world's sixth-biggest wheat importer, buys the majority of its milling grain through import tenders for five types of feed quality wheat and sells to domestic millers at prices set twice a year.