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.
Wheat Basis Tumbles on Futures Rally
Mar 19, 2014
Grains were mostly lower overnight with corn and wheat retreating 3 cents and 6 cents respectively. Front month May soybeans moved up 3 cents in relatively quiet trade.
In beans, upside pressure on the market continues as old-crop stocks continue to be depleted under strong demand from exports and domestic crushing. China was an early season buyer of beans from the US and has not had any significant cancellations of their outstanding purchases. As of March 6th, US soybean export commitments have reached 44.3 MMT versus USDA’s annual export forecast of 41.6 MMT. Overnight there was talk of a leading Chinese soy buyer trying to resell cargoes set to be exported from South America in April and May as bird flu outbreaks reduce demand, hoping that the United States will take the shipments. The company is in talks to resell five or six cargoes from Brazil, equivalent to about 360,000 MT of soybeans.
On Wednesday, ag marketing firm Doane released its planting survey based on responses from more than 1,100 growers in 44 states. They project US corn plantings of 90.9 million acres, off from the 2013 plantings number of 95.4 million. For soybeans, they see 83.6 million acres being planted in 2014 versus 76.5 million in 2013. These estimates are quite a bit different than USDA’s Ag Outlook Forum projections in February which suggested 92 million corn acres and 79.5 million soybean acres in 2014. The first USDA survey on plantings will be released on March 31st. The Taiwan Sugar Corp. has rejected all offers and made no purchase in a tender to buy 20,000 MT of U.S.-origin corn and 15,000 MT of U.S.-origin soybeans.
In wheat, prices shot higher on Wednesday as dry conditions in the US Plains continue to plague growing conditions there. Worldwide, dry weather is becoming the norm in Australia and China which could threaten wheat supplies there. The next chance of rain in the hard red winter wheat areas of the southern Plains is late next week which means the next round of crop ratings on Monday should show further declines from Texas to Kansas. In the cash market, farmers were active sellers of wheat as bids approached the $7 mark. Basis levels were sharply lower for most of the country on Wednesday with losses of 10 cents or more fairly common.