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 Tender Activity in the Overnight
May 07, 2014
Grains are trading lower across the board on light news in the overnight session. KC Wheat is leading to the downside, giving back some of yesterday’s strong positive move. Coming into the morning trade break corn is down 2, soybeans down 6, Chicago wheat down 6, and KC Wheat down 11. The dollar index has stabilized from yesterday’s sharp declines but remains week technically, further losses in the dollar index should support US grain futures.
Corn futures are down 2 cents across the board on light overnight news. Expect relatively light weekly ethanol crush figures in today’s EIA report. Ethanol crush margins in eastern Iowa averaged $3.37 per bushel last week. This is still strong relative to history but down substantially from the $5.00 per bushel crush margins seen just a month ago. A rallying corn market and declining ethanol prices have both contributed to the decline in crush margins. Looking at corn technicals, this week’s move confirmed that both July and December corn futures are still in strong uptrends. Support lies around $4.95 on December and $5.02 on the July contract. Need help adding these trend lines and other technical indicators to your desktop trading software? Call the office at 877-472-4607, we’d be happy to help.
There was some tender activity in the overnight with the Taiwan Flour Millers' Association issuing a tender to buy 110,450 tonnes of U.S. wheat and Iraq issuing a tender to buy at least 50,000 tonnes of wheat from U.S, Canada, Australia, Ukraine or Russia. Heat continues to scorch the Southern Plains for another day, with little to no precipitation relief in sight.
Ukraine has been discussed a lot in recently and has definitely added a premium to this wheat market in in the past week. However, it is important to note that there have been reports that wheat shipments out of Ukraine are actually running ahead last year’s pace. This is a very important metric to monitor as much of the risk premium is made up of the POSSIBILITY for disruption. Although I don’t expect the Ukrainian situation to resolve itself completely any time soon, if tensions do not continue to escalate we could see some of that premium evaporate from the market.