Quality Concerns Cause Recovery In Wheat
Aug 06, 2014
Good Morning! Paul Georgy with the early morning commentary for August 6, 2014 at 5:30 am.
Grain futures are mixed with wheat leading the charge higher due to quality issue in EU and US.
Update - Morning Coffee Commentary:
SRW is getting attention as trade is talking about a boat being loaded out of Toledo, OH. Quality of southern Midwest wheat is a concern as vomitoxin is showing up in the high yielding wheat crop.
Paris Euronext has changed the quality standard on its milling wheat contract to prevent poor quality wheat being delivered to hedgers.
Technical and fund short covering is also providing support to the wheat complex.
Funds bought a net 4,000 wheat contracts, sold 3,000 corn, sold 5,000 in soybeans on Tuesday.
Will crop revenue insurance payout this year on corn? Rich Nelson, Allendale’s Chief Strategist did a quick analysis using 180 APH, 75% coverage and $4.62 insured price equals $623 insured revenue. Current outlook of 195 farm yield, 75% coverage and $3.66 Dec futures equals revenue of $714 and no insurance payment.
Reuter’s informal survey of six analysts put the average price for 4th quarter corn at $3.52, soybeans at $10.27 and wheat at $5.52.
USDA Attaché report: The marketing year (MY) 2014/15 corn production forecast has been revised slightly downward to 22.3 MMT mainly due to lower planted area, while for MY 2013/14 corn production is revised slightly upward based on revised official government data. MY 2013/14 corn imports have been revised downward to 10.7 MMT. The Government of Mexico (GOM) continues to promote its plan to shift part of Mexico’s white corn production to yellow corn production through supports to its corn growers.
The Goldman Roll starts today by moving out of the September CME grain contracts.
Informa’s estimate for corn yield is 168 compared to USDA’s July estimate of 165.3. Their soybean yield estimate is 44.5 a decline from USDA’s July estimate of 45.2.
Allendale’s study of the possibilities USDA might change corn yields from July to August show a rise in yield 10 out of the last 21 years. Using an average percentage change it suggests a yield of 171 on the August 12th report. Review the study here.
The USDA raised the soybean yield only 5 times out of the last 21 years from July to August.
Corn and soybean basis at processor locations is steady/firm as farmers stop selling on recent weakness in futures.
New lows for this downtrend were posted for the August and October lean hog contracts on Tuesday. The market continues to hold concern about the threat of Russia banning US chicken as well as the supply issue just ahead. There are three pork plants that are considering moving from the current four day kill schedules back to a normal five day run. Pork cutout value is up .14.
No significant bids or offers have been posted yet. We would look for steady to lower trade this week based on the 26,000 head increase in this week’s showlist. Futures are implying cash at the end of August will run $158 compared with the $163 last week. Beef values are mixed with choice up .05 and select down 1.28. The CME Feeder Index is 225.15.
Markets as of 5:30 AM CDT
- Dec Corn +1 1/2
- Nov Beans -1 1/4
- Sep Wheat +8 1/4
- Oct Cattle +.12
- Oct Hogs -.15
- Sep Dlr +.14
- Sep S&P -9.25
- Sep Crude +.15
- Oct Gold +4.20
Chart of the Day
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