The wheat market stands out as the lone wolf here this morning as it is the only grain or soy market that is not under pressure. Chicago, KC and Minneapolis are all showing slight gains for the overnight trade. While a couple cent bounce may not amount to much in the overall scheme of things, we realistically have harvest behind us and it is difficult to continue pressing a market on supply once it is known.
While psychologically the corn and bean harvest should act like an anchor pulling against the wheat market, its biggest obstacle remains the world competition. We are finally competitive with Russian wheat but EU/French wheat remains at a solid discount so unless we have some type of distinct freight advantage this keeps us out of the trade picture. All that said, Egypt did purchase 55k MT of US wheat for late October. Over the weekend Russia reported that for the marketing year, which began July 1st, they have exported 26% more grain that the previous year or which 87% is wheat.
Not that it is a big market influence, on their release on Friday Informa projected that the 2015 US wheat acreage would potentially increase 509,000 acres above current USDA numbers. This would equate to 57.009 million acres and would be the highest total acreage since 2008 if correct.
As they old saying goes, the journey of a thousand miles begins with one step and for wheat we should be close to at least begin taking steps on level ground.
With clear skies ahead the trade is expecting the corn harvest to kick into a higher gear and we have begun the week with a dip into lower lows. The trade is expecting the report this afternoon to show harvest to date in the 12% to 15% complete range. Recognizing that is really a small percentage and remain behind normal, yield reports have continued to be outstanding.
As expected, it has not produced any market reaction but the Informa acreage estimates on Friday were interesting. They currently project we will plant 4.325 million acres less corn that the existing USDA estimate for 2014 with a total of 87.275 million. If correct, this would be the lowest planted acreage since 2008. They also adjusted down their assessment for the 2014 crop reflecting the recent FSA number estimating a planted number of 89.309 million compared with the USDA figure of 91.6 million. As I commented in the weekly newsletter, we need to keep in the back our minds the potential for acreage adjustments for 2014, particularly post harvest if the USDA/NASS have not made any changes prior to that. Yield is the name of the game right now and there are some even projecting a figure north of 180 but IF there were eventually an acreage cut, it could be that ending stocks will not climb significantly above current projections.
I continue to believe that December corn has potential to head down and revisit the 2009 cycle lows that sit right at the 3.00 mark and the way we have begun this week, that could happen by early October. While there is nothing etched in stone just yet, we have not seen a corn ending stocks figure north of 2 billion since the 2004/05 crop year but when viewed as a stock to usage ratio, supplies are nowhere near as burdensome as that period and actually line up about the same as 2009/2010, the last time we traded prices into this range.
Beans have taken the harshest hit of any this morning with November below 9.50 for the first time since July 9th 2010. Back at that time, we developed a base roughly between 9.50 and 8.90 that we traded within for around three months. With a clear forecast for the week ahead and consistently solid early yield reports, it would appear the bean market has little to provide support. The trade is looking for harvest progress to stand between 2 and 5% complete.
As with the corn, there were several interesting notes from the Informa acreage estimate and it provides us with a base for discussion moving ahead. First and foremost, they are calling for planted acreage in 2015 to reach 87.652 million acres. If correct, this would be the first time ever in this country that we would plant more beans than corn. I remember 20 years or so ago there was discussion that North America was going to evolve in to the corn hemisphere while South America would produce all the beans. Granted, South America has certainly stepped up the production but evidently North American producers did not get the memo. Hence the danger of making long-term projections. Depending on what number you use for this year, either the current USDA estimate of 84.8 million or Informa’s adjusted 83.66, this would mean bean acreage in the United States could climb either 2.85 or 3.99 million next year. In either case, the change is huge.
Adding to the potential bearishness of the potential US beans acreage are the recent numbers from Brazil. The early beans are already going into the ground and Conab currently estimates that total acreage will be up 5% this year with a potential to produce a total crop of 95 MMT. This compares with 86.7 MMT produced this last year. Of course we all know that planting a crop does not assure great production but if the US sticks in an additional 3% on top of record acreage and Brazil pushes acreage up 5%, we have quite a buffer against weather issues.
The slide would appear to be well greased at this point and with the majority of the harvest ahead of us, it would appear that bears are well in control of the bean market for now.