Morning Comments - Beans Sales Positive Again
Mar 20, 2014
Fundamentals – It is officially the first day of spring and as I look out the window of my office all I see is a fresh, although quite thin, blanket of snow. The real spring is slow in coming for pretty much everyone.
The wheat market was the star performer on the upside again yesterday. Some believe it was due to concerns about potential greater than normal abandonment of the winter crop while others point to the ongoing tensions in Ukraine and the need for additional risk premium. Undoubtedly it was a combination of both as funds continue to buy as we push to the highest levels traded since June of last year for spot futrues. I do not want to downplay either of these issues nor am I prepared to step in front of a raging bull, but do feel it is time to take a little more rational look at the overall situation. This advance should be providing Canada and Europe plenty of incentive to boost acreage and while that does not insure good crops, it can ease many concerns. Sure, if an El Nino truly develops later this summer that could pose issues with the next Australian crop but that is stretching the envelope pretty far to build a bull case.
Export sales are slipping as this past week we sold 401,800 MT or 14.77 million bushels. This was still within the range of trade estimate of 250k to 500k MT. This brings the year to dates sales up to 29,516,000 MT or 1.085 billion bushels, meaning we will need to sell an average of 8.2 million per week moving forward to reach the USDA target of 1.175 billion. There were sales of 7.2 mill. for 14/15.
Fundamentals – Corn has turned into a follower instead of a leader at this point with the wheat market calling the shots. The biggest bright spot for corn right now is ethanol margins that are just through the roof and will keep demand and basis levels strong for anyone in a reasonable proximity to a plant. For the week ending March 14th, production bounced back to 891,000 barrels per day. This is below the year to date weekly average of 895,000 barrels but was a solid bounce from the prior week and still reflects usage of over 94 million bushels of corn. Weekly stocks were down for the 4th week in a row and sit 26 million below the year to date average.
Corn export sales were just above the upper end of estimates coming in at 745,800 MT of 29.37 million bushels. This brings our year to dates total up to 38,964,000 MT of 1.534 billion bushels. To reach the USDA target of 1.625 we need to average just 3.8 million per week moving ahead.
Fundamentals – While wheat may have been the leader yesterday, beans were no slouch. There is talk that a 4th cargo of beans that had been destined for China was sold into the United States but it would appear that until the bulls see a measurable shift in the supply/demand tables they will continue to hold fast. Even with the overnight strength we have not yet been able to reach back to the highs posted two weeks ago but they are within striking distance. To borrow a phrase from the movie Jerry Maguire, the bulls in this market appear to be saying "show me the beans."
The trade was expecting export sales to come in anywhere from a negative 100k MT a positive 300k MT and we actually registered 202,200 MT or 7.43 million bushels. Realistically, anything in the plus column is feed for the bull at this point in time. This brings our YTD total up to 1.633 billion bushels, which is 103 million bushels above the USDA estimate and puts us almost at the same place we were before the adjustment on the last supply/demand report. It would seem obvious that the export and import estimates will be pushed higher on future reports. Sales for the 14/15 marketing year were also quite solid at 437,500 MT or 16.08 million bushels.
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