The wheat market just cannot seem to find a friend at this point and really have little news that would provide encouragement. Chicago futures have been able to remain above the late July lows so far but both Kansas City and Minneapolis futures have poked into lower lows.
Competition in the export markets remain very stiff, particularly from the Black Sea region and I even read that Brazil may be trying to sell wheat, and if correct would indicate they will no longer be in our market as a real buyer.
The sluggish trade was verified with the latest export sales as we sold just 338,700 MT or 12.45 million bushels last week. This number was down 43% from last week and 37% below the 4-week average. The top purchasers were Unknown destinations at 68.9k MT, Brazil at 59k MT and Mexico with 51.9k MT.
Prices have stabilized overnight and there is no question that we sit in a very oversold position but there would appear little to scare the bear away from this market just yet.
We are looking at relatively stable trade in the corn market right now, which would seem quite understandable in light of the news we have received this week. In theory, the trade was geared up for a larger yield and carryout number than the USDA gave us, which would imply that we have already factored that into the price structure. Add in a surprise sale of 130k MT to unknown destinations and we have enough of a story to keep prices from dipping lower for the moment. Historically, corn will have a tendency to trade flat during the month of August as we assess the overall condition of the crop and that would appear to be the situation we have right now. There appears to be nothing that would encourage buying at this time unless it comes via spread action against beans or wheat and it would be difficult to sustain a rally on that right now. The trade will be keeping a close eye on the preliminary acreage data that should be released by the FSA tomorrow in case there is any suggestion that current acreage estimates are too high, but I would be surprised to see any shocking revelations this year.
Granted, the marketing year is winding down rapidly but the old crop export sales number did not help the mood any this morning. We posted a negative 117,100 MT or - 4.6 million bushels as business is pushed out into next year. Sales for the 2014/15 crop came through at 787,800 MT of 31.02 million bushels. The top purchasers were Columbia for 284k MT, unknown at 138.2k and Mexico for 75.5k.
Ethanol production bounced back well last week as we produced 273,714,000 gallons, using an estimated 98.4 million bushels of corn. Inventories were down for a second week in a row, reduced by 21 million gallons.
The corn market has been moving in a sideways pattern now for the past four weeks and it is possible that we could extend that out for another one to two weeks but I suspect that any rallies into the 3.75/3.80 level basis December corn would be met with stiff selling. As I commented yesterday, if we did close above 3.74 ¾ tomorrow, technically the market could be providing us a tip off that enough is enough, but lacking that I have to believe we will be headed for lower lows as we move out into harvest.
Reality appeared to come home to roost yesterday as November beans pushed and closed below the 10.55 level where we had posted a double bottom last month. Realistically, you would want to see a second consecutive close below that mark for a confirmation and the sluggish action this morning would make one think that is quite feasible.
I recognize that beans do need heat and sunshine moving forward but the latest 7 day precipitation maps would indicate that if there were any concerns about dry spots through the Mid-west, they will be alleviated during that period. NOAA is showing that pretty much the entire upper 2/3rd of this country is in store for 1 to 2 inch rains between now and the 21st of this month.
We do have August beans expiring today which should complete the old crop/new crop story for this year but there will still be a few weeks of good domestic demand as crush margins remain solid with limited availability in many areas. Meal demand has been stronger this month than the industry had anticipated but the drag continues to be oil as evidently both here and abroad, there is more than sufficient quantities of vegetable oil.
No surprises in the sales numbers for either crop year. For 2013/14 we did record sales of 61,400 MT or 2.26 million bushels. 2014/15 sales were solid at 1,081,800 MT or 39.76 million bushels. The primary purchasers were China at 640k MT, unknown destinations at 293.5k MT and Taiwan at 115k MT.
NOPA crush numbers will be issued tomorrow with the trade looking for between 113 and 117 million bushels.
New crop export business has continued to provide support for this market but as we inch closer and closer to harvest without any weather hiccups, I have to believe that the bean market will continue to works it way into lower ground.