Jul 22, 2014
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Cash Grain Insights

RSS By: Kevin McNew, AgWeb.com

Kevin McNew is President of Grain Hedge and Geograin. McNew was raised on a farm in central Oklahoma and received his bachelor’s degree from Oklahoma State University, and master’s and Ph.D. degrees in Economics from North Carolina State University. For over a decade, he was a Professor of Economics at the University of Maryland and Montana State University, focusing on commodity markets. He has received numerous academic awards for his research and outreach work, and was (and still is) widely regarded for boiling down complex economic issues into easy-to-understand concepts for applied life.


Grain Gap Lower in the Overnight

Jul 21, 2014

 This morning all the grains are trading lower as ideal weather during pollination weighs heavily on the market. September corn is trading down 6 cents, September wheat is down 3 ¾ cents and August soybeans is trading 4 ¾ cents lower.


This afternoon’s crop progress report should show unchanged conditions ratings and nearly 50% of the corn and soybean crop entering the reproductive phases. Weather looks to remain very favorable for the remainder of the week with NOAA and private analysts both expecting cool temperatures across much of the grain belt. Showers should be light and intermixed, continuing to support soil moisture.


The longer term outlook remains favorable, with the 8-14 day forecast from Planalytics projecting below average temperatures and above average precipitation for the majority of the grain belt. This is confirmation of NOAA’s projections from last week for a cool, wet, August for the U.S. grain belt.


New crop soybeans are now 6 cents away from the low printed at $10.65 per bushel following the last USDA supply and demand report. Since then new crop soybeans rallied to $11.18 ¾ last Thursday, helped to its high on Thursday by the Malaysian airlines incident over eastern Ukraine. The geopolitical event was used as a selling opportunity after the initial reaction sent soybean prices higher. Keep a close watch on new crop soybeans around $10.65 which should act as a strong support level during today’s trade.


Over the weekend France and Germany both received precipitation that stopped fieldwork during harvest. The moisture throughout Europe during harvest has caused quality concerns for the wheat in that region. This is has been an ongoing story this year for European wheat and the U.S markets are unlikely to respond to it in any kind of meaningful way. 


On the demand side this morning we have some action. Export sales of 135,000 metric tons of soybean cake and meal to unknown destinations for new crop delivery and 120,000 metric tons of old crop soybeans to China. On the global front, Turkey’s state grain agency issued an international tender to import 165,000 metric tons of milling wheat and 65,000 metric tons of animal feed barley. 

Markets Mixed on Geopolitical Uncertainty

Jul 18, 2014

 Grains traded a quiet overnight session following yesterday’s volatile trade day. Corn is down a penny, soybeans up 3 cents, and Chicago wheat is of a penny. The situation in Ukraine has done very little to move the grains or outside markets in the overnight session as we see crude oil and the S&P 500 trading unchanged. Facts are still being sorted out as to who fired the missile that downed the Malaysian Airline flight yesterday morning and, for the moment, this story has not greatly impacting U.S. grain prices. Escalation in the conflict would support U.S. grain futures, especially wheat which traded up nearly 3% yesterday.

This morning there was another reportable sale for new crop soybeans to unknown destinations for 464,000 MT. This is the second large new crop sale in two days showing demand for soybeans at $11 is picking up. Soybean is the only grain that traded higher in the overnight session.

This week’s AMS grain transportation report showed that all locks north of St Louis are open along the Mississippi river following the temporary closures caused by flooding from this springs heavy precipitation.  The reopening of the locks in the northern Mississippi has increased the demand for barge traffic which has lifted the rates from Minneapolis-St. Paul to the Gulf 18% higher than rates before the flooding disrupted grain transportation three weeks ago.


The Ukrainian situation and weather will be the major driver into next week’s trade. We now have a sizeable portion of the US corn crop silking and, for the moment, weather conditions look near ideal entering August. NOAA released their updated weather projection and their models indicate average precipitation with slightly below average temperatures through August. The next major weather event for this market could be towards the end of September as an early freeze becomes a concern. We continue to feel that producers who find themselves under-sold on the new crop should price grain on any rallies and use a call strategy if they are still bullish the longer term outlook. If you would like to discuss your specific marketing situation please feel free to call our office. Our number is 877-472-4607 and we are available between 8AM and 4PM central time.

Strong New Crop Bean Sale!

Jul 17, 2014

 The grains shed a couple pennies in the overnight session with old crop corn down 2 cents, Chicago wheat down 1 cent, and august soybeans down ¾ of a cent. Expectations at the office here are for a continuation of yesterday’s bounce, but we are concerned that the upside potential will be limited as strong selling pressure will likely meet any sharp rally. A strong new crop soybean sale to china should also help support the market this morning.  


Corn had great export sales this week beating expectations for both old and new crop. Old crop sales came in at 573,700 MT which was well over expectations of 250,000 to 350,000. Old crop corn still ahead of pace to meet USDA expectations by about 43 million bushels.


Soybeans met analyst expectations for both old and new crop. Old crop sales were small, but at least they were positive which kept soybean sales well ahead of pace to meet analyst expectations. This weeks 37,700 MT pushed old crop sales now 38.7 million bushels ahead of existing export projections which indicates that net cancellations must occur between now and August 31st to meet USDA projections. New crop sales were slightly lower than expected with only 495,000 MT booked, compared to expectations between 500,000-700,000 MT. However, a reportable sale announced this morning of 708,000 MT of U.S soybeans to China should help lift the market. Wheat sales missed expectations to the low side only booking 320,700 MT compared to expectations of 400,000-550,000 MT.


The European Union will begin taxing corn imports at a rate of $7.2 per metric ton. This was announced following U.S. export prices at the gulf moving below levels required by the European commission. Imports of corn have not been taxed since August 2010 and this is viewed as negative news for U.S. corn prices.


Port worker strikes in Argentina have continued on Thursday. The key export facility of Rosario has come to a stand-still as port workers and grain inspectors are demanding higher wages. Argentina is a major exporter of soymeal and soyoil, and the strike has worked to underpin the soy complex in the last two days.


Markets Higher in the Overnight

Jul 16, 2014

 Grains are moving higher in Chicago, with corn up 6 cents, soybeans up 9 cents and Chicago wheat up 5. The corn and soybean market are oversold technically and this could be the start of a "bounce back" traders have been waiting for. Considering the long run fundamentals we feel any bounce should be used as a pricing opportunity as many producers are still very "long" this market with their cash position. The market should be supported by large exportable sales which included: 120,000 MT of old crop soybeans to China, 240,000 MT of new crop soybeans to unknown destinations and 210,448 tons of new crop corn to unknown destinations.  

Argentinian port workers will begin an indefinite strike on Wednesday, demanding higher salaries to compensate for inflation nearing 30%. This comes at the peak of Argentina’s corn and soybean harvest and is expected to impact ports across the country. Argentina is the world’s largest soyoil and soymeal exporter and this morning we are seeing September soymeal futures trade up 1.3% in Chicago.

For wheat, the market is ticking higher here this morning but is relatively weak within the grain complex. Large global ending stocks triggered the decline that started following the May 9th USDA supply and demand report. Harvest pressure has also been weighing on the market with the USDA reporting that U.S winter wheat harvest was 69 percent complete, up 1% from the five year average. The spring wheat crop condition rating held steady as well with a 70% good to excellent rating which is just 2 points lower than last year’s spring wheat rating at this time.

In a recent tender from the Iraqi State, U.S wheat was still priced to high at $362.96 per metric ton compared to the Russian wheat offered at $308.58 and the Ukrainian wheat offered at $311.15 per metric ton.


Crop Conditions Climb

Jul 15, 2014

 Alert: NOPA soybean crush numbers out at 11:00 AM central time

Grain futures are trading lower in Chicago this morning following yesterday’s bounce. Corn is off 3 cent, soybeans down 5 cents and Chicago wheat is down 2. Crop condition numbers released after the close have weighed on new crop futures. This morning there was a reportable sale released showing 120,000 metric tons of soybeans sold to China for the 14/15 crop year. 

The USDA reported 76% of the corn crop rated good-to-excellent, up a percent from last week. 34% of the crop is now silking which is slightly ahead of the five year average. Cooler temperatures across the grain belt during pollination will be a concern for some southern producers, but this should not be a long term bullish story. Growing degree days may be an issue as we approach harvest. Soybean conditions are still rated 72% good-to-excellent but we saw one percentage point moved from the good to the excellent category. 41% of the crop is now blooming which is four percentage points ahead of the five years average.

NOPA crush numbers will be out at 11:00 AM central time this morning. Traders expect NOPA to report 119.486 million bushels crushed during June. This would be down roughly 8 million bushels from May’s crush. Now the question is if near term demand has been met or will we find stronger crush in July following an old crop sell off following the June 30th reports. On the international demand front, Chinese officials held another state auction of soybeans on Tuesday. Buying interest in main land China is starting to fade with just 59,000 of the 352,000 metric tons offered sold. This was down from nearly 100,000 sold the week before and much larger sales earlier in the summer.

Moisture across Europe has the wheat harvest on hold and some analysts are beginning to get concerned about quality problems of this years crop. At the moment there is still time to correct the issue, but the recent rains in Germany and France has merchandisers concerned.

Yesterday export inspections were released within analyst expectations for corn and wheat, while soybeans beat the average analyst guess by reporting 115,280 metric tons inspected for export.  For soybeans, the forecast ranged between 30,000-75,000 metric tons.


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