Apr 19, 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.

 

Bean Sales Still Not Being Canceled

Apr 17, 2014

 Grains climbed higher overnight with soybeans once again leading the charge for its 4th consecutive day of gains. In the night trade, front month May soybean futures were up 7 cents a bushel while wheat posted a 3 cent advance. Corn followed with a 1 cent gain.

Soybeans continue to be fueled by tight supplies in the US where strong exports and crush have cut into available supplies. This week’s sales showed only 19,000 MT of old-crop for the week, but the total commitments for the year still far exceed USDA’s projections. Total export commitments for old-crop stand at 44.6 MMT versus USDA’s projection of 43.0 MMT to be shipped for the entire year.

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In corn, weather conditions look fairly good for planting. The next few days look fairly dry across the Midwest, although a system is expected from Sunday into Monday. After that, the southern half of the Midwest through the Delta should be fairly dry in the 6-10 period. The 11-15 day, the last five days of April, looks dry across most of the central U.S. as well. Weekly ethanol production released on Wednesday by EIA showed strong levels at 939,000 barrels per day, up 45,000 from last week and the highest weekly total since December.

For wheat, weather continues to be a factor in the southern Plains. There might be some rain tomorrow, and then a better chance this weekend. But most areas are expected to see at most 0.5 inch of moisture, not enough to dramatically improve the situation. Looking ahead in the 6-10 and 11-15 outlook the region looks fairly dry across those areas

 WEEKLY EXPORT SALES (in thousand metric tons)

 

OC Actual

OC Expected

NC Actual

NC Expected

Corn

601.9

550-850

192.6

0-150

Soybeans

19.2

-100-100

400.7

175-350

Wheat

438

50-250

359.9

225-375

 

Soybeans Eclipse $15 Amid Tight Supplies

Apr 16, 2014

 Soybeans moved sharply higher in the overnight session with front-month May futures gaining 17 cents a bushel and new-crop November up 8. Wheat was also higher with a 3 cent advance, while corn was fractionally lower.

Yesterday brought bullish news for beans with NOPA monthly crush figures being released. For the Month of March, US crushers used 153.8 MB which was above trade expectations of 146.1 MB going into the report. With tight stocks and strong exports, the strong crush number suggests even more tightness going forward. While some imports have occurred of late to help alleviate tightness, it seems the US is well shy of reaching the 65 MB import projection to keep stockpiles from disappearing altogether by the end of the marketing year. Some crushers are boosting their basis sharply in recent days with +50K or higher becoming the norm across much of the Midwest with 2 weeks left until first notice day on May beans.

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For wheat, prices were weaker on Tuesday for the first time in three sessions, but recovered some of the losses overnight. Damage from the freeze in the southern Plains is still being debated. Oklahoma State agronomist Jeff Edwards said "Most of Oklahoma spent at least four hours below freezing last night and some areas spent an extended period of time below 28F. While temperatures in the wheat canopy might have remained slightly higher than reported air temperatures, they were still probably low enough to result in significant injury to wheat."  In Ukraine, the situation is getting worse and more and more operators are challenging the ability of the country to properly produce and export grains. But no concrete impact can be observed for the moment.

In corn, the market continues to be somewhat of a follower of the wheat and soybean market. However, its own fundamentals remain supportive with export activity exceptionally strong, and ethanol margins running high. Today will bring the latest EIA ethanol production figures which should continue to show robust production for the ethanol producers.

 

Cold Weather Threatens US Plains Wheat

Apr 15, 2014

 Grains were mostly lower overnight following Monday’s rally. Nearby May soybeans was the exception, gaining 8 cents a bushel, while corn and wheat lost 2 cents each.

Cold temperatures across the southern Plains poses a threat to the wheat crop. According to Oklahoma State agronomist Jeff Edwards, wheat in Oklahoma ranges from just past jointing to late boot and if forecasts are correct wheat injury is likely. Given the limited moisture and limited time prior to harvest, Edwards thinks, it is not likely that the crop will recover from a complete loss of tillers. In Monday’s Crop Progress report, USDA saw ratings slip slightly, going from 35% good to excellent last week versus 34% good to excellent this week for the winter wheat crop.

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In corn, plantings got underway this past week with 3% of the corn crop planted according to USDA. That’s up from 2% last year, but behind the 5-year average pace of 6%. Export inspections for corn were strong, totaling 1.44 MMT, which was above the 1.350 MT upper end of trade expectations going into the report. It was also the highest weekly total going back to 2008.

For soybeans, export inspections were on the low side of trade expectations. Actual inspections came in at 267,000 MT versus analyst expectations of 325,000 to 450,000 for the week. Soybean cash basis bids are mostly steady at elevators and processors around the U.S. Midwest, a touch firmer on the Mississippi River.   

Wheat Skyrockets on Ukraine Tensions

Apr 14, 2014

 Wheat jumped higher in the night session reacting to escalating tensions between Ukraine and Russia over the weekend. At the end of the overnight session, wheat was up 15 cents a bushel while corn and soybeans gained 4 and 6 cents, respectively.

Ukraine has given pro-Russian separatists a Monday deadline to disarm or face a full-scale anti-terrorism operation with full force. This has raised the risk of military conflict, with the market building in a premium for potential trade disruptions or production issues down the line. In the case of wheat however, Ukraine farmers planted their winter wheat and face little constraints, but the same is not true for spring planted corn where farmers are reported to be facing resource constraints. However, trade has not been noticeably impacted. Indeed, Russian agricultural consultancy SovEcon has raised its 2013/14 grain export forecast due to more active March shipments than previously expected, it said on Monday.  Global wheat prices have been rising in recent months on concern over grain supplies from the Black Sea, triggered by Russia's annexation of the Ukrainian region of Crimea. Russia’s exports have been higher caused by global price growth and a weakening rouble. Russian wheat was the lowest offer in a tender from Iraq’s state grains board to buy at least 50,000 MT of wheat to be sourced from the United States, Canada, Australia, Ukraine or Russia.

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In corn, South Korea's largest animal feed maker Nonghyup Feed Inc has purchased 193,000 MT of optional origin corn and 65,000 MT of optional origin feed wheat in a tender which closed on Monday.     The tender had sought September/October arrival. In Ukraine, a grains conference on Friday suggests that production there could fall sharply in the coming year with analysts looking for a 23-24 MMT crop as compared to 31 MMT last year.

For beans, export activity has been mostly quiet of late with most business occurring for new-crop delivery. At least one soybean cargo defaulted on by Chinese importers was sold by Japan's Marubeni Corp, three sources said, as slowing demand and tightening credit in the world's top importer hits oilseed trade. One Tokyo-based source with direct knowledge of the situation said Marubeni incurred a loss of $4 million on 4-5 soybean cargoes which were defaulted on by Chinese buyers as they could not get letters of credit.

 

Chinese Crushers Default on Bean Purchases

Apr 10, 2014

 Grains were weaker overnight following Wednesday’s volatile trade from the latest round of USDA supply and demand data. In the night session, beans were down 10 cents while wheat and corn gave up 3 cents a bushel.

USDA’s supply and demand report released on Wednesday showed tightening US corn and soybean carryout. For corn, USDA raised US exports by 125 MB, which led to an equal decline in ending stocks at 1,331 MB, and below trade estimates going into the report of 1,403 MB. For soybeans, exports were raised by 50 MB over the previous forecast in March, but imports were raised 30 MB to a record high level of 65 MB if achieved. These adjustments, combined with a 5 MB drop in crush cut into the US carryout by 10 MB from the March forecast, and now stands at the razor thin mark of 135 MB.  

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While the markets were spurred on immediately after the report, prices quickly eroded as sell triggers were reportedly hit and farmer selling was said to intensify. May corn breached below the $5 mark but managed to inch above it in the night session. Overnight there was chatter that several Chinese soy crushers were going to announce a default on soybean export deals in the wake of poor margins in China and this morning it was confirmed. Chinese importers have defaulted on at least 500,000 MT of U.S. and Brazilian soybean cargoes worth around $300 million, the biggest in a decade, as buyers struggle to get credit amid losses in processing beans. Three companies in the eastern province of Shandong had defaulted on payments for shipments as they were unable to open letters of credit with banks.

For wheat, prices continue to be dogged by ample world supplies. World wheat carryout increased from 183 MMT to 186 MMT in the latest supply and demand report. Also, logistics problems in Canada seem to be waning as CN Rail announced it would be meet the government target to move 500,000 MT of grain for the week in Western Canada. In the drought stricken US Plains, the weather looks dry over the coming days with only a modest chance of a rain even towards the beginning of next week. The next month should be critical for crop development there.

WEEKLY EXPORT SALES (in thousand metric tons)

 

OC Actual

OC Expected

NC Actual

NC Expected

CORN

960.6

700-900

37.9

0-200

SOYBEANS

66.2

0-150

19.3

100-300

WHEAT

336.4

250-375

310.5

150-300

     

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