Sep 20, 2014
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The Hueber Report

RSS By: Dan Hueber

The Hueber Report is a grain marketing advisory service and brokerage firm that places the highest importance on risk management and profitable farming.

Nary a bull to be found

Sep 19, 2014



Without some type of miraculous recovery today, the wheat market will have closed lower for the fourth week in a row and at the lowest level for a spot contract since June 25th, 2010.  With the exception of dryer than normal conditions in Australia, just about every news item is negative.  After showers pass through this weekend the weather outlook appears conducive to wrap up harvest of the spring wheat, export sales were sub-par yesterday morning at 11.6 million bushels with little interesting in the lineup and of course, stiff competition in the international markets as France and Russia aggressively market their crops. Without bearish news we would not have any it seems.

I intend to expand on this theme a bit more in the weekend comments but it would appear that we are reaching the point in not only wheat but commodities in general that everyone has given up hope.  All they can envision is low to no inflation and declining prices ahead.  For me, that begins to raise a big warning flag.  This is not to say prices will not head lower for the near-term or that it can identify a specific point in time for which we will turn around, but this is the kind of attitude that develops and exists when you are approaching lows in markets.  As one of my favorite saying goes, when everyone is thinking the same way, no one is thinking and once that happens, we will miss subtle changes that are taking place in the undercurrent.

Keep in perspective as well that markets always overshoot be that at bottoms or top so for now, we need to remain patient as the market demoralizes the last of the bulls.  


While weak, the corn market has still been resistant to pressing into lower lows but with the selling witnessed this morning, it would appear that we will put that to test for the weekend. Here are well we are struggling not only with the weight of a potentially larger crop but the overall negative attitude toward commodities in general. 

Export sales last week were Ok, coming through at 26 million bushels.  This brought the marketing year to date figure up to 513.3 million bushels so we need to average just 24.7 million per week to reach the target of 1.75 billion.  The most discouraging aspect of this is that we really need to boost that number closer to the 2 billion bushel level to lift prices away from the basement.  The USDA did announce a sale this morning of 376k MT of corn to Mexico.

The most positive news I have seen in the past 24 hours is the fact that the CME lowered margins on corn from $1500 to $1250 per contract.  While this may not sound like a big market influence and reflects the lack of volatility we currently experience, traditionally this has been once of those minor flags that is waved when you begin approaching lows. 

After showers pass through the Midwest this weekend, the outlook appears to be nearly ideal to put the finishing touches on the corn market.  With ample moisture already present we should potentially be building test weight, which would be that final essential step for maxing out the yield this year.  It would appear that the harvest should really kick into gear once the calendar rolls over to October.

Later this morning Informa will be releasing their initial estimates for corn and bean acreage for 2015.  While this will only the opinion of one company and should not be a market mover, it should provide an interesting base from which to begin discussions about next year.


Solid export sales yesterday of 53.9 million bushels were ultimately not enough to support the bean trade nor was a sale announcement this morning of another 1.236 MMT or 45.4 million to China as prices have now extended into lower lows for the year.  With a clear forecast in the weeks ahead the trade will be looking for harvest to kick into high gear.  Yield reports from areas in the south continue to be outstanding with 60 to 90 b/p/a’s commonly heard.

The CME also cut margin on beans, moving from $3000 to $2500 and meal from $1500 to $1300.  As I commented under corn, traditionally you begin to see margins reduced as you approach lows in markets but the key word to keep in mind here is "approach."

The Informa estimate for 2015 beans should be particularly interesting as we will potentially be coming away from a huge record acreage of 84.8 million this year. With 9.75 new beans versus 3.80 new corn, will many intend to cut back on the beans?  A topic of debate for another day.

Acre debate continues

Sep 18, 2014


An early travel schedule has meant that the morning comments will be out before export sales are released this morning so we will report on those figures later today.


All the nervous anticipation concerning a possible early interest rate boost by the Federal Reserve was for naught as policies were left at the status quo with a rate hike expected sometime later in 2015.  There were two dissenting voices on the committee but Chairman Yellen, citing the ongoing concerns about the slow employment gains and fledgling economic recovery in face of world headwinds as the reason to stay on the current course.  This news still did not temper the enthusiasm in the dollar as prices poked into a higher high yesterday and has advanced again overnight.

Other news is sparse this morning.  The Russian wheat harvest has advanced to around 70% complete and yield has continued to perform better than expected.  Estimates for the total crop range between 59 and 62 MMT.  The forecast in Australia leans to the dry side, which could be a drag in yields as plant should be filling out heads but hardly an alarming problem at this stage. 

The world remains awash in wheat and as we have been experiencing, others in the Northern Hemisphere outside of our borders continue to dominate the export scene.  Chicago futures did close higher yesterday and are relatively flat this morning which could be suggesting that we have readjusted to the recent supply increases and with nothing exceptional happening in the Southern Hemisphere, we may be ready to begin base building once again.  This is not to say that we could not still see a dip in December Chicago futures down against the 2010 lows at 4.73 but as a whole may be set for sideways action for the last quarter of 2014. 


The corn market struggled throughout the day yesterday trading in a very narrow range but is realistically treading water at this point.  This is really the third time since the spring peak that we have witnessed this type of price action.  The first was back in June when we spent 3-weeks chopping between 4.55 and 4.35 in December futures before exiting through the lows.  After reaching the 3.60 level then in early August, we spent a little over 4-weeks trading between 3.60 and 3.80 before the next push lower.  In each case, the breakdown occurred right at the end or beginning of the month.  Would this suggest we could keep tracking sideways now through the end of this month?  Certainly not out of the question. 

Ethanol production last week remained very solid as we manufactured 273,126,000 gallons, which should work out to around 98 million bushels.  Note though that stocks jumped 33 million gallons this past week and with the summer driving season behind us, DDG’s under pressure, and the corn market largely flat for now, it could begin to weigh on margins.  

Not surprisingly, there continues to be a debate as to the discrepancies between the USDA/NASS acreage numbers and those of the FSA.  Realistically there always is and the fact that there are stores that the FSA will update the numbers at least another time just adds to the dispute.  We very well may eventually see the acreage number pulled lower but I suspect for the time being, the focus will again shift to the many exceptional yields being reported.  This is something to keep in the back of your minds though as if you recall, it was back in January of this year when the bear was all primed for a negative final production report and when they were not granted their wish, that is when prices really turned the corner back higher. 


It would appear that the bean harvest in not stepping into gear fast enough for a number of processors as there are reports each day of additional plants shutting down for maintenance.  The potential challenge here is that losing capacity now could make it difficult to reach the USDA target at 1.770 billion bushels.  Keep in mind that would be the 3rd largest crush on record.

Export sales are expected to be in the 1 to 1.4 MMT range as China continues to book in needs through spring.  Outside of this I find very little fresh new to mull around this morning as the trade awaits additional harvest news.  It would appear that there could be a few showers that pass through the Midwest over the weekend but outside of that, the weather would appear ideal to speed up the maturation and of course the harvest of this crop. 

Fed Watching

Sep 17, 2014



Generally quiet news morning as we reach mid-week with many traders/investors as concerned about the Fed Reserve Open Market Committee meeting that is being held as anything Ag related.  As has been the case when this group meets, everyone will be scrutinizing each and every word for a hint as to when they may begin boosting interest rates, or maybe better stated if there is a possibility that it could occur sooner than later.  A rise in rates would not only potentially stall the equity markets but should send the U.S. Dollar higher, which of course is not a positive for commodities export business.

As expected, the Egyptian wheat tender went to France who is aggressively marketing their crop.  Turkey, the T in the MIST countries, was in for 200k MT of US wheat and Morocco is tendering for 386k MT.  Weekly sales will be released tomorrow morning. 

The ranges for wheat overnight are quite small at this point and we currently hover around the unchanged mark but this of course after dropping to lower lows once again yesterday. I continue to believe December futures have room to slip down to at least the June 2010 lows at 4.73 between now and the beginning of October. 


Well, the FSA acreage bump faded rather quickly yesterday as ongoing reports of big yields occupied the minds of traders.  While I suspect we will eventually see the USDA adjust corn acreage lower, considering that the FSA data is evidently still incomplete and may not be finalized until December, that would mean changes will not be made until the final reports in January. Of course the horses are long out of the barn by then so closing the door a touch may not be much of a market mover at that time.  We did still manage to close right around the unchanged market so it was a victory of sorts.

At this point lower prices do not appear to have stimulated any exceptional export interest for new corn.  The only tender lining up overnight is Israel looking for 70k MT and it would appear the report tomorrow morning will not hold any positive surprises.  You have to imagine that outside of immediate needs, buyers will be content to allow the market to come to them.  Also consider the fact that since July, new crop corn futures have lost around 17% and during the same time the dollar index has gained over 5% so all the flat price decline is not being reflected in other countries. 

While I am not sure if this qualifies as new or old news but it was reported overnight that China and the US failed to reach any kind of agreement on the testing for and acceptance of certain GMO’s in DDG’s as well as corn.  This effectively continues to lock us out of the majority of the Chinese market at least until they suffer a crop problem.  You have probably all read that Cargill has now filed a suit against Syngenta over unapproved GMO varieties which will be very interesting to watch unfold. 

The corn market has actually been quite stable now for the past 5 sessions which is not unexpected but I cannot imagine we will hold this range for any extended period.  A push through exiting lows in December corn at 3.35 ¾ should open the door for a slide down to the targets between 3.10 and 2.90 most logically in October. 


The early bean strength yesterday fizzled quickly after touching the 10.00 mark in November futures.  It would appear we know where the sell order will be sitting is at this point.  We have tried to stabilize and bounce overnight but without a fresh positive story soon, I suspect the expanding harvest and consistently solids yield being reported will overwhelm the support once again. 

According to the Ministry of Agriculture in Argentina, farmers in that nation have sold just 58% of this years’ crop.  Last year at this time they had sold around 66% which was also at a slower pace than usual and I have to believe heavily influenced by the troubled political/economic situation down there.  It is better to hold a commodity than a worthless Peso.  There are two negatives for the US with this situation though.  First, it means there is a larger current world inventory just as our new beans are becoming available and hence, greater competition.  Second, this means the Argentine farmer is probably cash strained moving into the spring season, which would suggest they will plant crops that require less money, i.e., more soybeans. 

As with the corn, the FSA data released yesterday would hint that we could see acreage adjustments on future reports but if that does not happen until January, it could be anti-climatic.  I continue to believe we will see November beans slide down to at least the 9.50/9.40 zone and if yields continue to come in a solid as the early numbers, a push down against 9.00 would not seem unreasonable.

Acreage confusion

Sep 16, 2014



While it is not much, the wheat market is looking at a higher trade here overnight and we have posted the first higher high in the past 7 sessions and only the second in the past 11. Hardly what would qualify as a turnaround but you have to begin somewhere.

I suspect the bounce is primarily technically inspired, as there is precious in the news that one would construe as positive.   The Russian Ruble has pushed to record lows against the dollar keeping US wheat less than competitive against the Black Sea and  French wheat is even less expensive than the Black Sea currently.

Export inspections last week fell right in the range of estimates at 20 million bushels.  This brings the YTD loadings up to 279.8 million bushels.  The glass half full crowd would say this means we need only average 17.4 million per week to reach the USDA targets but the half empty group would counter that this pace is 34% behind last year and with stiff competition the picture will not improve.

Spring harvest has reached 74% complete, which was up 16% for the last week and is 12% behind the normal pace.  Winter wheat planted is now at 12% complete, up 9% in the last week and 1% ahead of the normal pace.

While the bounce the morning allowed the few remaining bulls a little chance to take a sigh of relief, I would not be too confident that we have seen the last of the selling.  I still expect to see prices press into lower lows at least once more time with room to take December futures down to at least the 4.73/4.83 range. 


The corn market did finally catch a little bounce for the close yesterday and have followed through a bit overnight.  It would appear that concerns about possible acreage adjustments after the FSA updates number has done what the threat of an early frost could not. As it turns out, the FSA release did not really provide much for the bull to hang onto.

The FSA reports that planted acreage that has been certified is 84.3 million, which is actually 1 million higher than their August estimate.  There was speculation, evidently by the bulls, that the figure could be a million lower than the previous estimate.  To complicate the figures even more there is a story circulating that due to technical difficulties the FSA would not have the "real" final data until December.  The Farm Service Agency has many fine individuals that work within their offices and are asked to do more with less each year.  I shudder to think of the outcome had some Washington administrators and politicians had their way and were successful at pushing the entire crop insurance program onto them. 

We appear to be past the cold weather concerns and with forecast for normal to above normal temperatures stretching now through the end of the month. This should help crop development speedily move along.  As of September 14th corn in the dent stage had reached 82% which is just 3% behind normal but corn mature stood at 27%, 12% behind the 5-year average.  The crop rating was unchanged at 74%, which other than for the historical reference means little at this point.  This was the first week of summarized harvest data and for the 18 major states and we stand at 4% complete versus a normal of 9%.  North Carolina and Texas were the furthest advanced at 52% and 59% respectively.  Illinois only reflected 2% complete versus a normal 13% and Iowa was a goose egg compared with a normal 5%. 

After a nice bump the previous week, export inspections were pretty dour.  For the week ending September 11th we loaded just 29.2 million bushels, which was a solid 10 million below even the lowest estimates.  Year to date we stand at 57.75 million bushels.  

It is nice to see a nice little bounce this morning following-through on yesterday strength but it is difficult to imagine that is will carry far.  Yield estimate continue to increase as Cordonnier has pushed his number to 173 and I have read other now advertising figures in the upper 170 zone.  There are some who suggest that the FSA figures will ultimately result in a couple million cut in acreage.   While I do not profess to have any insight as to if that will be correct, keep in perspective that a boost in yield to over 175 would more than compensate that kind of loss in acreage.

Overhead resistance should be tough as we approach 3.50 in December futures and I expect would be thick from there all the way to 3.60.  The last corrective phase in corn entailed 6 weeks of sideways trade but with harvest upon us, it is difficult to imagine a replay of that kind of action. 


Anticipation of the FSA acreage data prompted a bean bounce as we but we have the same type of semi-conflicting information as well.  The FSA reports planted acres reported at 80.8 million, which is up 1.6 million from last month.  They have prevented plant at 841k which is 14,000 acres higher than the August figures but of course this all could be adjusted in December if the stories are correct.  As with corn, a higher yield on the next report could easily offset any loss in acreage.  Condonnier also bumped his bean yield but just by 1/10th to 46.7.  

There were no surprises in the monthly NOPA crush data as we used 110.66 million bushels of beans last month.  Crop conditions were left unchanged once again 72% good/excellent and beans dropping leaves moved to 24% of the crop, which lags the 5-year average by 8%. 

November beans pressed back against the 10.00 level overnight and I suspect we will find very stiff resistance from there up to the old lows at the 10.20 mark.  The current weather outlook for the balance of the month would look ideal to kick the bean harvest into high gear and I cannot help but think that will squash any rally in the near future.


Losing the investment community

Sep 15, 2014



Markets have picked up right were we left off on Friday.  December wheat has now pushed down into the same sub 5.00 level that the September contract reached last Friday at expiration. 

Saudi Arabia was active in the market over the weekend as they have purchased 610k MT of wheat in the world market.  I have yet to see the actual breakdown but I understand that it will be sourced from Europe, Australia and the United States. 

SovEcon, who is a private Russian Ag consultancy company, boosted their estimates for the overall Russia crops.  The total grain crop is expected to be in the 104 to 106 MMT range, which is up from their previous estimate of 98 MMT.  Of this total, wheat is projected to represent 60 MMT, which was up 2 MMT from their last estimate.  By no means is this a shocking revelation as these size numbers have been bounced around for some time now but it certainly does little to temper the negative psychology of the market.  In fact, it would seem that just about everywhere you turn right now you will uncover a bearish commodity story. 

If it is not about grains it will be about gold or energies or vegetable oils.  When I see information become so lopsided, my contrarian nature begins kick in and I begin to look for a reason as to why the majority could be wrong but unfortunately at this point, it is nearly impossible to find one, or at least one that could stem the negative outlook. 

It does not sound like the so-called peace in Ukraine will be able to be sustained much longer which could provide a little support. Other than that, we shall see what the weekly exports and harvest updates tell us throughout the day but lacking something really fresh, it would appear that prices will continue to drift lower for now.


It is indicative of just how weak a market is when there is a frost in parts of crop production areas and we do not even bat a bearish eye.  Granted, we do not know what or if any damages may have occurred and it represented a small portion of the production area but after the hype of the past couple weeks about an early freeze you might have though it would be worth a few clicks higher. 

This is indicative not only of the potential crop size that we are looking at this year but also the larger disillusion with commodities that is being experienced from the speculative/investment sector.  Hedge funds have reduced long holdings in Ag commodities to levels not seen since January and with the news at hand, it would appear that the exodus should continue. 

The USDA did announce a sale of 120,000 MT of corn to Mexico this morning as they continue to be one of our most consistent buyers.  As the "M" in the MIST nations, they will be a country we need to count on and watch as a key consumer of US Ag products in the years ahead. 

It would appear that the great lakes region has moisture is store for the week ahead but temperatures across the entire upper Midwest are forecast to return to normal to above normal readings.  I saw that here in Northern Illinois we could reach into the low 80’s by the end of the week, which would be a full 25 degrees warmer than last Saturday. 

Evidently with the freeze story now in the rearview mirror, unless we turn excessively wet, most of the action will be centered on yield reports.  We could experience a week to 10 days of stable action but I suspect that as the calendar turns over into October, the competition will heat up again as to how large a crop estimate there can be made.


The bean market begin this new week under pressure but did not press through last weeks lows and have found a little buying now in the daylight hours.  There would appear to be little if anything in the news to stimulate much buying outside of uncertainly over possible frost damage to the north and if that is the case, I would not expect to see it carry very far. 

We will have the August crush number released later this morning with the trade expecting a figure of around 111.6 million bushels.  I guess not bad for a period when we were supposed to have run out of beans. 

Export inspections and weekly crop conditions will be released throughout the day buy I would expect either to be much of a market influence.  Ratings should be unchanged to possibly a smidge lower.

Like corn, we sit in a very oversold short-term position and could be in line for a week to 10-days of sideways to even higher action.  If correct, look for very stiff resistance in November beans back between 10.00 and 10.20.

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