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May 2014 Archive for 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.

Morning Comments - Where has the risk premium gone?

May 30, 2014

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Wheat

The poor wheat market just cannot find a friend at this point in time.  Futures prices extended into lower lows yesterday and have followed suit again overnight.  The gap the was left as we began this week does now officially qualify as a breakaway measuring gap which provides us with eventual targets down around contact lows at the 5.60 level.

The current U.S. weather outlook calls for several waves of showers to move across the country over the next week to 10-days which looks ideal for all crops that are in the ground.  Once again there is a little discussion of a high pressure ridge building in the Volga region of Russia that could create some issues there but in the majority of the growing regions of Europe, Ukraine and Russia the weather has been very favorable.  The Black Sea and French markets evidently have taken note as the have been tracking lower, making U.S. wheat just that much more uncompetitive.  Black Sea wheat has broken around $35 ton this week.  Additionally, planting progress has finally kicked into gear in Canada. In Saskatchewan wheat is now 64% planted, right in line with the 5-year average.

Often when you reach the end of a marketing year we will find some unusual sales numbers as we move from one crop year to the next and that was the case for wheat this past week.  For the 13/14 crop year we posted a negative 52,400 MT or -1.9 million bushels.  This leaves us with total sales of 1.166 billion bushels, just 18.9 million below the USDA target.  Sales for 14/15 crop year were solid though at 531,500 MT or 19.5 million bushels.  This was bolstered some by the rolling of sales forward but were almost 9 million higher than the 10-week average.   

You might be able to make the case that we have pilled so much bad new on the wheat market recently that there will be little else to push it lower.  While there could be some validity to that reasoning, it would not appear via price pattern that the bear is satisfied just yet.  Out of curiosity I looked at the old "Voice of the Tomb" theory of seasonal trades for this time of year.  It is interesting to note that during the spring the "voice" tells us to sell July wheat on the 10th of May.  It just so happens that this year that was about 4 days after the peak and the opening price was 7.22.  The next suggestion from the "voice" would be to buy December wheat on the 1st of July. 

As oversold as this market is, I am not sure we will remain under pressure for another 30-days, and I intend to be on the lookout for bottoming signs now as we move into the month of June but that said, for now the bears holds the upper hand. 

Corn

While July corn still closed a bit soft yesterday, at least we did not press into a lower lows and have witnessed a little more stabilization this morning.  Part of this could be explained as just end of the month quietness but I would like to think it is a reflection of a market that has pressed just about far enough for the time of year we sit.

Corn usage remains consistently solid.  The EIA Ethanol numbers released yesterday revealed a slight increase over the previous week as we produced 272,538,000 gallons using approximately 98 million bushels of corn.  This should keep up right in line with the USDA projection of 5.05 billion bushels of corn usage this year.  The only cautionary point in the report was a build in stocks of 21 million gallons, which takes us to a 13-month high in inventory and almost 10% above a year ago.

Export sales were also solid as we sold another 682,000 MT or 24.5 million bushels of corn.  The upper estimates were looking for 20 million.  This brings year to date sales up to 1.79 billion bushels which means we only need to average 7.9 million per week for the next 14 weeks to meet the target of 1.9 billion. 

Of course, this does tend to be the time of the year where the trade has shifted it’s focus from demand to supply and with nothing threatening the crop at this point, the path of least resistance has been lower.  The weather outlook for the next week to 10-days look quite favorable with several showers passing through.  Unless the extended forecast shifts to extreme temperatures, I suspect it will be challenging to see much of a weather related rally from that point. 

All that said, the recent break has sucked much of the risk premium out of corn and has us sitting in a very oversold position and I would expect to see a corrective rebound during June.  Keep in mind the word corrective though as the words implies a rebound within the existing trading range.  We are going to post an outside lower monthly reversal and are turning monthly indicators lower in the process, which does not paint a pretty longer term picture for the corn market.

Soybeans

The soybean market remains stuck between contradictory forces.  An impossibly tight old crop situation but record new acreage and potential for a massive crop.  That said, there seems never to have been a panic to obtain old supplies, which could imply that last years production was understated and for the new crop, we have the risk of weather for the balance of the growing season.  These opposing stories continue to leave us stuck in a trading range.  While I am of the opinion that we will eventually breakout to the downside, it would not be surprising to witness another 30-days at current ranges before that occurs.

While export sales were significantly lower than last week, we still sold an additional 60,300 MT of beans or 2.2 million bushels.  Of course any sales just dig the deficit a bit deeper and we now sit 51 million bushels above the USDA estimate.  At this point I suspect we are going to have to see the June grain stocks report that will be released on the 30th of next month to possibly find a satisfactory answer of how many beans this country holds. Sales for the 14/15 marketing year were very solid at 821,100 MT or 30.2 million bushels.  

As I commented initially, the bean market remain between that proverbial rock and a hard place and while it may test our patience, we need to wait for the market to grow comfortable (or not) that we have done enough to bring the supply in balance with the demand. 

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Morning Comments - What would be called a slow news morning

May 29, 2014

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Wheat

Overall this is what would have to be classified as a quiet news day. The wheat market did try and rebound a bit overnight but it would be difficult to classify that as much more that a dead cat bounce and we have erased the gains now that the day session has kicked into gear. 

Once again concerns about dryness in the Volga region of Russia is creating a minor concern but evidently not enough of one to really bring in buying activity.  I understand that around 15% of their total crop is produced in that region and of course at this point it is just a concern with the forecast.  There has been recent moisture through growing regions in Europe, Ukraine and other parts of Russia, which of course are favorable for growing crops.  Note as well that there has been some discussion of additional spring wheat potentially being planted in North Dakota due to the delayed corn progress.

Export sales will be released tomorrow morning and various index funds begin rolling positions ahead beginning tomorrow but I suspect much of the trade will be dominated by end of the month positioning.  While there is no sign of a low just yet, I believe wheat should begin to stabilize at this current time and price with room then for a corrective rebound after rolling into the new month.  

Corn

The corn market has provided us with little news this morning as well and has basically surrendered the gains achieved yesterday.  While not a market mover domestically, it is interesting to note that China only auctioned 499k MT of corn instead of an expected 3.5 MMT which sent the Dalian market sharply higher overnight. 

At this point the market does not seem to be overly concerned about the 10% or so of the crop yet to be planted.  Part of this could stem from the fact the weather outlook for that which is in the ground looks favorable and I suspect that a lack of new interest at the end of the month has kept a few would be buyers on the sidelines.

We will see the weekly EIA ethanol number later this morning and export sales tomorrow morning and the two should set the tone as we complete the week and the month.     

Soybeans

The bean market tried to extend yesterday’s rebound strength into this morning and were successful for a while making yesterday look something like a "Tuesday undo" day other than the fact that it happened on Wednesday.

Yesterday the USDA did announce a sale of 110k MT of 14/15 beans to China and 172k MT of meal to the Philippines for next year as well but the export news is quiet this morning.  There have again surfaced rumors that Chinese importers have had difficulty in obtaining letters of credit for Brazilian beans and there supposedly are several cargoes of beans looking for a new home.  Considering the USDA projects that we will import 90 million bushels this year, it would be a good bet they will head this way. Export sales in the morning will undoubtedly set the tone to finish out the week and the month. 

Overall, nearby beans remain in a congestion pattern as we have now for the past two months as they look for confirmation that we have found balance.

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Morning Comments - End of the month blues

May 28, 2014

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Wheat

The wheat market continues to slip away and has pushed into lower lows once again overnight.  July futures have now reached back to the same level where it was trading at the beginning of March, right about the period when there was a threat of an actual war between Ukraine and Russia. Note that on the first trading day of March, prices gapped higher in what was a breakaway leaving a hole on the spot chart between 6.10 ½ and 6.16 and on the July chart between 6.02 and 6.08. There would seem to be no question that we now sit in an oversold technical position but this market has little story for the bull at this point and may not be able to find much supportive until we have moved into next month.  The next level of support underneath begins at the 6.25 level and extends down to 6.00.

After weeks of deterioration the overall winter wheat conditions showed a slight improvement.  Good/Excellent was up 1% at 30, fair was down 1% at 26% and poor/very poor unchanged at 44%.  A year ago at this time the ratings stood at 31/27/42.  Spring wheat planting edged up to 74% complete which compares with 77% a year ago and 82% average. Spring emergence runs a bit behind normal and stands at 43% compared to 57%. 

Export inspections slipped a bit this past week as we moved 18.7 million bushels bringing the marketing year to date tally up to 1.129 billion bushels.  With basically a week left we would need to export another 55.8 million bushels to reach the target. 

As I commented above, wheat sits in a very technically oversold position and could see a corrective rebound at any point.  That said, we can remain oversold for sometime and this late in the month with the overall weather outlook favorable both domestically and across Northern Europe/Russia, I suspect it would require something out of the ordinary to bring buyers back to this market.

Corn

The corn market has continued into lower lows for the swing as well in the overnight trade.  This carries us into a congestion range were corn was trading between 4.68 and 4.56 back in late February before issues in Ukraine had really caught the attention of traders.  This market is also contending with the end of the month blahs and at this point it would appear doubtful that we will find many willing buyers before the beginning of June. 

As expected we did see great strides in planting progress this past week in the areas that have been furthest behind schedule.  North Dakota planted 50% of the expected crop and now stands at 67% complete, Minnesota planted 28% more and is up to 81% complete, Wisconsin increased 31% and is up to 67% and Michigan jumped 24% to 53% complete.  Nationwide we stand at 88% complete which is right at the historical average and 4% ahead of last year.  This would imply that we still have around 5.2 million acres to plant if we are to reach the USDA target of 91.7 million acres.  Emergence was reported at 60%, which is just 4% behind average and 11% ahead of last year.  We should see the overall crop rating beginning next week but the states that have reported reflect a solid start.  Arkansas 76% good/excellent, Illinois 67%, Indiana 68% and Missouri at 61%. 

While not overly inspiring, the corn export inspections have been consistent.  For the week ending May 22, we loaded out 45.7 million bushels bringing the year to date tally up to 1.287 billion bushels.  This is just above the pace needed (43.8) to reach the current target of 1.9 billion bushels. 

There will be quite a discussion/debate between now and the end of June as to how many acres of corn will be lost to either prevented planting and/or other crops which would appear to be a certainty at least in North Dakota.  The question mark of course is were additional acres plant in the heart of corn country with the rapid pace of planted that was witnessed?  Historical patterns would say yes.  All that said, with the weather outlook quite favorable for growing conditions, it will probably be challenging to find much buying interest outside of short-covering between now and the beginning of June.   

Soybeans

While the bean market may have taken a few good body blows yesterday, none of them came even close to delivering a knockout punch.  Trade is a bit mixed this morning with nearby futures holding steady and the new struggling as the widow maker July/Nov spread continues to trade at a bit more than a $2.50 inverse.  In is interesting to note that this spread actually posted its highest trade back on the 17th of April at $2.77 but has been stuck basically between $2.75 and $2.25 for two months.  That should be indicative of a very tired bull but one that probably will not surrender until we have more evidence of supply/demand in balance. 

Of course that would not explain the tenacity of the bulls in November futures. Planting increased 26% last week bringing us up to 59% complete, which is actually 3% ahead of the normal pace for this point in the year.  Factor in the probability of additional acreage on top of the already record projected 81.5 million and the favorable growing condition forecast and it would make one wonder why we have not already pushed back below the 12.00 mark. Yes, we have broken fairly sharply over the past  2 ½ days but keep in perspective, up until last week, the high for the swing was 12.49 and we currently sit around 12.35. 

I have commented before that I try not to argue with markets as one; it is fruitless and can be financially painful and two; if markets are not acting in a fashion as the fundamentals would seem to dictate, we have probably missed something.  That said, I continue to believe that the gates are closing rapidly on the this bean bull and for the November contract especially, once they have been shut, it may require quite a weather disruption to open them again.

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Morning Comments - The Bull cannot find any feed this morning

May 27, 2014

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Wheat

The long weekend did not lift the spirits of the bulls and we have begun the week with pretty dour price action.  Following the European market lower, Chicago wheat actually gapped down and has slipped to the lowest point traded since early March. 

Black Sea wheat continues to be discounted and with overall favorable growing conditions across the United States, bulls would seem to have little to hang their hats on for the time being.  This was evidenced by the Commitment of Traders number released on Friday which revealed that funds liquidated another 13,900 contracts of wheat and now stand at just 17,400 contracts long.  The bigger question would seem to be, what would cause them to return before harvest?  Outside of a few continued concerns about moisture in the Volga region of Russia, positive news is hard to find.

Technically, this market sits in a short-term oversold position but if the gap lower this morning remains unfilled through Thursday, it would not be a good signal.  

Corn

What, with nearly ideal weather, it is pretty difficult to find many bulls in the corn market this morning.  The pressure is not quite as significant as that in the wheat but we have violated last week’s lows with July futures trading to the lowest point since the 3rd of March.

The trade is expecting to see planting progress to have reached the 85 to 90% complete mark on this afternoons report.  If correct, we will have basically caught up to the average pace for this date, which is 89%. Eyes will be focused on the progress made in North Dakota over the last week as now that we have moved past the prevented planting date, we should see some switch to beans or other crops. 

There will not be a nationwide crop condition report for another week but I suspect the state-by-state numbers that are released this afternoon will all show improvements.  Over the past 4 days I have had the opportunity to drive across Northern Illinois, a swath of Iowa and Southern Wisconsin and while the corn is still relatively small, you would be hard pressed to find much that was not looking good. 

As with wheat, funds have continued to liquidate longs, selling another 22k+ contracts last week and would appear to have little to no reason to step back in anytime soon.  Argentine corn is again selling at a discount to the United States, the current weather forecast looks great for development and then just for good measure for the bear, the Chinese Ambassador to Brazil has stated that Brazil should eventually be come the main source of corn for his country. 

We already sit in a short-term technically oversold position and into solid levels of support in the corn market but currently lack a stimulus that would excite any buying.  That said, as we all know the real growing risk remains yet ahead of us, not to mention grain stocks and acreage numbers barely a month from now that should be very key this year.  As such a corrective rebound should be soon in order.   

Soybeans

Defensive trade as well for the beans market as we begin the week but we have seen this a number of times before over the past couple months so it is difficult to read much in to the action just yet.  We continue to confront the seemingly impossible tight balance sheet for this crop year and until we find something that changes that story, bulls have the upper hand.  That said, I am in the camp that believe we have priced in the known factors, plus a little additional risk premium and it will just be a matter of time before we roll over.  Granted it is still 30-days away but the next real check for this market will be the quarterly grain stocks report at the end of June.  Many in the trade continue to believe that the availability of beans thus far in the year reflects the possibility that the USDA understated last years crop and that report will be the next "check" to find out if that sentiment is correct.

The trade is expecting to see bean planting progress to have reached the 55 to 60% complete level this afternoon.  Normal for this time in the year would be 61%.  Weather conditions look ideal for development. 

As would seem reasonable, new crop beans have been hit harder than old this morning but neither have done any irreparable damage.  If November futures close back below the 12.50 level it would be psychologically damaging for the bull but realistically, this contract will need to push and close below the 12.00/12.10 range to confirm a peak and send the bulls rushing for the exits. 

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Weekend Commentary - Where will our investment come from?

May 24, 2014

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If we look back just four or five years, we would find a significant amount of news and books devoted to growing global investments into resource rich countries.  China appeared to be leading the charge but nations such as India and the Oil rich nations of the Middle East were not far behind.  One of the more interesting investments was when China purchased Mount Toromocho in Peru for $3 billion.  To the casual observer that would seem like a fairly hefty price if they intended to open a new ski resort or mountain climbing center, after all, Mt. Toromocho is about half the height of Everest. But as you might suspect, the Chinese were not looking for a new playground; this mountain is estimated to hold around two billion tons of copper, making it one of the largest sources of copper in the world.   While South America and even Australia were certainly on the radar for foreign investors, by far it seemed that Africa garnered the most attention and capital.  And why not? You have a number of burgeoning countries that have been or are working through the pains of post-colonialism that are rich in many resources, including arable land, but poor in expertise, infrastructure and investment.  Much of the interest was stimulated by the commodity boom between 2000 and 2008, especially food security issues; as always, necessity is the mother of all invention, or in this case investment. We do not seem to hear quite as much about the development and investment that is occurring these days, nor have we seen food riots to bring issues such as this to our collective attention, but make no mistake, the investments continue to expand and ultimately, we in Ag will feel the impact.

In a recently released report by the United Nations and the Organization for Economic Cooperation Development (OECD), they project that the overall investment in Africa will reach a record $80 billion dollars in 2014 and they expect the overall economy for the continent to grow by 4.3%.  The last official data that has been released comes from 2012. That year, China had invested another $27.7 billion, but interestingly enough the three countries that invested the most were the United States, France and Britain who invested a combined $178.2 billion.  As a percentage of all investments, less money was flowing to resource rich specific countries, but seeing the aggregate continues to climb, that would be as expected.

Looking out over the intermediate time horizon, between 5 and 20 years, I have to believe that this will create an increasing challenge for U.S. Agriculture.  In Ethiopia alone it is estimated that there are 183 million acres of ground that is suitable for farming with only 1/5 of currently in production, and the Democratic Republic of Congo could ultimately before farming acreage roughly the size of Brazil.  As I have pointed out in previous letters, this is not unlike the situation that existed in South America at the peak of the last commodity bubble in the early 1970’s. As we are all aware, they now produce more soybeans than the United States.  While there are still numerous political/tribal/religious issues that will be confronted in Africa, that does not appear to be discouraging the investment money.

What I find unfortunate here at home is that we do not seem to find the same kind of appetite for investment, particularly in infrastructure, that will be required to keep us competitive in the future.  Being blessed with the ability to ship off three coasts, a major rail network and having a large navigable river running right through the middle of the nation has afforded us a major advantage over our competitors, but that advantage appears to be literally crumbling away.  We can blame it on restrictive regulations, too much debt, a lack of forward planning, what have you, but that does not change the story.  Regardless, it is difficult to believe there is enough unified long-term vision and patience required to make this kind of investment when it is much sexier to dream about investing in the next Apple, Microsoft or Snap Chat. This is just another reason that I fear U.S. Agriculture will be looking at stagnation for the better part of a generation.

Morning Comments - Losing the story

May 23, 2014

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Wheat

Over the past two weeks, the wheat market has completely lost it’s bull story and hence the additional risk premium that had been built into the price level.  The situation in Ukraine in by no means "settled" but the riots and protests have become less frequent and there will be elections over this coming weekend for a new President.  I read this morning that Putin has already stated that he intends to work with whoever is elected.  While I suppose there is some latitude in how the word "work" may be defined but ideas of Russian troops crossing the border have subsided.  Keep in perspective that Ukraine is a mess both politically and financially and it is very likely that farmers will have skimped on fertilizers and the like this spring so we can be confident this will not be the last time the market is impacted by that part of the world this year.  For now through, they sit on the back burner. 

Problems in the south and southwest of our country have also been delegated to the rear.  The market has already accepted, i.e., factored this in to the price and without continued losses, the bull lost the feed source.  Additionally, weather across Europe has been very favorable and even in the regions of Russia where there have been recent concerns, forecasts call for cooler and moist conditions ahead. 

All this said, this market has now broken between 11 and 12% over the past 12 days and sits in a short-term oversold position.  I would not expect to witness much today with a 3-day weekend looming but it would appear that we should at least be in line for a corrective rebound as we move into the end of the month. 

Corn

Outside of the planting delays in the upper Midwestern states, and a slightly slow start for the crop the corn market has also lost much of its bull fodder.  Demand has continued to remain consistently solid but that is not a new story as we have adapted to the increased levels.  Of course we will have to wait until Tuesday for the next update but we should see solid planting progress reported to the north and with the weather turning warmer and generally moist, the state by state condition reports that are released should look solid. There is nothing here that would qualify as enough to turn the trend "bearish" per se, but rather a lack of fresh positive input which you need to sustain or rally prices.

As we all know, we are months away from putting this next crop in the bin and with the increased usage that we have experienced and corresponding less plentiful stocks, there is not much room for problems this growing season.  Now more than ever though, we cannot lose sight of the fact that this is a world market and if the FAS USDA numbers are close to correct, there will be ample product to go around.  This is something the wheat market appears to be coming to grips with right now. 

Corn has done a nice job of stabilizing yesterday and again overnight and it would appear that we should be poised for a corrective rebound through the balance of the month.  That said, without a little weather panic thrown in, I suspect strength would be relatively short lived for the time being. 

Soybeans

The bean market continues to live in a far different world than the grains as briefly pushed into higher highs for the year on Thursday. The strength finally closed a little gap that had been left in July of last year, and while the does not qualify as a signal for a top, it does eliminate one more target to shoot for.  While prices are higher again this morning, it is interesting to note that we could not sustain the gains that were posted immediately after the export sales were released.  

As I commented yesterday, when you are dealing with a bullish psychology as we have right now, it does not require much in the way of positive news to excite that buyers and anything that does not support the bias, such as record acreage being planted this year, is dismissed at least for a while.  Eventually, those factors will come home to roost.

For now, the focus remains on the impossibly tight old crop situation and the need to move beans from areas of plenty, i.e., South America to areas of shortage, the North.  While there have been glimpses of the market moving into a fevered blow-off stage, it would appear that we are not quite there yet.  That said, the pieces appear to be in place for that to happen quite soon, possibly before the end of this month.

We wish you all a happy and safe Memorial Day Weekend


Morning Comments - The Herd Charges Again

May 22, 2014

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Wheat

To a large extent, the only story is over in the bean and product markets this morning but we do at least have wheat somewhat stabilized.  As a whole the weather outlook for the crops in the ground looks favorable and the slow planting pace in Canada is largely being ignored at this point.  The outlook in Europe is very favorable and even over in Russia in areas that have been of concern; the outlook is calling for cooler and wetter conditions.

Exports sales bounced back from last week but feel right within the range of trade estimates at 142,200 MT or 5.2 million bushels for the soon to be complete 13/14 crop year.  This brings total sales up to 1.168 billion bushels leaving another 17 million to sell over the next 2 weeks.  Sales for 14/15 improved slightly over last week and came in at 7.7 million bushels. The 10-week average though has been 9.4 million. 

While we are slow to come away from support, it would appear that this initial down wave should be complete and a corrective rebound is in store as we push into early June.  If the existing lows hold there should be room for a bounce back to 6.94 and possibly 7.03. 

Corn

The corn market finally showed signs of stabilization yesterday and prices have been able to pop higher overnight.  While much of this is likely stimulated by the raging bean bull, as I have been noting, corn was very oversold after this recent 10% break and appeared the be in line for a rebound.

The EIA ethanol production came in right at trade expectations as we produced 271.95 million gallons last week.  This works out to around 97.8 million bushels of corn and keeps us on pace with the USDA estimates for usage. Inventory for ethanol was down 13 million gallons but the total inventory is still over 5% higher than it was a year ago. 

Export sales were the highest posted in the last 3 weeks at 507,800 MT or 20 million bushels.  This figure was right at the 4-week average of 20.3 million but 26.5% below the 10-week average of 27.3 million. Sales for the 14/15 crop year were within expectations but pretty uninspired at 2.5 million bushels.

With the weather outlook favorable and the belief that the upper Midwestern and Plains states are making good planting progress this week it is difficult to point out much positive news in corn right now but that does not mean we still cannot post a corrective bounce.  Ideally July futures have room to bounce back against the 4.90/4.99 level between now and the beginning of June.

Soybeans

As I commented initially this morning, it is all about the beans right now.  When markets get in a froth like this almost every story will be interpreted as bullish and the move will not end because of a shocking news story and special revelation.  It will only happen when we have wrung out the last bear and sucked in the last long.  Just how long before that happens is course the major question right now but I am in the camp that continues to believe that will happen in the not too distant future.

In fairness to the bull, domestic bean processors continue to make money and are searching for product so nearby basis levels have been pushing higher and until we see meal demand backup they should continue to hunt for product.  Now here is where it becomes challenging to sort out truth from fact.  One of the reasons cited for the bean strength yesterday was a story that a cargo of meal from Argentina that was destined for the US had been canceled and the profit spit between the buyer and seller.  Hence, less product that is needed coming into the US.  I have read this morning though that this story was misconstrued and they had cancelled the shipper and were going to move it on a different vessel.  Regardless, as I commented, when the market psychology is bullish, everything will be interpreted as bullish as well.  This is herd mentality at its best.

The action in the new crop months has been even more perplexing for many as we watch November futures push into higher highs in face of what should be record acreage that could even be growing.  This actually may be more about "market mechanics" at this point than anything fundamental or technical.  We already have the speculative crowd heavily involved in the July/November bean spread and producers/hedgers short November futures because they have locked in profitable levels for increased acres.  The problem could be that now with China in purchasing decent quantities of new beans, there are just not enough sellers regardless of what the potential carryout will be next year.  This would eventually take care of itself but for a period it can make the short pretty uncomfortable which in turn can compound the issue if they begin to exit.

Feeding the fire again this morning were the largest export sales figure since the middle of March.  For the week ending May 15th we sold an additional 164,400 MT or 6 million bushels of beans.  This of course digs the 13/14 marketing year hole just a bit deeper as we have sold 49 million more bushels than the projection.   Sales for the 14/15 crop year were also strong at 451,200 MT or 16.6 million bushels.  Of that total China accounted for 8.47 million bushels and Unknown 6.61 million for a combined 15.08 million or 90.8%. 

I cannot yet say if we have reached the blow-off stage in the bean market but with a 3-day weekend just ahead and a push into new highs, it would appear that we need to be on the lookout for that potential.

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Morning Comments - Three Day Weekend Just Ahead

May 21, 2014

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Wheat

The wheat market was unable to maintain the early strength yesterday and is just mixed overnight but we continue to hold right at key levels of support at the 6.62/6.62 level in Chicago July futures.  One of the few remaining supportive factors we have right now are concerns about dry conditions in Russia and while a forecast by no means assures adequate rain, the outlook moving into June predicts moisture on the way.  This is a situation that will need to be watched but dry areas will have to expand before we see much price impact.

Domestically, the latest NOAA 6 to 10 day updates have warmer temperatures and additional moisture through the pretty much the entire center of the country.  The 8 to 14 day forecast moves the moisture somewhat to the east but the upper Plains still show above normal precipitation during that period impacting both spring wheat and corn planting.  While there should have been decent progress made this week, I expect more and more talk of prevented plant and/or switching to other crops. China reports that during April they imported 374k MT of wheat, which was up 84% from a year ago. 

Overall news is relatively quiet this morning so we shall have to see if export sales provide us with any direction tomorrow morning.  As I commented in the initial statement, wheat sits at a must hold level and a break through the 6.60 zone would confirm that we have a top in place. 

Corn

The corn market cannot seem to find a friend at this time and appears to be the favorite for the short leg of spreads.  As I outlined above, the 6 to 10 and 8 to 11 day weather outlooks do not provide much good news for those in Northern states that still have acreage to plant but it is a great forecast for corn that is in the ground.  Hopefully decent progress has been made this week and gauging from the markets lack of concern, there are evidently some thoughts that the rapid pace of planting in the center of the belt will equate to more corn acreage in those areas. 

China will begin auctioning 1 MMT corn from reserves today, which is more of a psychological negative than anything else at this point particularly since the corn is reportedly of poor quality.  Additionally, it is common knowledge that with the large crop they produced last year they have not created a noticeable impact on world markets other than through their lack of presence.  For the month of April they imported 93k MT of corn which was down almost 78% from a year ago. 

EIA weekly ethanol numbers will be released later this morning and export sales tomorrow.  These two figures could set the tone for the trade into this upcoming long weekend. 

July futures have reached into a technical retracement zone that stretches from 4.73 to 4.63 and sits in an oversold position.  As such we should be close to looking at least at a short-term rebound but need a little stimulus to scare the short.  We have dropped 10% in price over the past 8 sessions and with a 3-day weekend just ahead, there may be a few bears who would like to remove a little money from the table.  

Soybeans

That must have been quite a disappoint for the bean bulls yesterday.  To be so close to key overhead resistance and early momentum apparently on their side only to see it all slip through their fingers late.  That said none appear to have moved into panic mode overnight as prices have stabilized and bounced back once again.  I understand that Brazilian farmers were good sellers yesterday and Argentina the day before so it would appear that the major beneficiaries of the rally this week has been South America.  I wonder if we will get a thank you note?

China imported 6.5 MMT of beans during the month of April, which was a bit less that the 7.1 MMT that was expected.  Of this total, Brazil supplied 3.95 MMT and the US 2.5 MMT.  This number is 53% higher than a year ago.  For the first 4 months of this calendar year, China has purchased 16.2 MMT of beans from the US, up 32% over the previous year.  Of course at this point, these have been factored into our current price structure.  It will be the sales or lack there of moving forward that matter now.     

Export sales in the morning, which needless to say will be scrutinized closely followed then by the 3-day Memorial Day weekend.  We shall have to see how emboldened the bulls are feeling by Friday. 

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Morning Comments - A test of will between bean bulls and bears

May 20, 2014

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Wheat

Realistically it was all about the bean market yesterday but the buying in that complex was enough to lift wheat prices from the lows to post a slightly higher close.  There were some attributing the strength to concerns of dry conditions in Russia but as I commented yesterday, this market was sitting in a oversold position at least for the short-term and looked prime for a corrective rebound. That appears to be what we have in the making. 

Export inspections fell within the trade expectations at 21.3 million bushels lifting the total for the year up to 1.109 billion bushels.  With basically 2 weeks left in the marketing year, we need to average 22.2 million per week to reach the 1.185 billion bushels target. 

Strength this morning is partially technical but also reinforced by the weekly reports. Winter wheat in the good/excellent category slipped another 1% and stands at just 29%.   Last year at this date good/excellent stood at 31%.  Poor/very poor was up 2% to 44% vs. last year at 41%.  Spring planting continues to lag and stood at 49% vs. 64% last year and 68% average.  Minnesota stood at only 20% complete vs. a normal 72% and North Dakota at 25% compared with an average of 55%. 

While the domestic situation is far from ideal, worldwide the wheat picture looks ample.  It does bare keeping an eye on the weather situation in Russia but unless we see problems develop there, I suspect rallies will be short-lived for now. 

Corn

While the wheat market was able to get a little lift out of the bean rally the corn market was not quite so fortunate.  There are a number of traders who appear to play the bean/corn spreads based predominately on price ratio and as you might surmise, as they purchased beans yesterday they sold corn.  Of course, there really was not much in the way of news that would have helped the corn market but we are into short-term oversold position and should be in line for a technical rebound. 

Export inspections were down 6 million from the previous week as we shipped 41.7 million bushels, which takes us a bit under the pace need to meet he USDA targets.  Year to date we have now moved 1.240 billion bushels and will need to average 44 million per week to reach the USDA target of 1.9 billion. 

No real surprises in the state-by-state progress report as nation wide we have reached the 73% complete mark.  This compares with an average of 76% and last year at 65%.  As has been the case, the upper Midwestern and Northern Plain states remain the furthest behind.  North Dakota is 17% complete, which means they have 2.45 million acres yet to get into the ground.  Minnesota is 53% complete, leaving 4.04 million acres to plant, Michigan is 29% done with 1.85 million to plant and Wisconsin has planted 36% leaving 2.62 million acres to go.  These states have prevented planting dates between the 25th and 31st of this month.  Additional rain has fallen across Minnesota this week but the forecast now through Memorial Day looks clean.  Nationwide crop ratings will not be issued until next week but there are a number of states that reflect a great early growing season.  Alabama rates their crop 79% good/excellent, Arkansas 74% and North Carolina 81%.  As you might suspect, at the bottom was Kansas who rated the corn crop just 36% good/excellent. 

As I commented previously, the corn market sits in a short-term oversold position and ideally is poised for a corrective rebound possibly into the end of the month.  If that turn out to be correct, I will view it as a potential selling opportunity.

Soybeans

While the rally in beans yesterday appeared to be sparked by the export inspection number I have to believe it was primarily a technical bounce that will have a difficult time extending.  Nearby futures are right back against the recent resistance between 14.90 and 15.00 and November futures have pressed against recent highs at the 12.50 level.  Do we actually need more incentive to plant additional acreage this year?  It is estimated that a buy stop for 10,000 contract in July futures was trigger when the rally began yesterday and needless to say, why would anyone want step in front of that.

Export inspection we down 2.2 million bushels from the previous week at 6.2 million but that is still over 2 million above the pace we need to reach the USDA estimate.  Year to date we have now shipped 1.538 billion bushels of the 1.6 billion projected. 

Decent strides were made in planting progress as we increased 20% and stand at 33% nationwide.  Last year at this date we have planted 21% and the average is 38%. 

Argentine farmers are reported to have taken advantage of the move yesterday as it is estimated at they sold around 450,000 MT. 

The pattern has not changed in the bean market as we freely push from one end of its trading zone to the other.  Right now the bulls appear to have the upper hand but how long that can be maintained is questionable.  For now, it is a test of wills between the bull and the bear and demands patience from the rest of us.

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Morning Comments - Should be full steam ahead this week.

May 19, 2014

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Wheat

The wheat market picked up where it left off last Friday with defensive action to start the week.  So far July futures have held just above the key support level at 6.64 and have bounced back a touch.  This is the level where support was found during April and from where we staged the most recent rally.  As you might suspect, violating that, particularly on a close would not look good. 

Overall news is relatively quiet.  Weather in North American has to be considered generally favorable.  There is a little concern with dryness in Russia but nothing that would bring buyers rushing in for now.  Russia did report over the weekend that for the marketing year that began on July 1st, they have exported 23.708 MMT of grain, which is an increase of just over 60% from the prior year.  Of that total, wheat accounted for 17.30 MMT or 73%.  Ukraine also noted that grain stocks as of May 1st were higher that a year ago attributed to a better than previously estimated crop.  It was reported that they are holding 9.1 MMT of total grains, up 12% from last year.  The wheat portion of this inventory was 3.4 MMT.

Ukraine will be holding nationwide elections on the 25th and if that brings stability or additional turmoil is of course yet to be seen. 

Short-term this market sits in an oversold position and could be in line for a temporary bounce but we would seem to lack the kind of news at this time to produce any sustained rallies.

Corn

The corn market also extended last weeks’ break and pushed to the lowest level traded in July futures since the 11th of March.  The 4.80 level in this contract market a key base of support and one that have been violated on a closing basis, it should confirm our reaction high and unleash additional selling.

As with wheat the corn market is sitting in a short-term oversold position and down against the key support mentioned above and could be in line for a bounce but there would appear to be little in the news right now that would help sustain much of a move.  The current weather outlook is favorable not only for a pickup in planting for the areas that remain behind normal but also for the development of what is already in the ground.  The trade is expecting to see the nationwide planting reach the 70 to 75% complete mark on this afternoons’ reports.  The trouble spots of North Dakota, Minnesota, Wisconsin and Michigan should still stand out but they should be able to make great headway this week. 

The Goldman roll begins tomorrow and could create pressure on the July contracts. 

Soybeans

Unlike the grains, beans has seen more two-sided action overnight.  I suspect they are being supported by spreading against corn and wheat and we are also seeing bear spread action in the beans themselves.  Neither would I consider longer-term positive. 

The weather outlook is very promising for rapid advancement with bean planting for the week ahead as well.  Trade estimates for this afternoons update look for completion between 35 and 40%. 

South America should continue to own the bean export trade for the foreseeable future as basis levels continue to break in both Argentina and Brazil as they have more than ample inventories to move, but that is not really fresh news either.  I continue to believe it is just a matter of time before the last of the bulls surrender but it would appear they continue to hold out for more confirmation that we have domestic supplies in balance. 

The Goldman roll should keep pressure on the July futures in relation to back months and if that is enough to push us below 14.44, it could unleash another round of sell stops and would confirm that we have a high in place.

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Weekend Comments - Lessons learned

May 18, 2014

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It has been generally assumed that now we are past the harsh winter of 2013/14, consumers would begin flocking to the malls and online stores not unlike the famed Swallows returning to the Mission San Juan Capistrano.  Of course we know what can happen when we "ass-ume".  The commerce department this week released the April retail sales, which reflected a very tepid .1% increase over March.  In fairness, the March estimate was revised up to a 1.5% gain, an increase of .3% from the previous report reflecting pent up demand from the frigid winter months. But why did that not carry over into April, the time of year when we should see new shoots of growth emerging from the ground as well as the consumer? 

I suspect that part of this could be due to the fact that in many regions of the country, it would seem that winter will never end, which I was reminded of yesterday morning when I was greeted by a snow shower that actually left my vehicle covered in fresh blanket of white fluff. But that would hardly seem to be enough to make people cower in their homes for any extended period of time. A bigger rationale may be found in another release that was published this week and that of household debt.

According to the NY Fed, household debt, which includes mortgages, credit cards, auto loans and student loans, rose $129 billion from January through March.  This was actually the third consecutive quarter of growth, which could be taken as a positive sign for retail sales. But when you look a little deeper into the figures, it would provide more of a clue as to why that might not be the case.  In the latest report, the fastest growing category was student loans, which increased $31 billion.  Auto loans were up $12 billion, but the largest dollar increase came via mortgages, which increased $116 billion.  At first glance that would sound very positive for the real estate sector, and indeed in many parts of the country, real estate has witnessed very positive trends. But it turns out that part of this growth is attributed to fewer people going into foreclosure.  While that is certainly a good thing, it would do little to encourage additional consumer spending. What Americans appear to be eschewing is credit card debt, which of course has been the backbone of consumerism and one of the major problems that plagued the country after the bubble had burst.   Outstanding credit card balances have now dropped down to $659 billion dollars, which is the lowest level seen since 2002.

By no means could this be only reason for the uninspiring growth last month, but it is interesting that on a rather consistent basis we see growth projections falling short of the expectations.  While that translates into an agonizingly slow recovery for many, particularly for those still hunting for work, overall, I have to believe that consumers becoming more disciplined with debt is a positive trend in the nation.  Are the days of "consume today, pay tomorrow" over? By no means do I believe that we will return to the spending patterns of previous generations, though it would appear that many people learned a very painful lesson after the financial meltdown. As we know, those are the kinds of lessons that tend to remain etched in our collective memories for some time.  Let’s at least hope that is the case.

 
 

Morning Comments - Tough to find much positive

May 16, 2014

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Wheat

Here we sit right in the middle of May and in Northern Illinois I woke this morning to be greeted by snow showers.  I am beginning to get the impression that I am stuck in a real life version Disney’s Frozen.  As you might expect, it is melting almost as fast as it is falling but this has been a strange spring indeed. 

The wheat market is stable here this morning but after the additional pressure yesterday, I cannot imagine there are too many bulls feeling comfortable with their position at this point.  On their revised estimates yesterday, Informa actually boosted overall wheat acreage 250,000 acres.  Granted, this is not a big shift but it is interesting to note that the majority of the increase was in winter.

The weather outlook for much of wheat country looks favorable and with little other news demanding risk premium, i.e., Ukraine, it would appear that for now, the path of least resistance is lower.

Corn

July corn sliced through two key levels of support this week, first at 4.97 ½ and then at 4.90 ¾ and particularly when that second level was violated the gates were opened and we quickly pushed down to a very key level of support at the 4.80 mark.  The question of course now is can we make a stand once again at this level?  I believe the odds are stacking up against it.

The talk in the export trade yesterday was that origin optional corn that is on the books for South Korea and other Asian countries will now most likely come from Brazil.  China, while it has not been a real positive influence on our corn market as of late, is for all intents out of the market for the balance of the year and there is even some discussion that with their large inventories, they could export a little corn.  Harvest in Argentina is running behind schedule and is only estimated to be 30% complete versus last year at 46% but that is more related to a late planting season and will mean that there should be ample quantities available for June and beyond.  The Informa acreage estimate could have been considered a little positive as they actually lowered their corn number by 110,000 acres but that is a pretty insignificant shift and they increased Sorghum acres by 880,000 which of course can be used as a substitute feed grain. 

I am afraid, there is not much we can point to right now that would be considered a positive market influence outside of the slow planting pace in Northern States but even there, the forecast for next week looks very favorable.  If we begin to push through the 4.80 level, I suspect that fund long liquidation could step up even more and while that downside could be limited as we move into early summer, it may be a challenge to attract that money back. 

Soybeans

The beans bull was hoping for a positive jolt from the April crush figures and while 132.7 million bushels is nothing to sneeze at, it was by no means the kind of ammunition they were looking for.  As such, we did see a pretty solid washout yesterday and while it was not quite severe enough to be called a key reversal, I suspect there are a number of bulls that may not have slept too well last night. 

Informa did bump their acreage estimate up 580,000 acreage to 82.07 million, which did not stun anyone but this was at least partially masked over by a announcement of a sale of 120,000 MT of new beans to China.  We all recognize that we still have basically 4 to 5 months before we harvest our next bean crop and acreage by no means assures an adequate crop, but when the record acreage number grows even larger, is would sure seems to help provide a nice cushion. 

I believe the key line in the sand for July beans right now sits at 14.41 ¾ and if we violate that on a close, our top is confirmed.

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Morning Comments - Crush could be a catalyst

May 15, 2014

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Wheat

Through February, March and April, the wheat market led the grain trade higher and gauging from the performance over the past week, it would appear that it wants to take the lead to the lower side as well.  The damage to the winter crop in the south/southwest as a whole would appear to have been woven into the current price structure and with moisture in the forecast and a late developing crop, there is probably little play from that moving forward.  The situation in Ukraine is no longer daily front-page news and as a whole, there have not been serious disruptions in either shipping or spring planting despite fears of such.  Planting in the Canadian prairies is finally under way and last but not least, US wheat is becoming less competitive on the world stage.  Not much here for the bull to hang their hats on.

Granted we are into the last few weeks of sales for the wheat marketing year but the 13/14 numbers dropped off dramatically and the 14/15 sales were not that exciting either.  For this year we sold just 54,900 MT or 2 million bushels.  Year to date we stand at 1.163 billion bushels vs. the projection of 1.185.  Sales for 14/15 were 197,100 MT or 7.2 million bushels. 

Baring an unexpected surprise it would appear wheat should be headed on a seasonal trip lower into June. 

Corn

The pressure in wheat has tugged at the corn market but independently; it would not appear to have much fresh positive news to work with either.  While the planting pace has been slowed in many areas this week, the outlook after this weekend, particularly in the upper Midwestern and Northern Plains states is calling for warm and dry, which should allow potential for rapid progress. 

The market did not even seem to find much encouragement from the better than anticipated ethanol production numbers.  For the week ending May 9th, the industry produced 271 million gallons, which equates to around 97.5 million bushels of corn.  The USDA did bump the ethanol usage number up 50 million on the last report to 5.05 billion and this keeps us on pace for that number.

Export sales bounced back nicely from last week but certainly were not enough to excite any bullish fervor.  For the 13/14 crop year we sold 343,000 MT or 13.5 million bushels.  This is down 39% from the 4-week average and almost 48% down from the 10-week average.  Year to date we have now sold 1.752 billion bushels leaving another 148 million to sell to reach the revised target of 1.9 billion.  For a point of reference, back in December the estimate was forecasting exports of 1.45 billion bushels so for this factor alone, it is understandable why corn is over 70 cents higher than it was at that time.  Sales for the 14/15-crop year were also pretty uninspired at 3.9 million bushels.

Later this morning Informa will release their updated acreage estimates. Not that this will be a major market mover but many are expecting to see both corn and beans to be a bit higher and if correct would create more drag on prices.

Soybeans

As wheat and corn struggle and turn south, the bean market continues to hold its ground.  Granted, we are not moving into higher levels but the bulls by no means has abandoned the ship either.  I have always been a believer that you do not want to argue with price action because just because we do not think something seems right or rational, does not make it so and chances are we have missed something in the picture.  That said, I am hard pressed to see why this market should advance from here, particularly in the new crop months but I am going to tread lightly until I see signs that back me up. 

I had heard export sales estimates anywhere from a negative 50,000 MT to a positive 100,000 MT and we came in at 73,600 MT or 2.2 million bushels.  While not stunning, as long as we remain in the plus column it provides fodder for the bull.  YTD we now stand at 1.643 billion bushels or 43 million above the most recent projection.  Sales for the 14/15 crop year came through at 324,700 MT or 11.9 million bushels.

As I mentioned under corn, later today we will hear Informa’s updated acreage estimate but more importantly, after that the April Crush number will be released.  I have seen estimates ranging between 125 and 141 million bushels.  This is a tough call as to market impact as margins have been solid and crushers sitting on inventory so they will squeeze every bushel they can so it will be interesting to see the reaction, particularly if the numbers are towards the upper end of the estimates.

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Morning Comments - Searching for Midweek News

May 14, 2014

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Wheat

We find very little fresh news to work with overnight and as such, price action is dragging and wheat appears to be in the most defensive posture.  It would appear the trade is resigned to deteriorating crops in the southern plains and unless we see additional concerns with the spring crops here and into Canada, we may have milked much of the rally that can be expected from the existing news. 

The political scene in Ukraine has settled down for the moment but we are hearing reports that the turmoil there has created some impact on the spring work.  To date, planting of spring grains has totaled 7.219 million hectares, which is 87% of the projected total.  This number is around 500,000 hectares behind last years pace and reportedly caused by famer resistance to rising fuel and fertilizer prices because of the other issues.     

May contracts expire at noon today, which should be uneventful in wheat and July future are holding a 3 to 4 cent premium over the May.

Corn

The nearby corn market was able to hold key support again yesterday and is trading stable overnight.  The USDA did announce a sale of 126,000 MT to South Korea yesterday, which likely helped provide some of the support but nothing out of the ordinary appears to be lining up on the export scene. 

Showers have passed through the Midwest once again but forecasts call for a drying and warming period just around the corner.  This will be especially welcome in the upper Midwest and Northern Plains states.  As expected there is talk of possible corn acreage moving over the beans or other crops but I suspect changes will be pushed out the last minute if that were to occur.  Speaking with a number of people in the I-states, it would appear that with the rapid pace of planting that we witnessed last week, additional corn acreage was planted, which could potentially balance out any losses to the north.

If the prices of fuel and fertilizer were impeding spring grain planting in Ukraine, it does not seem to be reflected in corn.  It was reported that they have now planted 4.436 million hectares, which is around 86% of intended and basically right at the same pace as a year ago.  One could speculate though that with input costs higher, farmers may use less fertilizer and hence lower the potential yield.  Only time will tell.  The Rosario Grain exchange upped its estimate for the Argentine corn crop from 23 MMT to 23.9 MMT.

We will see the weekly EIA ethanol production number later this morning and export sales tomorrow. 

May futures expire at noon and currently carry a minor of a premium to the July.

Soybeans

Bean futures bounced back quite well yesterday and are just mixed overnight.  We remain below the highs that were posted in Monday session.  Part of the strength yesterday was attributed to higher that expected prices paid for beans auctioned in China.

The Rosario Grain Exchange released revised estimates for the Argentine crop.  With better than expected yields being reported they are now estimating a bean crop of 55.7 MMT vs. the previous estimate of 54.9 MMT. 

The expiring May contract is sitting at a 20-cent inverse to July and hovering right at the 15.00 mark.  There is a possibility that July futures could push up against that same level once the May expires but the ranges have already overlapped this week so by now means would it be essential.

Export sales tomorrow morning could really set the tone for the market and then latter that same morning we will see NOPA crush data.  

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Morning Comments - Searching for something fresh

May 13, 2014

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Wheat

Even though we closed lower, wheat did a nice job of bouncing back from the extreme lows yesterday.  That said it has struggled to hold its head above water overnight.  This is not because of a lack of supportive news. 

Export inspections came in a bit above the upper end of expectations and the 10-week average at 22.9 million bushels.  With the increase in the estimate on the last S/D and just three weeks left in the marketing year we still need to ship 96.5 million bushels so we do need to pick up the pace if we are to hit the mark. 

While not unexpected the conditions of the winter wheat crop deteriorated once again with the poor/very poor number climbing 4% to 42%.  Good/Excellent slipped 1% to 30%.  We now have 75% of the HRW in Oklahoma rated Poor/VP, 68% of Texas and 56% of Kansas.  Spring wheat planting was up 8% to a total of 34%, which lags the average for this date by 19%.  The Upper Midwest and Northern Plains states are pulling the averages down.  Even oats are only 56% planted versus a normal of 79%. 

The late day rebound was enough to keep from rolling this market over enough to confirm a reaction high but it was appear that the bull is tired.  Without a fresh spark of news in the very near future it could be difficult to keep him upright. 

Corn

Corn appears to be enjoying a Tuesday undo bounce here during the overnight hours.  If you really wanted to find an excuse for the strength one could say that the rains passing through were providing support but that would be a stretch as forecasts call for a clearing and warming pattern through much of the rest of the month.  One item of concern though is the planting progress in the upper Midwest and Northern Plains states. 

The overall planting progress was excellent last week as producers planted an additional 30% of the crop bringing the total up to 59%.  This moves us 31% ahead of last year and 1% ahead of historical averages.  The states that remain furthest behind averages are Michigan with 20% planted vs. a normal 41%, Minnesota at 31% vs. 62%, North Dakota at 3% vs. 33% and Wisconsin at 20% vs. the normal 41%.  There has already been discussion of losing acres in some of those regions as we are quickly closing in on prevented planting dates for crop insurance but if correct, current forecasts should allow for solid progress between now and the 25th

Export inspections have been consistent for the last several weeks and for the week ending May 8th we shipped another 47.2 million bushels.  This brings the year to date tally up to 1.198 billion bushels and with the recently revised target of 1.9 billion that leaves around 702 million to move.  With 16 weeks left in the season that works out to 43.88 million per week. 

The corn market was bent pretty hard yesterday and while not quite to the breaking point, we have reached uncomfortably close.  If we have not found a reason to bring back the buyer very soon, I suspect this 4.97/5.00 range will give way opening the door for a push down to at least the 4.75 level. 

Soybeans

Beans are also witnessing a nice bounce overnight but as with corn and wheat, I am hard pressed to find reasons as to why it will extend from here.  Note that the May futures will expire tomorrow and they are currently trading at the 14.92 level, a 20 cent premium to the July.  While nothing would say we have to stay right there for expiration, it is interesting to note that the high in July futures yesterday was 14.96, so even if we rallied to the same level as May, it would not equate to any additional strength. 

Solid progress was made in bean planting as we increased 15% for the week, reaching the 20% complete mark.  This moves us to only 1% behind average.  As with corn, the states that are furthest away from the normal pace were Minnesota 4%, Michigan 10%, North Dakota 0% and Wisconsin 4%.

Export inspections were just over double the prior week and better than expected at 8.8 million bushels.  This brings our year to date total up to 1.532 billion bushels.  With the 20 million boost that the USDA added in last Friday, this means we have another 68 million bushels to ship over the next 16 weeks or 4.25 million per week.  I understand right now there are ships lined up in Brazil to load around 19 million bushels for US destinations. 

The bean market could struggle for another day of so but without a fresh piece of positive news I would expect the direction to turn lower after the May contract has expired.  

Morning Comments - Blue Monday

May 12, 2014

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Wheat

Fundamental – The reaction to the basically neutral wheat report was negative and it would appear that the bulls are headed for the exits again this morning.  There is really little fresh to cover in the news this morning.  Conditions remain dry in the TX/OK/KS wheat country but elsewhere around the globe, there appears to be few issues. Pro-Russian separatists in Ukraine held their own referendum to break away over the weekend, which will mean little if anything as even Russia said they will not recognize any vote.  May 25th will be the countrywide elections. I do not believe there is anyone under the illusion that this will end the problems but it could at least provide some legitimacy to the government. 

Technical – The overnight selling in the wheat market has very decisively pushed July futures through last weeks’ lows and the key 7.25 level.  We are also very close to rolling intermediate indicators over into a sell mode on the July contract and have already done so on spot futures. Short-term oscillators should be oversold by tomorrow and ideally we would have room for a minor rebound and a possible selling opportunity.  The next cycle dates ahead line up out around the 23rd.   

Corn

Fundamentals – As I commented over the weekend, the reaction in corn on Friday was probably the most discouraging of any market as we ultimately closed lower on positive news.  The pressure is not significant this morning and we have not violated any key support areas but neither is the much that would encourage bulls to jump on board. 

Moisture across the Mid-west has brought planting to a temporary standstill but we should see tremendous progress reported on this afternoon’s report.  Initially I expected to see corn 50-55% complete but I have read reports this morning with some looking for this number to be north of 60%.  With temperatures on the rise and a return of dry weather for the latter part of the week, it would appear that it will be difficult to see any kind of weather related strength for the near future.   

Technical – While there is no signal that is infallible, the outside lower reversal that was posted in the corn market on Friday does look ominous.  On the positive side, we have not violated any key levels of support just yet but intermediate indicators have begun to cross lower and without a reason to extend this rally, it is just a matter of time before we see long-term indicators turn lower as well.  I believe the line in the sand for July futures right now is 4.97 ½, which was the May 5th low and also where the 55-day moving average is crossing right now.  Consecutive closes below there should confirm a high.  Until that happens we could witness sideways action between 5.20/5.00.  Cycle dates ahead between the 19th/22nd and then the 30th/3rd

Soybeans

Fundamentals – Beans did witnessed a little follow-through from the big bull spread rally posted last Friday but have now surrendered all of that in the daylight trade.  Granted, we still have little play room with our current inventory situation but maybe we need a few more large cancellations weeks before the bull will have finally had enough and give up.

Corn planting south of I-80 should be pretty well wrapped up and I suspect we should see decent progress made in beans this past week.  Even here in Northern Illinois, I spoke with several farmers over the weekend who had completed corn and had already made the switch to beans. 

Technical – July beans were able to extend the Friday rally a bit higher overnight but have struggled now in the daylight hours.  The 61.18% and 78.6% retracements are right here between 14.90 and 15.03 and with the daily oscillator now back into the overbought zone I am expecting to see this move exhaust at this range.  The idealized cycle date for the week sits on Thursday so I will be watching for signs of a top by mid-week.  

Soybean Oil – July bean oil gets to play a little catch-up this morning and is looking at a nice corrective rebound.  Ideally we will have room to push up into the 41.95 to 42.35-retracement range before we exhaust the move but that could happen as early as tomorrow.  

Soybean Meal – With the overnight follow-through, July meal did complete a 78.6% retracement at 489.30 but has not held the strength.  The daily oscillator is just reaching into the overbought zone and we should be positioned for a high by mid-week.  Failing to reach back to the existing peak at 494.30 would look like  classic topping action.

Cotton – The bears are in control of the cotton market again this morning as we have pushed beneath last weeks lows.  Intermediate indicators point lower and it would appear that we are in store for a deeper correction but I am not interested in chasing a sale.  The 180-calendar day cycle count from the November bottom lines up on the 21st and I intend to remain patient until then.

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Thoughts for the Weekend

May 09, 2014

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There have been two controversial topics in the news this past week, the release of the Third National Climate Assessment, published by The U.S. Global Change Research Program and additional discussions, or maybe better phrased additional finger pointing, about the proposed Keystone Pipeline project.  While the two are not technically dependent on each other, they are related in the respect that we find familiar camps facing off and reiterating the same basic lines that we have heard for some time now.  It is interesting and almost a little comical that over in the climate debate a new face has been enlisted to espouse the global warming story; Bill Nye the Science Guy.  Mr. Nye is certainly an intelligent and likeable individual.  At one time he was a mechanical engineer at Boeing before embarking on his more well know career in the broadcast business as the countries most likeable "nerd" science teacher.  From what I know, he does not have any real background in meteorology or climatology. But then again, neither do the talking heads of television and radio that show up to debate this topic from either perspective.  But gosh darn it, you almost have to trust someone who has appeared on Dancing with the Stars, right? 

Regardless, I do not believe that this new release is going to bring the two global warming camps any closer together nor will constantly railing on the Obama administration for blocking the Keystone pipeline make the project a reality.  With both topics, once you have cut through the blustery rhetoric, there are issues that need to be discussed further, but it would seem that in our culture today, specifically the political culture, there is little room or time for this—everything is a net sum game.

These topics brought to mind a very good article I read recently but the late Reid Buckley.  That may not sound like a familiar name to most of us but his, also decreased, brother should. William F. Buckley, Jr. was the founder and editor of the National Review. From the 1950’s forward, the Buckleys, and particularly William, were the intellectual backbone of conservatives in this country and probably never found a debate that they did not relish in taking part in.  The article by Reid that I came across was actually published in 2009 but the words ring even truer today than they did five years ago.  The title of the piece is Up From Conservatism[1] and the jest of it was lamenting the state of conservative thinking in this nation today.  He asks, where are the innovative thinkers today who can present an intellectual challenge to the other side of aisle but also be open minded enough to recognize that there are important topics that deserve critical research and debate.  Unfortunately, today we appear to be spoon fed the same rhetoric again and again and are asked to blindly follow the lead of the power brokers and certainly to not question their wisdom.  On the right, those that do question are either labeled RINO’s or Libertarian extremists. 

These two topics that I began with this week would seem to be prime examples.  The minute the subject of global warming is raised, most on the right label it a liberal propaganda and lift up such scientific evidence as "anyone living in the upper Midwest this winter did not feel any global warming". While that may make for a folksy sound-bite, it is immediately missing the "global" part of the conversation.  In case you are wondering, I am in the camp that believes this is a cyclical phenomenon with mankind as only one minor factor.  Taken a step further, I find absurd the idea that we can "control" the cycle of the earth, but people do not like to think they cannot control their own destiny.  The partisan skepticism is the same for the Keystone pipeline. The minute the topic is brought up, proponents in the media label it as an Obama conspiracy to block progress and leave us dependent on foreigners for our energy needs.    First of all, the pipeline was going to be built to bring Canadian tar sands oil (foreign) down to Oklahoma/Texas where we already have a bottleneck in the system and was conceived of before the North Dakota fields and fracking really came to fruition.  The question that would seem begged to be asked, is that still the best direction for our energy needs with these changes? But unfortunately, anyone who would ask this is instantly labeled a turncoat.

There are two quotes that I want to share from Mr. Buckley that I believe sums up were we have evolved to;

"For 40 years, smug, snide right-wingers have made merry mocking Greenpeace fanatics and ecological doomsayers without learning a blessed thing about the precariousness of the ecology and the effect of human action (not to speak of avarice) on it, as when we promiscuously exfoliate the rain forests or condemn yet one more green acre on the southeastern shore of New Jersey to the desolation of heedless urban development. We conservatives are so self-satisfied that we have incapacitated ourselves from peering beneath the antics of idiots and the wild exaggerations of scruffy environmentalist kooks to the gathering of real dangers that their hysterical rhetoric obscures. The climate is most probably changing, and the human impact on it should be studied."  And "Are we not perhaps talking too much to ourselves? Are we not writing too much for the applause of our fellows? Is any of us—with few exceptions—saying anything that we have not heard before, and are we not—all of us—submitting intellectually to conservative political correctness and the inertia of the modern super state?"

I am no more qualified to answer that final question any more than I am qualified to provide the complete answer to global warming or the usefulness of the Keystone pipeline, but I do know that I at least want to be provided with real dialog and debate to help come to an informed opinion.  Of course the same charges can be leveled at the other side of the isle.  Ultimately, I believe that if conservatives want to be the voice of real and positive change, we need to find the new Buckley that can help us blow away the chaff, present a defensible argument and encourage each of us to think for ourselves.



[1] www.theamericanconservative.com/articles/up-from-conservatism/

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Morning Comments -Full - What will Uncle Sam have in store for us?

May 09, 2014

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Wheat

Fundamental – Overall markets are in a holding pattern as we await the USDA numbers.  The wheat market potentially carries the risk of a surprise if there were to be one today.  As I commented yesterday, there are some analysts that think the Hard Red production number could be cut to as low as 700 million bushels.  Over the past several years the USDA has been none to shy about making big changes but I would be surprised to see that large of a cut this early in the year.  

The average trade estimate for All Winter Wheat stands at 1.468 billion bushels, All Wheat at 2.046 and a projected ending stocks figure of 588 million for 13/14 and then 553 million for 14/15.  The domestic number that will be most closely watched will be Hard Red Winter and the average estimate is 782 million. The average estimate for the 13/14 World ending stocks is 185.95 MMT and for 14/15 184.53. 

Little seems to have changed in Ukraine and I suspect we will hold at least a certain level of risk premium through the general elections on the 25th.  Realistically, I do not imagine much will be settled even on that date and we can probably expect to see years if problems there.  As a side note, I happened to meet a woman last night who was from Ukraine and her husband was from Russia.  From the sounds of it that have some very interesting discussions around the dinner table.

Technical – While we know that the reports in the morning could be the driving force for higher or lower prices, from a purely technical standpoint it still appears that we have potential to extend up from here.  With intermediate and long term indicators nearing in on the overbought zone, I would not expect it to be an extended run but believe July futures could still make a stab at the major 50% retracement of 7.72.  Cycle dates ahead between the 12th/14th.   

Corn

Fundamentals – The corn market posted a nice turnaround from the early weakness yesterday but appears to be treading water at this point.  I would not really expect to see any shocks in the report tomorrow but as an ex-boy scout I was taught to be prepared for the unexpected. 

I am sure this sounds redundant by now but the average estimate for 13/14-crop year ending stocks remains at 1.314 billion. We could see export estimates bumped up 25 to 50 million bushels balanced out by adjustments in the feed/residual numbers.  14/15 crop year ending stocks are estimated to be 1.672 billion with the wild card there being the yield number that the government uses.  Current year World ending stocks are expected to be 157.31 MMT and for 14/15 159.41 MMT. 

Once we have moved past these numbers the most of the focus should shift over to weather again.  The latest forecasts have moisture moving across many parts of the Midwest from the weekend into the middle of next week but the does not appear to be any major events that would bring planting to a complete halt.  In fact, with the amount of crop that should have gone into the ground this past week, we cannot be too far from the time when the attitude will be rain makes grain. 

Technical – The corn market hangs in limbo at this point.  We have been chopping in a semi-sideways pattern now for the past 6 weeks searching for something to move us in one direction or the other.  Short-term indicators are overbought and I suspect it would take something quite friendly to lift us up through the top.  As I have commented previously, there remains a possibility that we could still make a stab at overhead targets around 5.30 but I believe we are in the waning moments of this rally.  Cycle dates ahead on the 12th, the 19th/22nd and then the 30th/3rd

Soybeans

Fundamentals – The bean market caught a nice wave of short-covering and fund buying yesterday.  This was enough to pull us back above key support levels but does little to change the overall outlook right now. 

We shall see what the USDA has in store for us in just a few hours but as I commented yesterday, most believe adjustments will most likely cosmetic.  The average estimate for the 13/14-crop year ending stocks is 134 million bushels, down 1 million from last month.  The average estimate for the 14/15 ending stocks is 307 million bushels and if correct would be the largest ending inventory number since the 2006/07-crop year. In the World figures the trade is looking for 13/14 ending stocks of 69.77 MMT and for 14/15 a new record estimate of 80.34 MMT. 

Technical – Beans are still enjoying a minor technical bounce and with the overnight strength, July futures have been able to reach up and complete a 38.2% retracement of the recent slide at 14.72.  The daily oscillator is still pointed up and unless Uncle Sam provides something negative later this morning, it would appear that we have room for another couple days of advance and possibly a push against the 14.78/14.81 level.  Cycle dates ahead between the 14th/16th

Soybean Oil – July bean oil also has a minor corrective bounce underway.  With the overnight strength we have posted a higher high and with oscillator pointed higher we should have potentially a couple days more. Ideally we will make a poke up into the 41.95/42.35 retracement range into early next week.

Soybean Meal – July meal posted a nice bounce yesterday but has seen absolutely no follow-through in the overnight trade.  Here as well baring something overtly negative from the government today, we should have room for a couple more days of corrective strength.  Look for tough resistance between 482 and 489. 

Cotton – July cotton has been treading water now for the past couple sessions and appears to be waiting for the USDA releases later this morning.  The technical picture has turned negative but we seem to be in no hurry to move out of the existing trading ranges.  I have cycle dates lining up through this weekend and then the 180-calendar day cycle count from the November low sitting out on the 21st

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Morning Comments - Where did our corn demand go?

May 08, 2014

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Wheat

It would appear that we have a minor wave of profit-taking going on the wheat market and realistically there is little fresh positive news to entice buyers.  By no means has weather improved in the Southern Plains states but as a whole that was one of the vehicles that brought is to this party.  The other has been the explosive, no pun intended, situation in Ukraine and even there, tensions have settled down considerably.  Putin has called for Russian troops to pull away from the border between the two nations and has called for restraint and patience from the pro-Russian militants.  Ukraine is scheduled to hold elections on the 25th, which of course could mark a turning point or a flash point.

Wheat sales bounced back this week as we sold 320,500 MT or 11.8 million bushels.  This brings our YTD total up to 1.161 billion, just 14 million below the USDA target of 1.175.  There are four weeks left in the marketing year.   Sales for 14/15 came in at just 125k MT or 4.6 million bushels.

I would suspect semi-quiet trade into the reports tomorrow morning.  The average trade estimate for All Winter Wheat stands at 1.468 billion bushels, All Wheat at 2.046 and a projected ending stocks figure of 588 million for 13/14 and then 553 million for 14/15.  The domestic number that will be most closely watched will be Hard Red Winter and the average estimate is 782 million but there a number of analysts that believe this number could ultimately be below 700 million. The average estimate for the 13/14 World ending stocks is 185.95 MMT and for 14/15 184.53. 

Corn

The corn market was not able to extend higher yesterday and has seen a wave of liquidation now overnight and into this morning. Pressure in the wheat, a few bulls taking money off of the table in front of the report, good planting weather and now lousy export sales this morning have all conspired to take the wind out of the bull sails. 

Other than a few nuisance showers, planting progress is in high gear and it will should be very interesting to see the updated numbers next week.  The week prior we increased 10% to 29% complete with very questionable weather so pushing beyond the 50% mark now seems very believable.  The biggest concern will be the Northern Plains states where activity have been limited but there as well we should see great advances made. 

Ethanol production slipped a bit this last week as we averaged 894k barrels a day or 263.9 million gallons.  This should equate to just a touch under 95 million bushels of usage and keeps us at the 5 billion bushels pace.  After two weeks in a row of building stocks; up 53 million gallons, stocks were down 3 million. 

Conab released update Brazilian production number this morning with a couple minor adjustments.  Corn production is now estimated to be 75.2 MMT versus the previous estimate of 75.5 MMT. 

Export sales for corn were a very dismal 161,300 MT or just 6.4 million bushels.  There were two major large cancellations by China of 210k MT and unknown of 116.8k MT.  While this is only one week, we know that have been other cancellations already this week and seeing that export inspections have already lagged sales, the USDA could be conservative in boosting the export figures.  YTD we have now sold 1.739 billion bushels leaving only 11 million more to sell with 17 weeks left in the marketing year.  Sales for the 14/15 crop year came through at 121k MT or 4.8 million bushels. 

For the morning reports, the average estimate for ending stocks remains at 1.314 billion for 13/14. For the current crop year exports should be bumped up 25 to 50 million bushels balanced out by adjustments in the feed/residual numbers.  14/15 ending stocks are estimated to be 1.672 billion with the wild card there being the yield number that the government uses.  World ending stocks for 13/14 are expected to be 157.31 MMT and for 14/15 159.41 MMT. 

Soybeans

The soybean market has witnessed a little bounce overnight and into this morning with the emphasis on little.  Spot futures closed below key support at 14.60 yesterday and even with the rebound this morning, we have not quite been able to reach back to that point.  As the old saying goes it would appear that we can "put a fork in it" as this piece of meat (tofu) looks done.  This is not to say that we cannot bounce but with the bulls story evidently behind us the mentality should be one of selling rallies instead of buying breaks. 

Beans sales bounced back with the largest number in 4-weeks at 40,800 MT or 1.5 million bushels.  This moves us to 1.64 billion bushels and 96 million above the existing USDA estimate.  Sales for 14/15 were 14.2k MT or 500,000 bushels. 

Conab bumped their estimate for Brazilian production. They are now estimating a crop of 86.6 MMT versus the previous estimate of 86.1. 

We shall see what the USDA has in store for us tomorrow but most believe adjustments will most likely just be balancing of numbers.  If exports are bumped higher, so will imports.  The average estimate for the 13/14-crop year ending stocks is 134 million bushels, which would be down 1 million from last month.  Reflecting the huge projected acreage, the average estimate for the 14/15 ending stocks is 307 million bushels.  If correct that would be the largest ending inventory number since the 2006/07-crop year. In the World figures the trade is looking for 13/14 ending stocks of 69.77 MMT and for 14/15, 80.34, which as I mentioned yesterday would set a new record.

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Daily Comments - Count down to Friday

May 07, 2014

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Wheat

Fundamentals – The wheat market continued to lead the advance yesterday as the worsening crop situation provided the fuel for buying.  As I have commented previously, this is primarily a domestic situation and overseas markets are not following suit.  US wheat is basically pricing itself out of world markets at this point.

Most of the focus now will have shifted to the report on Friday.  The average trade estimate for all winter wheat stands 1.468 billion, which would compare with last year production of 1.534.  The average estimate for all wheat stands at 2.046 billion compared with 2.13 billion last year.

While prices are soft overnight there is nothing to indicate we have completed this advance.   

Technical – July wheat did poke in a slightly higher high yesterday but basically remains right at the retracement targets between 7.41 and 7.43.  Even with the pressure we have experienced this morning prices remain above the March reaction high of 7.25 and intermediate indicators point higher.  I continue to believe there could be room yet to make a run for the next targets up at 7.70 before we have exhausted this move.  On the weekly Gann chart a 50% retracement of the entire 2012 to 2014 high to low range sits at 7.72.  Cycle dates ahead between the 12th/14th.

Corn

Fundamentals – The corn market appeared to be tugged higher with wheat yesterday but another round of fund/ETF buying certainly helped as well.  The monthly census report did reinforce what the trade already knew, which is export demand has been solid through March but all indications now point to a slacking demand.  Yesterday there were cancellations of 100k MT of corn that had been sold to Spain and 120k MT from unknown destinations and ethanol margins have deteriorated rapidly.  That leaves weather/planting progress as a possible stimulus and it would appear that we will have made major strides this week.

Looking out to Friday, the average trade estimates for 13/14 stands at 1.314 billion bushels, which would be 17 million bushels under the April estimate.  As I commented yesterday the wild card in the reports could be the yield estimate, as it is unknown if the USDA will make any adjustments from trend-line due to the lateness of the planting.   If they use 2013 as a benchmark, there would be no reason to lower the numbers.  As it stands, the average estimate for the 14/15 carryout is 1.67 billion.  World ending stocks for 13/14 are estimated to be 157.3 MMT and for 14/15, 159.41 MMT. 

Technical – July corn posted an impressive rebound yesterday and has moved back up to within striking distance of recent highs and the April 9th reaction high at 5.24.  It would appear that we still have potential to make a run for overhead retracement targets at the 5.30 zone but I suspect time is running short.  Cycle dates line up now through Monday, the 19th/22nd and then between the 30th and 3rd

 

Soybeans

Fundamentals – Even though spot bean futures bounced enough yesterday to hold above critical support prices are under pressure again this morning and everything seems to be shaping up to confirm we have our high in place.  Bull spread unwinding continues and export/import numbers would suggest that we have righted the ship once again. 

During the month of March we imported 3.18 million bushels of beans, of which almost 80% came from Canada.  While that number is not huge in itself we can then look to the lineup from South America where it appears we have another 18 to 20 cargoes headed this way just over the next few weeks. 

We will see export sales in the morning and it will be interesting to see if we post a second week of negative number but regardless, much of the focus should be on the Friday reports.  The current estimate for the 13/14 ending stock is 134 million bushels down just 1 million from last month and the average estimate for 14/15 is 307 million bushels.  World ending stocks for the current crop year are 69.77 million, which would actually be a slight uptick from the April number of 69.42 and for the 14/15 crop year the trade is looking for 80.34 MMT, which if correct would set a new record.   The previous high watermark for world ending stocks was set in the 2010/11-crop year at 71.72 MMT. 

Technical – Spot beans did dip through the key support at 14.60 yesterday but were able to bounce for the close. But this morning, bears on the hunt again and we have pushed into lower lows.  On the lows we did reach down to test the 55-day moving average, which is the first time we have visited that line since the 11th of February.  Short-term oscillators are quite oversold which could offer us room for a rebound and if correct, I would view that as a selling opportunity.  Without a solid rally into the weekend, the weekly indicators will have finally rolled over into a sell.  My next cycle date ahead is on the 15th.

Soybean Oil – With the pressure this morning, July bean oil is right back down on last weeks lows, the 89-day moving average and the 78.6% retracement of 40.91.  While the potential of holding this level is looking questionable, we do sit in a short-term oversold position so I am not interested in pressing the short side just yet.  Cycle dates line up for Monday.

Soybean Meal – Meal is the one member of the complex that will not give up as prices bounced enough yesterday to hold closes above the 13 and 21-day moving averages and pressure has not been all that significant this morning.  The market continues to lose upward momentum and we remain a solid $20 off of last week’s highs but have failed to really confirm a peak.  The daily oscillator is oversold and could have us lined up for a couple days of rebound.  Cycle dates ahead between the 12th/15th

Cotton – After failure to extend any higher over the past week it would appear that the cotton bulls became anxious and have headed for the sidelines.  With the break overnight and into this morning July futures are back below the late April highs at the 93.50 level.  In the process we have turned intermediate indicators lower once again and could be in store for 1 to 2 weeks of negative trade.  Cycle dates ahead on the 9th, the 16th and then the 180-calendar day cycle count from the November low on the 21st

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Morning Comments - Time to look out to the Friday Figues

May 06, 2014

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Wheat

Up Monday, down Tuesday. That is what it would appear we have at least so far in the Chicago wheat market but the pressure is not terribly significant and the KC market is a touch in the plus column.  Values did back off from highs significantly yesterday but we still closed above key resistance and appear positioned to work into higher ground. 

The situation in Ukraine has not improved any but neither has there been any verifiable issue with shipping or the spring crops that have not already been factored into the risk premium.  That turns the story back to the domestic front.

As expected wheat conditions slipped once again with good/excellent down 2% to 31%, fair down 2% to 31% which means the poor/very poor number needed to push up 4% and stands at 38%.  Comparatively, last year at this time the numbers stood at 32/29/39.  Spring wheat planting increased 8% to 26%.  This compares with 21% last year and an average of 41%. 

Export inspections were about as expected at 19.8 million bushels bringing the marketing YTD tally up to 1.064 billion.  It is looking a bit questionable as to if we can make the projections as with just 4 weeks to go, we need to export 110.5 million bushels or 27.6 million per week.  Over the past 10 weeks we have averaged 20.7 million per week.

Focus through the balance of the week should shift to the reports on Friday. Currently the average trade estimate is looking for winter wheat production of 1.468 billion, 13/14 ending stocks of 588 million and 14/15 ending stocks little changed from there at 553 million.  For world ending stocks the average estimate for 13/14 is 185.95 MMT and for 14/15 is 184.53 MMT.  

While I am not looking for a runaway in the wheat market as production potential through the rest of the world continues to look promising but currently it is the market that would appear to have upside room. 

Corn

Solid rally in the corn market yesterday as we pressed back against key overhead resistance but we have unwound part of those gains overnight.  The semi-favorable weather outlook and prospects for rapid planting progress should keep a lid on this market.

As of May 5th, planting did reach 29% for the nation, which was up 10% for the week and within the range of estimates.  It is always interesting to note how various people report figures like this as it become pretty obvious of what their market bias is without them flatly stating it.  Those bullish reported that corn planting was ONLY 29% compared with a historical average for this date of 42%.  The bears in turn would say, another 10% of corn made it into the ground during the past week which keeps us a full 17% above the pace last year and with the great weather outlook, we could see massive gains this week.  Take your pick.  Regardless, we should not have much problem pushing north of the 50% level before next Monday. 

Export inspections came in right at the 10-week average at 48.8 million bushels.  Marketing YTD we now stand at 1.151 billion bushels.  I fully expect the USDA to boost the estimate 50 million bushels on Friday but with the current target of 1.75 billion we will need to average 35.2 million per week for the next 17 weeks.  This will need to be watched closely as so far, exports shipments have not been keeping pace with sales and while the USDA may project 1.75 to 1.8 billion bushels, we may never get that out of the country before the end of the year.

For Friday, the average trade estimate for 13/14 ending stock is down just 17 million bushels at 1.314 billion.  If exports are bumped higher part of that may be compensated for via the huge feed/residual number.  For 14/15 we should see no changes in the acreage from the March intentions so the big question will be what they plug in for a trend-line yield.  It should be in the 163/165 range.  The average estimate so far for the 14/15 ending stocks is 1.672 billion.  World ending stocks for 13/14 are estimated to be 157.3 MMT and for 14/15 159.41. 

While there is no question that we have the entire growing season ahead of us and with the increased usage, we have less room for crop problems but it would appear that is one of the few remaining strands that the bulls can hang onto at this point. 

Soybeans

The early strength in the bean market faded pretty quickly and now in the overnight trade, we have pressed down through key levels of support.  If this weakness carries into the close, it would paint a negative picture. 

The trade attention has slowly but surely turned to the record imports that are moving into the United States.  Through February we had imported 20 million bushels and there are already another 15 million that should be into our shores over the next several weeks.  Last year total we imported 36 million.   We should see updates through March over the next few days but beans continue to come from all directions. Through February Canada has sent us 11.5 million bushels which is nearly double that of a year ago. 

On the flip side, export inspections were within trade estimates but the third lowest of the marketing year at 3.7 million bushels.  Marketing year to date we stand at 1.523 billion bushels, just 57 million below the target.  This means that we will need to average 3.3 million per week to reach the 1.580 billion target which is not far off of this past weeks number. 

We did see a little planting progress made as we increased 3% to a total of 5% in the ground.  This compares with last year at 2% and an average of 11%.

Looking out to the Friday supply/demand estimates, the average estimate for the 13/14 carryout is 134 million, which is virtually unchanged and 307 million bushels for the 14/15 ending stocks. World ending stocks for 13/14 are expected to fall in around 69.77 MMT and for 14/15 80.34. 

Without a weather issue, it would appear that the bean bull has little to look forward to.

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Morning Comments - Building in Risk Premium Again

May 05, 2014

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Wheat

We are beginning this new week with strength across all the grain and soy markets but it would appear that the wheat is the market that is driving the bus.  While we did not gap into higher ground we have finally been able to extended through the resistance that has stopped us for weeks. 

The one-two punch that the bulls were able to deliver are not new news with the familiar combination of the increasing bloodshed in Ukraine and a less than desirable weather outlook for the Southern Plains. 

Fighting over the weekend had reached to Odessa, which is Ukraine’s 3rd largest city and also a major warm water port on the Black Sea critical for exports and imports.  Thankfully Russian troops have "officially" remained behind their own borders, and observers believe they will continue to do so but the escalation of fighting has demanded additional risk premium in prices.

It would not appear that the TX/OK/KS region can look forward to improving conditions anytime soon and I understand there were 100+ degree temperature recorded in Kansas over the weekend. We should see crop conditions deteriorate again this afternoon.   

Corn

Corn is enjoying a little bounce this morning as well but I suspect most of this is a sympathy reaction with the wheat.  While intermittent moisture is still forecast for much of the Midwest at varying times this coming week, as a whole we should see excellent planting progress made.  For tonight’s planting progress report I have seen some people calling numbers as high as 35 to 40% complete but I suspect we will be closer to the 25 to 30% range.  Regardless, it would appear that we should not have much difficulty in reaching beyond the 50% mark by mid-month and with temperatures finally improving the overall crop should be off to a good start. 

The wheat market and the Ukraine situation should continue to provide some support but as the trade focuses more on the domestic production situation, I believe it will be difficult to sustain rallies. 

Soybeans

Beans have also been able to provide us higher values overnight albeit fairly minor.  Looking around the newswires this morning, I have a challenging time finding a good reason as to why the bean market is higher at all.  Everyday there seems to be additional stories of South American beans headed for U.S, ports and little seems to be improving with the picture in China be that with bean crush margins, too much inventory booked to come in and their overall economic situation.  The PMI, which is their manufacturing index was flat in April and many were looking for a slight improvement.

I recognize that is it difficult to say we are "out of the woods" yet with the overall bean situation, particularly with planting and production weather ahead of us but I suspect the burden of proof should soon shift to the bulls and not the bears.

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Morning Comments - Full - Did Someone Yell Fire?

May 02, 2014

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The exchange theater was crowded and when someone yelled fire we witnessed that proverbial rush for the exits yesterday. It was not so extreme that anyone who wanted out of the door could not make it through but there were certainly a number of bumps, bruises and cuts along the way.  It is estimated that funds sold somewhere between 9 and 12,000 contracts of beans, 8 to 10,000 contracts of corn and 5 to 6,000 contracts of wheat. 

Wheat

Fundamentals – The pressure in wheat, particularly KC was not quite as dramatic as that in corn and beans, which is understandable.  The Quality Council has wrapped up tour of Kansas and yesterday afternoon published an estimated crop for that state of 261 million bushels with a yield of 33.2 b/p/a.  This compares with last years’ Kansas production of 319 million bushels. 

There remains potential for moisture to pass through this region during the next 10-days but it would seem obvious at this point that part of the acreage in the Texas/Oklahoma and Kansas region is beyond salvation.  Lets keep in perspective that this creates a domestic issue, not a world problem and at this point is not really a surprise to the market.  Taken a step further for the bean trade, this could increase bean acreage even further assuming there would be enough moisture to justify putting the seed in the ground.

The situation in Ukraine is going from bad to worse and they appear to be moving ever closer to an all out civil war.  This should help maintain risk premium in the wheat and corn market but the trade appears to becoming just a bit numb to the situation. 

Technical – While the pressure in July wheat yesterday was fairly heavy, and we appear to have failed against the March 20th highs, the technical picture in this market is anything but clear.  With the little rebound we have seen this morning, prices actually remain higher for the week and we are well off of the low end of the current trading range down around 6.65.  All that said, we sit on good end of cycle counts and indicators are close enough to the overbought zone they make the threat of a high appear realistic.  After this weekend I have cycle dates ahead on the 13th, the 23rd and then the 5th of June and for now will have to remain patient looking for a more conclusive price signal. 

Corn

Fundamentals – While we have seen a number of large daily swings, for July corn futures the break yesterday posted the largest single day loss since prices turned higher in January.  I would never say there is any one-day of action that would "assure" that a market has reversed, but that appears to be a pretty big warning flag that troubles are ahead.  Combine the long liquidation that we witnessed with a weather forecast that is generally clear through mid-to late next week for much of the corn belt and you would be hard pressed to find a reason to bring many buyers back to this market.

All that said, I do not believe we have a major washout in the corn market on the radar at this point in time.  As noted yesterday, export sales were respectable and it is anticipated that the USDA will push usage higher again on the May 9th supply/demand report with a bump in the export projections.  This should keep the nearby corn market supported on weakness but lets not lose sight of the fact that we have already priced this into existing levels.  Additionally, the export numbers can and should be boosted but it is becoming questionable if the shipments will be able to keep pace. 

Markets have stabilized overnight and I would not be surprised to see corn hold and may even try and bounce between now and the 9th but beyond there, we should be transitioning once again from a demand mindset to a supply mindset which means weather becomes the complete driving force.  

Technical – The washout in the corn market pushed July futures back below the 13 and 21-day moving averages once again and this time, we are sitting on the cusp of crossing these two averages over.  If, or maybe better stated, when this happens it will be the first time they have been negative since January 24th.  There remains a possibility that we could try and stabilize and bounce back a bit between now and the 8th of May but for all intents and purposes, it would appear that we have a high in place for corn.  If correct, this should open the door for July futures to slide down to at least 4.85 and potentially the 4.80/4.75 zone. Cycle dates ahead between the 8th/12th, the 20th/22nd and then the 29th through the 3rd of June.      

Soybeans

Fundamentals – Reality appeared to have finally delivered the bean bulls a strong slap across the face yesterday.  This happened to coincide with new $1 limit for beans and nearby futures responded by testing out half of that.  Negative export sales, ships lining up in South America to load beans and meal for the US, China trying to resell cargoes where ever they can.  Should anyone be surprised? 

Funds have actually been reducing their positions as of late but still remain heavily committed to the long side.  Prices have been able to bounce a bit overnight but it is difficult to imagine a reason that buyers will be flocking back to this market en masse without something unexpected coming in from left field.    

Technical – July beans have indeed now posted an outside weekly range and we need to see if we close below the 14.60 ½ for a key weekly reversal setup.  It would appear that our peak may have come just a few days ahead of the 270-calendar day cycle count this Monday.  With the break yesterday I do not really want to chase a short lower today and but could be interested in a sale on a bounce early next week.

Soybean Oil – The break yesterday and the follow-through overnight, July bean oil has already reached down to complete a 78.6% retracement of the recent rally and tested the 89-day moving average. This actually pushes the short-term oscillator into the oversold zone and seeing that we sit right on the 90-calendar day cycle count from the January 31st low, we should be poised for a rebound.   

Soybean Meal – While not an outside week like the bean market, July meal did suffer a sharp break lower yesterday, taking us right back down against the 13 and 21-day moving averages.  These two averages remain positive as they have done so since last January but recently have been losing momentum.  As with beans, I would like to see prices try and bounce just a bit early next week and if correct, I am still interested in a possible short position. 

Cotton – July cotton has found a little more renewed buying interest this morning and have pushed into higher highs for this swing.  Short-term we sit in an overbought position but intermediate indicators continue to point higher.  I have cycle dates ahead on the 9th and then the 21st of May and believe we should press generally higher into that latter date.

www.thehueberreport.com 

Morning Comments - Beans sales negative for the first time this year

May 01, 2014

www.thehueberreport.com

Wheat

The Kansas City market continued to lead wheat higher yesterday spurred on by the reports coming from the tour.  The overall numbers will be released later today but reports from western Kansas indicate yields lower than last year. 

The wheat market will be confronting a situation somewhat similar, but not nearly as extreme to beans.  Reduced domestic stocks but ample world inventories.  Weather conditions across Europe and into Russia continue to look very favorable.  No real changes in the weather outlook here.  The EU model continues to predict moisture in the TX/OK/KS region between now and mid month but the window of potential benefit is closing rapidly. 

Export sales for wheat were somewhat lackluster but we continue to keep pace with the numbers needed to reach the USDA targets.  For the week ending April 24th we sold 214,900 MT or 7.9 million bushels.  With 5 weeks left in the marketing year we will need to average 5.2 million bushels per week to reach the 1.175 billion bushels target.  Sales for the 14/15 crop year came through at 219,500 MT or 8.1 million bushels. 

Corn

Weather is also impacting the corn trade but here with models beginning to agree more and more that temperatures will be on the rise and moisture a bit more scattered, the reaction is negative.  Everyone recognizes that weather forecasts can change quickly but we have built in risk premium in the past week or so and if planters really begin to roll, it will likely be difficult to justify maintaining. 

The actual EIA ethanol production report was within expectations at an average of 898,000 barrel as day. This should work out to almost 95 million bushels of corn.  That said, there are disconcerting signs in the inventory numbers.  Granted, the summer driving season is just around the corner and we general see a buildup in anticipation, but we have now seen weekly inventories grow in 5 out of the past 6 weeks with a cumulative increase of 81 million gallons.  This is not a trend that the demand bulls would want to see continue much longer.

While it certainly does not appear to be reflected in the price action this morning, corn export sales were solid this past week.  For the 13/14-crop year we sold an additional 938,000 MT or 36.9 million bushels.  This brings the YTD total up to 1.734 billion bushels vs. the current target of 1.75 billion.  It would stand to reason that the USDA will bump this projection up at least another 50 million bushels on the May supply/demand report.  Sales for the 14/15-crop year were negligible at 13,800 MT. 

As I commented just above, prices have not reacted positively to this sales news.  Granted, it is still early in the day but I believe this is indicative of a market that has pretty well factored in the demand surge in corn and will shift more and more of its focus moving ahead to weather.  

Soybeans

For some time now I have been writing that outside of the "known" tight domestic supply situation in beans it is difficult to find much positive but prices have ignored that and continue to maintain and/or extend the gains.  We may now be reaching the point this cannot be ignored any longer. 

Realistically, logistics aside, the world is sitting on a record supply of bean right now.  Even the logistic side of the equation appears to be correcting itself.  There are currently at least 6 vessels at Brazilian ports that will be loading beans for the US, which should account for around 13 million bushels.  I also understand that there are at least 12 cargoes of beans that China is trying to resell.  It would stand to reason that the USDA will boost in the import number on the supply/demand report on the 9th.  They currently have this figure pegged at 65 million bushels and I suspect they will increase this at least 5 million and possibly 10. 

Last but not least, I have been waiting for the export sales figures show up in the negative column and after barely registering in the black last week, we have our first negative number.  For the week ending April 24th sales were a negative 16,400 MT or 602,700 bushels.  Total cancellations for the week were 178,900 MT or 6.57 million bushels.  Even the sales for the 14/15 crop year were pretty uninspired coming in at 78.9k MT or 2.9 million bushels. Granted, the cancellations were not huge and we still remain 59 million bushels above the projected total exports, but the trend does not look positive. 

Prices extended the morning losses on this news and I continue to believe we should have our peak in place in this market between now and next Monday.  

www.thehueberreport.com 

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