Sep 1, 2014
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Cash Grain Insights

RSS By: Kevin McNew, AgWeb.com

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

 

Wheat Creeps Higher in the Overnight

Aug 29, 2014

 This morning soybeans and wheat are trading higher up 2 ¼ penny and 5 cents respectively. Corn is trading down 1 ¼ cents this morning. The U.S dollar index is in a consolidation pattern after making a sharp move higher between the 18th and the 26th.  

The white house spoke last night and mentioned that "We are not taking military action to solve the Ukrainian problem" and that the "ongoing incursion into Ukraine by Russia will only lead to additional costs for Moscow." With that being said, we can expect further sanctions by the west to be levied onto Russia. Over the last four days wheat has been able to rise to the top side of the range it has been trading in since early July. However, without a major disruption in the physical movement of grain out of Ukraine it is unlikely that wheat will be able to make any sort of meaningful rally.  

Next week’s weather forecast will provide ample moisture to finish off crops in the fill stage of development with precipitation amounts of 2-6 inches covering eastern Nebraska, Iowa, Southeast Minnesota and Wisconsin. The 16-30 day forecast did trend cooler for the northwest Midwest and needs to be watched for frost risk in late developing fields. For now frost risk is still very low, and there is no freeze expected in the Midwest next week.

This year excess precipitation during wheat harvest has been the global theme with the latest reports of this out of Bueno Aires. The precipitation in central and southeast Buenos Aires province, an area that makes up 18% of the planted area, is likely to suffer substantial losses due to excessive rains. Last week the exchange cut its estimated wheat acreage by 247,000 acres due to excessive rain in the region.   

 

New Crop Soybean Sales Beat Expectations

Aug 28, 2014

 Grains are slightly higher in the overnight session with corn up ¾ of a penny, soybeans up 3 cents and wheat up 6 ¾ cents as we move into the pause in trade. The tensions in Ukraine continue to escalate as reports out of Kiev accuse Russia of playing a major role in a counter offensive by the separatists. Concerns are that Russian boots and armored vehicles are on the ground in Ukraine, which if confirmed would be a significant escalation of the Ukrainian conflict. 

Wheat export sales were reported at 403,600 metric tons for delivery in 14/15 which was up 98 percent from the previous week. Brazil was highlighted as a major purchaser of U.S wheat buying 94,000 metric tons. Old crop corn sales had net reductions of 32,700 metric tons which was within analyst expectations. According to our model this puts corn on pace to meet the USDA expectations with only one week left in the marketing year. New crop corn sales were reported at 695,600 metric tons which was within expectations.

Old crop soybean sales recorded net reductions of 62,800 metric tons which puts soybean export sales at 35 million bushels ahead of pace to meet USDA expectations. It is likely we see the USDA revise their forecast in the September 11th WASDE report. New crop soybean sales were reported at 1,290,800 metric tons which was well above expectations. The majority of sales primarily went to China which booked 50 percent of this week’s new crop soybean sales.

Yesterday the EIA announced that ethanol production had fallen 24,000 barrels per day to 913,000 barrels per day. Ethanol stocks declined this week 934,000 barrels, bringing total stocks to 17.32 million barrels.

 

SDS Spotted In Some IL Fields

Aug 27, 2014

 We have a mixed morning in the grains with corn trading down 2 ½ cents, soybeans increasing 3 ¾ cents and wheat trading up a penny as we go into the morning pause in trading.

This morning the Taiwan Flour Millers Association rejected all offers for U.S wheat for a 99,410 metric ton tender which closed on Wednesday. The rejection came on the basis that prices were too high. Yesterday, the Russian Agriculture Ministry stated that they expect the 2014/15 grains exports to be at a record-high 27.5-30 million metric tons, up around 3 million metric tons from their previous forecast. GASC awarded the 175,000 metric ton wheat tender to Russia and Romania.

On Tuesday China’s state soybean auction sold 34% of the state reserves that were made available for sale, which was better than last week’s 24% sold when a similar volume of soybeans was offered by the state. This week’s Soybeans sold for an average of 24 yuan per metric ton more than last week.

There has been increased observation of SDS (Sudden Death Syndrome) spotted in fields throughout Illinois, South East Iowa, Northern Missouri and North East Kansas. In the Indiana crop progress report it was mentioned that "While soybeans setting pods received much needed moisture, excess water and humidity in the fields contributed increased SDS and foliar lesions in certain counties." SDS seems to be appearing rather quickly and will likely be mentioned in next week’s crop progress report. This will be an issue to monitor closely going forward.

Soybean Harvest Kicks Off in TX and MO

Aug 26, 2014

 The grains are slightly lower to unchanged this morning with corn down ½ of a cent, soybeans down 4 ¼ and wheat down ¼ a cent this morning. On Monday Egypt’s GASC announced a tender to buy an unspecified amount of soft wheat or milling wheat for delivery Sept 21 to 30. Traders are looking for Russia, Ukraine and Romanian wheat are likely to win the tender since Black Sea wheat is nearly $4 a metric ton more competitive than Chicago Wheat. GASC tender results are expected later today.

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Crop progress was released on Monday at 2 PM CST and showed that corn rated good-to-excellent has improved by 1% while soybeans have fallen 1% over the last week. Spring wheat conditions have also declined, falling to 66% good-to-excellent from 68% a week ago. Soybean harvest is now starting in the south with Missouri 2% complete and 8% complete in Texas. Early harvested soybeans have a strong cash market to sell into, with the spread between Sep/Nov at 79 ¾ cents this morning. The spread has been wildly volatile in the last week trading as high as 151 yesterday morning before seeing the gains evaporate by the end of the day. The start of southern soybean harvest will be putting pressure the old crop, new crop spread and has already started to affect Gulf bids which moved 10-17 cents lower yesterday.

This week’s weather is showing a wet pattern over the next 10 days with the majority of the grain belt receiving meaningful precipitation. The precipitation should cover the remaining dry spots which had developed over most of July and had been cause for concern for late planted soybean development. Currently, there are no early frost threats over the next 30 days.  

On Friday, Pro Farmer announced the aggregate U.S corn yield estimate at 169.3 bushels per acre which is 1.9 bushels per acre higher than the August USDA forecast and .9 bushels higher than the latest Planalytics yield forecast. 

Sept/Nov Bull Spreading

Aug 25, 2014

 This morning the grains are trading slightly lower with corn down 3 ½ cents, soybeans down 7 cents and wheat down 1 cent as we go into the morning pause in trading. The spread between the September soybean contract and the November contract has taken another giant leap higher, up 15 cents just in the overnight. The spread is now trading at 139 3/4, up from 15 cents on August 6th.

There should be more moisture this week throughout the Midwest as a storm tracks from Nebraska to the Great Lakes region from Tuesday to Friday. The storm should help the later planted corn and soybeans giving eastern Nebraska, Iowa, Southern Minnesota, and Wisconsin between ½ -1 inch of precipitation.

Heavy rains fell this weekend in Montana and the Western Dakotas which halted harvest and gave cause for concern about crop quality. In Montana, the higher elevations received snow which is still sticking on the peaks this morning. The wet growing season has caused concern about the emergence of Vomitoxin as harvest progresses. Vomitoxin has already been present in some of the early harvested crop.

France was able to wrap up wheat harvest over the weekend. Germany however, who has been struggling with wet weather during harvest, is still looking for a break in the forecast to cut the remaining acres.

Trading opened at 8:30 PM Sunday night, which was 1.5 hours later than expected after the CME ran into unspecified technical problems. Those problems have since been resolved.

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