Morning Update - Sales Uneventful
Mar 13, 2014
Fundamentals – It was all about the wheat yesterday. After early pressure across all markets, wheat turned around and led a grain advance, once again stimulated by the concerns about the situation in Ukraine. Recognize, that there has not really been any significant disruption in grain trade over there and news from the Ag community says there is good availability of seed and other inputs ready for the spring crops but the uncertainty of it all continues to force the bear, which in this case has been the large managed spec out of the market. Granted, if I were a country looking to secure grain right now, would I feel comfortable putting all my eggs into a Ukrainian basket? Probably not and hence the risk premium, but at this point, the rally is probably being driven more by technical and position squaring than any real fundamental.
Export sales came within expectations at 476,900 MT or 89.2 million bushels. This brings the year to date tally up to 29,114,000 MT or 1.070 billion bushels. To reach the USDA target of 1.175 billion we will need to average sales of just 8.8 million bushels per week.
Fundamentals – The corn market produced a very solid reversal from the early pressure yesterday and closed strong in the range but had it not been for the rout of the bears in the wheat market, I suspect the gains would have been meager at best. Outside of the Ukraine concerns, news was a little sparse and really not all that encouraging. Domestic basis levels overall continue to soften and Conab surprised the trade with a 75.2 MMT projection for their corn crop. Their previous estimate was 75.5 MMT and the USDA has them at 70 MMT. Evidently they are counting on a solid 2nd crop down there.
EIA Ethanol production came in at 869k barrels a day, which is the lowest weekly tally since early January and most likely impacted again by adverse weather. Marketing year to date, we have averaged 896k per day. The recent number would reflect corn usage of just under 92 million bushels. Weekly stocks were also lower, decreasing 30 million gallons.
Corn sales were towards the low end of estimates and the lowest number seen since the first week of January for the 13/14-crop year. The figure was 683,400 MT or 26.9 million bushels. Year to date we now stand at 38,218,000 MT or 1.505 billion bushels. As a point of reference, a year ago at this time we had only sold 582 million bushels for the marketing year. To now reach the USDA target of 1.625, we need to average sales of 4.8 million bushels per week. For the 14/15 marketing year we sold 4.1 million bushels this past week.
Fundamentals – While we did bounce well off the lows and have been able to push a touch higher overnight, the bulls in the beans market were all taken to the wood shed yesterday for a serious lashing. Most feel that China has canceled at least 20 cargoes of beans out of Brazil and we now have product looking for a home. Basis levels continue to crumble both here and in South America and for all intents and purposes, it would appear that we have finally tipped the scales back in the other direction.
Conab did slice their production estimates down to 85.44 MMT from the previous guestimate of 90. This compares with the last USDA figure of 88.5 MMT. While this was a bigger cut than the trade was anticipating, keep in perspective that it will still be a new record for Brazilian production.
US crush numbers for February will be released on Monday.
While not yet negative, we did post a marketing year low for bean sales, coming in at 113,500 MT or 4.2 million bushels. Year to date this bring the tally to 1.627 billion which is still 93 million above the new target of 1.53 billion. Sales for the 14/15 marketing year were decent at 776,900 MT or 28.5 million bushels.
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