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November 2012 Archive for Standard Grain

RSS By: Joe Vaclavik

Joseph Vaclavik is the president at Standard Grain in Chicago. Standard Grain provides futures and options brokerage to farms, feedlots, elevators, processors, end-users and traders. Visit www.standardgrain.com for more information.

 

Friday AM Grain Update

Nov 30, 2012

 Soybeans are leading the grain complex lower this morning after a poor technical performance on Wednesday and Thursday.  The January soybean contract was unable to hold a rally above $14.50 for two consecutive days, a red flag for traders who have found little in the means of fundamentals news and are relying on charts for direction.  Yesterday’s highs in the January contract correspond with the 200-day moving average, which is watched heavily by the fund community for trend changes.  Yesterday’s highs in the March corn contract correspond with the 100-day moving average.  As with beans, poor technical closes the last 2 days has likely encourage some speculative selling.  Yesterday’s Export Sales report from the USDA came in below expectations across the board and may have had something to do with the weakness.  Cumulative corn sales for the 12/13 marketing year stand at 42% of the USDA’s current forecast vs. 49% on average.  We’ll need to sell 421,000mt each week to meet the USDA’s current forecast.  Cumulative soybean sales stand at 75% of the current USDA forecast vs. 61% on average.  Only 229,000mt need to be sold each week to meet current USDA forecasts.  Many anticipate a heavy shift towards South American beans rather than US beans after the Brazil/Argentina harvest this spring.    

      The International Grain Council increased their worldwide soybean production estimate for the 12/13 crop year, which includes the South American crop to be harvested in the spring.  The estimate came in at 267mmt, up 12% on the year.  The council is obviously assuming a big crop from South America.  Brazilian soybean could be up 25% or more according to some analysts, as last year was seen as a crop failure. 

      The USDA is estimate the value of Ag exports in the 2013 fiscal year at $22.3 billion up from 2012’s $19.8 billion.  In August, the USDA forecasted 2013 exports at $19.9 billion.  Unstoppable China soybean demand is likely one of the bigger reasons for the increase.

         Argentina soybean planting is 45.2% complete up from 37% last week, according to the Buenos Aires Grain Exchange.  Corn planting is 52.4% complete vs. 50% last week.  Wheat harvest in Argentina is 25.7% complete.

      Hog producers should note that both the December and February contracts posted minor chart reversals yesterday.  Spread action was poor as well.  It looks as if some follow-throughs selling will be seen early this morning.  The futures’ premium to cash narrowed yesterday slightly.  The cash index and the nearby futures will converge ahead of contract expiration. 

      Outside markets are quiet this morning.  Equities are near unchanged while crude oil is marginally lower.  The bond market continues its march higher and looks poised to test the recent highs above 152’0 in the December contract.  It seems as if the Democrats and Republicans are again at a stand-still regarding the so-called "fiscal cliff."  The GOP is far more adverse to raising taxes while the Democrats seem set on raising taxes on those earning over $250,000/year.  As of now, everything is up for negotiation.  Capital gains tax, the mortgage tax deduction and loopholes used by businesses are all being discussed.

      Today is first notice day for all December grain contracts.  Positions should have been liquidated yesterday.  Personal Income data will be released at 7:30am CST.  Chicago PMI at 9:00am CST.     

Standard Grain

One Financial Place Suite 3990

Chicago, IL 60605

www.standardgrain.com | info@standardgrain.com | (312) 462-4438

Tuesday Morning Grain Update

Nov 20, 2012

       Soybeans are weak to start the day while corn and wheat are marginally higher.  Of course, there were more rumors yesterday of Chinese interest in US soybeans for export this week.  Headed into 2013, we believe that much of the "big money" in these markets will be on the defensive given the uncertain future of US tax code and regulations.  Every type of tax is on the table for negotiation when the Bush Tax Cuts expire on January 1st.  The capital gains tax is what affects banks, hedge funds, and traders of these markets most directly.  If there is a hint that these rates could increase after the first of the year, many of these traders will look to cover positions now in order to capitalize on a tax rate that is possibly more favorable than future rates.  Commodities that are near the upper end of recent ranges probably have the most to lose, as there is a greater likelihood that index funds in particular may want to lighten the load.  As far as the grain markets are concerned, the corn market is probably the most vulnerable given that a tax increase is in the cards.  Non-commercials held a long position of nearly 250,000 contracts in the corn market as of November 13th.

      The USDA released their Crop Progress report yesterday after the close.  Winter wheat ratings fell again, now rated 34% good-excellent, down 2% from last week.  24% of the crop is rated poor to very poor, up 2% on the week.  42% of the crop is rated fair.  Both the good-excellent ratings and the poor-very poor rating are the worst on record for this point in the marketing year.

      According to sources in Brazil, the soybean crop there is 67% planted up from 53% last week.  Most agree that South American grain and oilseed producers are off to a "good enough" start and that the potential for a big crop remains intact.  Well followed crop scout Cordonnier kept his estimates for Brazil/Argentina corn and soybean production unchanged this week.

      Export Sales will be delayed until Friday morning due to the Thanksgiving holiday.  The markets will be open a full day on Wednesday and will not reopen until Friday morning at 9:30am CST.  The markets will close early at 12:00pm CST on Friday, which will also coincide with the expiration of December options. 

      We look for a choppy, holiday type trade for the remainder of the week.  We wouldn’t be surprised to see some more action during the last few weeks of the year given the uncertainty regarding tax code ahead of the New Year.  The wheat market has been unable to rally on almost exclusively bullish news for several weeks now.  This is generally a strong indicator of a bear market.  The future of the soybean market is with South America.  Producers here in the US should be turning their attention to the 2013 corn, soybean and wheat crops from a marketing standpoint.  Now is the time to examine margins, break-evens, input costs, etc.   

Standard Grain provides futures and options brokerage to farmers and feedlots!  Call us direcly at (312) 462-4438 or email info@standardgrain.com 

Slow News Day in Chicago, Grains Mixed

Nov 15, 2012

 The grain markets are mixed this morning. Soybeans were unable to penetrate yesterday’s highs overnight and have sold off since.  Major support in the January soybean contract will come in near Tuesday’s low at $13.91 ¼.  Soybean spreads saw a significant rebound, but are also weak to start the day today.  South American weather has been mostly benign; sources in Brazil and Argentina firmly believe that the potential for big crops remains intact despite some minor weather issues.  The March corn contract will run into some significant resistance in the $7.35 – 7.38 area.  Fundamental news has been slow overall.  The weekly Export Sales report is delayed until tomorrow due to the Veteran’s Day holiday. 

      More talk regarding the Mississippi River and its low water levels has been circulating.  Some are pushing for action from the government, which may include dredging and removal of rocks in an effort to clear the path for barge traffic.  Most believe that the river will not close entirely, but that traffic will have to remain slow.  A continuation of these issues on the river can affect everything from export activity to domestic basis levels. 

      The USDA will release its Cattle on Feed report tomorrow.  Analysts look for an On-Feed number near 94.6%.  Placements are expected near 87.3% while marketings are estimated at 102.6%. 

      China’s government will continue to buy domestic corn and soybeans from local farmers in order to build state reserves.  China’s demand for US soybeans has been strong, however many now look for switches/cancellations of some sales in the near future. 

      Yesterday’s NOPA Crush came in at 153.5mil/bu vs. the average analyst guess of 147.7mil/bu.  Crush in September was 119.73mil/bu.  The USDA raised their estimate for soybean crushings on their most recent Crop Production report by 20mil/bu as part of a 100mil/bu overall demand increase for the 12/13 crop year.

      The Ukraine will export 5mmt of corn to China, according to a Bloomberg article this morning.  Ukraine wheat supplies have been tight; many believe a total ban of exports is imminent. 

      The soybean market acts poor to start to the day.  The trend remains lower while fundamental news is slow.  Most chart readers continue to maintain a bearish stance on the corn, soybean and wheat markets; some long-term chartists believe that the bean market will move as low as $12.00/bu over the long term.  Many producers are beginning to grow concerned as new crop 2013 corn and soybean contracts move lower.  Nov ’13 soybeans are now trading below $12.80 while Dec ’13 corn has been able to hold $6.00 for the time being.  Producers around the world have huge economic incentive to grow enormous amounts of corn, soybeans and wheat during the next 12 months.          

 

Standard Grain provides futures/options brokerage to farmers, feedlot operators, elevators, processors and private traders.  Call us today at (312) 462-4438 or visit www.standardgrain.com 

Monday Morning Grain Update...

Nov 12, 2012

 Grain markets are mixed this morning.  Margin call selling in the soybean market is out in full force after Friday’s poor report-day close.  The USDA raised their projection for 12/13 soybean carryout by only 10mil/bu on Friday, a number that the trade obviously viewed as being hugely bearish.  The most watched number in regards to the beans would have been the 1.5bpa yield increase, resulting in a production estimate that was 111mil/bu higher than the October estimate.  Although demand was raised by 100mil/bu, it seems that many traders are looking for some sort of switching or cancellations of export sales down the road.  We saw some small instances of this on Thursday’s Export Sales report.  This notion will hinge squarely on South American production and the availability of their crop to Chinese importers.  Nevertheless, the soybean market is now trading well below every major moving average and is nearly $3.50/bu removed from contract highs.  November ’13 soybeans traded below the $13.00 mark overnight, but have since recovered.  Inversions in the soybean spreads are quickly disappearing. The Jan-July spread is trading at a 38 cent inverse this morning after moving over $2.20 during August. The USDA did very little to update the corn balance sheet.  The estimate for corn yield was raised by 0.3bpa while usage was raised only slightly.  The result was a 28mil/bu increase in projected carryout.  The wheat numbers were outright bearish, with 12/13 carryout now projected at 704mil/bu vs. 654 in October. 

      The CFTC released their Commitment of Traders of Friday.  Managed money sold about 1k corn, leaving their long position near 235k.  The same group was net sellers of about 10k contract of soybean, leaving their long position near 165k.  Wheat traders were about flat, long 48k.  Continued liquidation in the soybean market has been the theme as of late.  The perception of a "big" crop in South America paired with far better than expected yields domestically have put major pressure on the soybean market, which has essentially trended lower since the first week in September.

      Outside markets are mixed this morning.  Crude oil is marginally lower while equities and metals are marginally higher.  The US dollar has stabilized, for the most part, since last Tuesday’s election ended.  Upbeat economic data out of China may be the cause for some early enthusiasm in the US equities this morning.  According the EIA, the US will overtake Saudi Arabia in oil ouput by 2020 in a major shift that would alter both the economy but also world politics.  The statement, which was made in the EIA’s World Energy Outlook, also mentioned that the US would be a net exporter of crude oil by the year 2030.

      Today is a day of margin call selling in the soybeans.  The corn market is holding up extraordinarily well given the pressure.  The wheat market, despite a barrage of bullish fundamental news including the poorest US crop condition on record, has been unable to hold a rally for several months. We look for the downward, range-bound trade to continue in wheat.  Look for an extremely volatile trade in soybean moving forward.  The market’s action will hinge almost entirely on South America.          

Standard Grain provides futures/options brokerage to agricultural operations of all types!  Call us today at (312) 462-4438 or email info@standardgrain.com !

Big Soybean Sales Expected Again...

Nov 08, 2012

       The grain markets are marginally higher this morning after a mixed post-election trade yesterday.  Outside markets have been weak since the Obama victory.  The stock market plunged yesterday along with crude oil prices while bonds shot higher.  We do not believe that the election result will have any major impact on our ag markets over the near term.  The longer term implications of the result may include more quantitative easing, which would ultimately lead to a lower US dollar and strong commodity prices.  Still, we believe that currency action and macro events pale in comparison to the lasting effects of this year’s drought, which will be felt for months to come.  Corn, soybeans and wheat continue trade within their respective ranges.  Wheat futures have been the strongest as of late.  The market is threatening to breakout above major trendline resistance.  The winter wheat crop is off the poorest start on record according to Monday’s Crop Progress report, while exportable supplies in the Black Sea region remain tight. 

      The USDA will release their Export Sales report this morning at 7:30am CST, Pre-report estimates:

 

·         Corn          100,000 – 300,000mt

·         Soybeans      400,000 – 700,000mt

·         Wheat         200,000 – 400,000mt

As soybean export sales continue to run rampant, many question what type of action the USDA may take on Friday’s report.  Most traders look for a slight increase in the soybean yield estimate, but also look for increase demand on the other side of the balance sheet.  Many look for a reduction in the projections for corn exports while looking for a slight decrease in overall corn production.  Harvested acreage will likely not be changed until January according to the USDA.  Analysts look for wheat carryout to grow by about 12mil/bu on tomorrow’s report; however some now believe that a bullish surprise could be in order due to increased feed usage and a possible increase in exports. 

We look for a choppy trade into tomorrow’s report.  Spec traders may want to take a shot at owning soybeans against the October lows in the $14.80 - $14.90 area on a post-report break, using tight stop orders.  We’re ultimately of the opinion that the markets may be range-bound for the next several weeks, barring any production disaster in Brazil and Argentina.  The status and perception of grain production in South America will be the biggest driver of these markets for the next several months.  The world desperately needs a "good" soybean crop from these areas. 

 

Need help with your marketing or trading?  Call Standard Grain today at (312) 462-4438!   

Friday Morning Grain Market Update...

Nov 02, 2012

 The grain markets are mostly lower this morning.  Nearby corn and soybean contracts tested last week’s highs yesterday, but were unable to penetrate, selling off later in the day.  After a brief rally on Wednesday, both corn and soybean spreads are under pressure again today as index fund traders roll long positions into 2013 contracts.  Groups such Rogers, Goldman Sachs and Deutsche Bank all participate in this roll.  Harvest is nearing completion in most areas of the country, although producers in the Eastern Corn Belt continue to experience delays due to rains and heavy winds associated with the hurricane this week.

      FC Stone released crop production estimates yesterday.  The ’12 US corn crop was pegged at 10.88bil/bu using a 124.0bpa yield vs. 10.82bil/bu previously.  The ’12 US soybean crop was pegged at 2.959bil/bu using a 39.1bpa yield, up from 2.849bil/bu previous.  The more heavily followed Informa will release their estimates this morning around 10:30am CST.

      EIA ethanol production was up 24,000bpd on the week at 825,000bpd.  Stocks were up .4mil at 19.2mil/bar.  The USDA will release a delayed Export Sales report this morning, Pre-Report Estimates:

·         Corn        100,000 – 400,000mt

·         Soybeans    500,000 – 700,000mt

·         Wheat       300,000 – 550,000mt

Argentina corn planting is 40% complete vs. 56% last year; soybean planting is 3.6% complete vs. 12% last year.  Brazil soybeans are 42% planted vs. 54% last year.  Most areas in Argentina have received excessive rains since October 1st while most of Brazil has been dry.  Most would agree that the direction of the soybean trade during the next several months will have more to do with the perception of the Brazilian crop than anything else. 

After yesterday’s failure against stiff resistance, it will be interesting to see if the markets are able to hold together today.  Most chart readers are still looking at a largely negative technical setup moving.  The USDA will release their November Crop Production report one week from today at 7:30am CST.    

www.standardgrain.com | info@standardgrain.com | (312) 462-4438

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