Sep 23, 2014
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March 2014 Archive for 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.

 

Drought Intensifies in Plains, Cutting Wheat Yield Potential

Mar 28, 2014

 Wheat gave up a large share of Thursday’s 13 cent gain in the overnight trade, slipping 9 cents back to the $7 area. Corn and beans were lower as well with modest 2 cent gains.

Markets continue to wait for Monday’s round of USDA reports. The Planting Intentions Report will be the first formal survey of farmers for the 2014 crop and is expected to show lower corn and higher bean acres for the coming year. Analysts look for corn plantings to fall in 2014 to 92.7 million acres, off from the 2013 plantings of 95.4 million. The range of estimates, however, is quite wide going from a low of 90.5 to a high of 94.5 million. For beans, traders expect plantings to come in at 81.1 million versus 76.5 in 2013. Again, a wide discrepancy exists among analysts with the range of estimates going from 78.5 million to 83.6 million. In wheat, analysts expect all wheat acres to be at 56.3 million, on par with last year’s plantings of 56.2.

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In wheat, yesterday’s latest drought monitor showed an expanding drought situation in the Plains especially in Oklahoma. Private weather firm Planalytic’s also released their first wheat estimate of the season showing winter wheat yields at 45.7 bushels per acre as compared to 47.4 bushels per acre.

On Thursday, Argentina’s government projected the soybean crop at 54 MMT, on par with USDA’s latest forecast, but pegged the corn crop at 29.8 MMT, quite a bit higher than the USDA projection of 24 MMT. FOB Gulf soybean basis offers fell 2 cents late Thursday on softer export interest. Traders continue to assess rumors of Chinese cancellations, with the latest suggesting some Chinese importers are having problems obtaining letters of credit from Chinese banks. Even so, nothing has shown up yet that suggests cancellations will make a dent in the 100 MB overage of export sales relative to USDA’s annual forecast of 1,530 MB. 

Corn Exports Crush Expectations

Mar 27, 2014

 Grain markets were mixed overnight with beans higher by 8 cents, wheat lower by 3 cents and corn unchanged in the night trade.

Wheat prices have been selling off of late on what traders say is a better chance of rain in the Plains. However, the rain is mostly limited and of little size. In Amarillo, TX 0.04 of an inch fell yesterday. Areas of Oklahoma and Texas have slim chances of rain in the next few days. Egypt’s GASC is rumored to be tendering for wheat early next week especially if the USDA reports on Monday are bearish. Overnight, Egypt’s minister announced the country will cut wheat imports by 1 to 1.5 MMT in the next fiscal year by reforming a subsidized bread policy it sees as inefficient.

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In corn, USDA’s attache in Brazil pegged the corn crop there at 72 MMT, higher than the official USDA forecast of 70 MMT. Weekly corn export sales for old-crop were a well above expectations at 1,408,300 MT, with traders only expecting 525,000 to 725,000. Outstanding sales, which is the amount of grain committed to but not shipped, is a record high 18 MMT. Going back to 1990 when USDA started collecting the data, the previous high was 16 MMT in 1996.

For beans, net sales of old-crop delivery were negligible this week with only 11,900 MT. Traders had been expecting 100,000 to 250,000 MT. But, even so, the total commitments are still well above USDA’s annual forecast for the year.

WEEKLY EXPORT SALES (in thousand metric tons)

 

OC Actual

OC Expected

NC Actual

NC Expected

Corn

1,408

525-725

28.4

0-200

Soybeans

11.9

100-250

534.9

300-500

Wheat

400.5

325-475

327.5

50-250

 

   

 

South Korea Buys US Corn Overnight

Mar 26, 2014

 Grains were lower overnight with modest losses across the board. Soybeans led the complex to the downside giving up 5 cents a bushel, while corn and wheat slipped 1 cent in quiet trade.

Participants got their first look at pre-report expectations for the March 31st planting and stocks reports. Reuters surveyed key analysts and found on average analysts look for corn plantings to fall in 2014 to 92.7 million acres, off from the 2013 plantings of 95.4 million. The range of estimates, however, is quite wide going from a low of 90.5 to a high of 94.5 million. For beans, traders expect plantings to come in at 81.1 million versus 76.5 in 2013. Again, a wide discrepancy exists among analysts with the range of estimates going from 78.5 million to 83.6 million. In wheat, analysts expect all wheat acres to be at 56.3 million, on par with last year’s plantings of 56.2.

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In export news, Argentina’s Rosario port returned to normal shipments yesterday following dredging activities that halted movement. Overnight, South Korea's largest animal feed maker Nonghyup Feed purchased 189,000 MT of U.S. and South American origin corn in a tender which had sought up to 210,000 MT for July/August arrival.

Dry conditions continue to be an ongoing issue in the Southern Plains. Moderate rains are expected today over arts of Kansas and Oklahoma, but beyond that the next expected rain event is 10 days out. Although it is still early in the crop development phase, there are some spots along the southeast edge of the Plains already jointing. If conditions from mid-April onward continue to show drought then this could start to hurt yields. 

El Nino Looking More Likely This Summer

Mar 25, 2014

 Grains were weaker overnight with wheat giving up 5 cents and corn down 3 cents. Soybeans had slim fractional losses in the night trade.

In beans, exports continue to be unusually brisk giving the market a reason to trade above $14 near term. Monday’s export inspections showed 732,132 MT for the week, bringing the total for the year to 39.6 MMT with USDA projecting 41.6 MMT for the entire marketing year. In Argentina, port problems continue to plague bean shippers there. About 80 ships were halted on Monday at Rosario as dredging activities were conducted to try and deepen the waterway. Three grain ships have run aground there prompting the Coast Guard to order dredging and halt ship movement.

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For wheat, crop conditions declined again this week in the Southern Plains. In Kansas, 33% of the wheat was rated good/excellent, down from 34% a week earlier. Oklahoma was at 17% good/excellent, down from 18% the previous week. The amount rated poor/very poor rose to 42% from 37% a week earlier. For Texas, 11% of the wheat was rated good/excellent, down from 13% a week earlier. USDA said 55% of the Texas wheat crop was rated poor/very poor, up from 52% last week. Climate models show an increased chance of an El Nino weather event later this year, the Australian Bureau of Meteorology said on Tuesday. The Pacific Ocean is "very likely to warm in the coming months", with models surveyed by the BOM calling for sea surface temperatures to reach El Nino threshold during the southern hemisphere winter. El Nino is associated with droughts in Southeast Asia and Australia and floods in South America.

Ukraine has kept up a high level of grain exports in March, shipping 2.4 MMT abroad so far this month, the agriculture ministry said, even while it has been embroiled in a conflict with Russia. In Russia, Sovecon sees 2014 grain crop at 88 MMT, up from its previous forecast of 86 MMT, but lowers its export forecast to 22 MMT from a previous figure of 24.1 MMT. Taiwan's MFIG corn purchasing group has rejected all offers and made no purchase in a tender to buy 60,000 MT of corn which closed on Tuesday. This marks the 2nd tender in a row that Taiwan has rejected on the basis of prices being too high. Overnight, China's quality watchdog at the northern city of Tianjin turned away 21,800 MT of U.S. corn after detecting an unapproved genetically modified corn strain (GMO), the official Xinhua news agency reported late on Monday.

 

Soybeans Climb Back Overnight

Mar 24, 2014

 Grains started Sunday night in the red with beans down 10 and wheat down 7, but gained ground throughout the night. Going into the close of night trade, nearby May beans are up 10 cents, wheat is up 7 and corn is up 6.

Exporters at the Gulf are seeing more competition from South America and there have been rumors over the past week of Brazilian soybeans moving into the U.S. Gulf or Wilmington, DE. Estimates have ranged from 2-3 early in the week, to as high as 12 cargoes by the end of the week.  Gulf basis levels slumped on Friday even with the slide in futures prices.

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In wheat, conditions are still dry through the Southern Plains. The best chance for moisture in the next 10 days seems to be Wednesday into Thursday, but after that weather looks to be dry out to the first week of April. In Canada, leaders of the union representing 3,000 conductors, yard workers, and traffic coordinators at Canadian National Railway Co narrowly rejected a second tentative contract deal with Canada's biggest railway. The Teamsters Canada Rail Conference said in a statement that it still has a valid strike mandate and added that its leaders will meet with counsel to decide on its next move. Canada continues to have sever logistics problems moving grain to export markets this season.

In the US rail costs have been skyrocketing, driving down basis levels especially in the Northern Plains. Northern shuttle trains are said to have traded as high as $7,500 a car this week, which is the equivalent of paying $2 a bushel to ship your wheat.  Overnight, Taiwan's maize industry procurement association MFIG has issued a tender to purchase up to 60,000 MT of corn to be sourced from the United States, Brazil or Argentina. The tender sought shipment between May 26 to June 14, and the deadline for offers is Tuesday, Mar 25. In its previous tender for 60,000 MT of corn on Mar. 19, MFIG rejected all offers and made no purchase as prices were regarded as too high.

Wheat Basis Tumbles on Futures Rally

Mar 20, 2014

 Grains were mostly lower overnight with corn and wheat retreating 3 cents and 6 cents respectively. Front month May soybeans moved up 3 cents in relatively quiet trade.

In beans, upside pressure on the market continues as old-crop stocks continue to be depleted under strong demand from exports and domestic crushing. China was an early season buyer of beans from the US and has not had any significant cancellations of their outstanding purchases. As of March 6th, US soybean export commitments have reached 44.3 MMT versus USDA’s annual export forecast of 41.6 MMT.   Overnight there was talk of a leading Chinese soy buyer trying to resell cargoes set to be exported from South America in April and May as bird flu outbreaks reduce demand, hoping that the United States will take the shipments.  The company is in talks to resell five or six cargoes from Brazil, equivalent to about 360,000 MT of soybeans.

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On Wednesday, ag marketing firm Doane released its planting survey based on responses from more than 1,100 growers in 44 states. They project US corn plantings of 90.9 million acres, off from the 2013 plantings number of 95.4 million. For soybeans, they see 83.6 million acres being planted in 2014 versus 76.5 million in 2013. These estimates are quite a bit different than USDA’s Ag Outlook Forum projections in February which suggested 92 million corn acres and 79.5 million soybean acres in 2014. The first USDA survey on plantings will be released on March 31st. The Taiwan Sugar Corp. has rejected all offers and made no purchase in a tender to buy 20,000 MT of U.S.-origin corn and 15,000 MT of U.S.-origin soybeans.

In wheat, prices shot higher on Wednesday as dry conditions in the US Plains continue to plague growing conditions there. Worldwide, dry weather is becoming the norm in Australia and China which could threaten wheat supplies there. The next chance of rain in the hard red winter wheat areas of the southern Plains is late next week which means the next round of crop ratings on Monday should show further declines from Texas to Kansas. In the cash market, farmers were active sellers of wheat as bids approached the $7 mark. Basis levels were sharply lower for most of the country on Wednesday with losses of 10 cents or more fairly common.

Soybeans Extend Winning Streak

Mar 19, 2014

Soybeans continued to move higher overnight with front-month May futures gaining 16 cents a bushel. Wheat and corn were down slightly with 3 and 2 cent losses.

U.S. soybeans rose for a third consecutive session as strong demand for domestic crushing and exports keeps the old-crop situation tight. Processors in Nebraska and Missouri were up about a nickel on Tuesday as farmer sales have dwindled. CIF soybean basis at the Gulf was higher on Tuesday as exporters need nearby supplies. Bids now through mid-April were +85K, up 5-11 cents. LH April is up 6 cents at +80K.

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In wheat, Egypt’s GASC bought 175,000 MT of wheat from combined sources of Russia, US and Romania. In the Ukraine, tensions are rising on the Crimea Peninsula as a Ukrainian servicemen was killed in a military conflict. Russia is now claiming control of the region with world opposition running high on the takeover. So far grain trade has not been disrupted but the geopolitical risks will likely continue to keep corn and wheat prices supported on the potential threat to a primary export market.

For corn, Taiwan's MFIG corn purchasing group has rejected all offers and made no purchase in a tender to buy 60,000 MT  of corn which closed on Tuesday. Prices were regarded as too high. Chinese feed mills have recently booked two more cargoes of corn, equivalent to about 110,000 MT, from Ukraine under a loan-for-grains deal signed in 2012, a Chinese buyer said on Wednesday. The fresh deal were in additional to 163,550 MT which have already arrived in China since late 2013, according to China National Complete Engineering Corp (CCEC), which signed the deal with Ukraine firms in 2012.

US Wheat Conditions Slide

Mar 18, 2014

 Grains were higher overnight with soybeans leading the complex higher on a 12-cent advance. Corn and wheat followed with 3 cent gains in the night trade.

On Monday, NOPA monthly crush figures for February came in stronger than expected with total crush hitting 141.6 MB versus trade expectations of 140.9 MB.  Soyoil stocks rose along seasonal lines with inventories climbing to 1.893 billion pounds from the January inventory of 1.789 billion pounds. In Argentina, a soybean cargo ship that ran aground nine days ago in Rosario has slowed exports longer than expected while port workers threaten to go on strike later this month if hefty wage demands are not met. The work of lightening the cargo to free the ship is going slowly and will continue at least until Wednesday, Guillermo Wade, manager of Argentina's port chamber, said.

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In corn, a South Korea feed group bought a 193,000 MT overnight believed to be sourced from the US and South America. In the US, farmer movement of grain has begun to slow and some basis levels are inching higher at key buyers around the country.

For wheat, USDA reported declining winter wheat conditions in the Southern Plains. Kansas wheat ratings declined from 37% good to excellent last week to 34% good to excellent this week. Windy conditions and limited precipitation across much of the state drew down topsoil moisture supplies, with much of the western half of the Kansas continuing in severe drought. Available soil moisture continued to be a concern going into spring. In Oklahoma wheat ratings declined with 18% rated good to excellent, down from 22% a week ago. And in Texas, ratings plummeted to 13% good to excellent, down from 28% a week earlier. Egypt’s GASC issued another round of wheat tenders on Monday, but US involvement is unlikely given logistics issues.

 

  

Is Soybean Market in for Rocky Ride?

Mar 17, 2014

 Grains were off sharply in the night session with wheat leading the complex to the downside on a 14-cent drop. Beans and corn were lower by 12 and 8 cents, respectively, in the overnight trade.

Wheat started the week on a positive front with front-month May futures hitting $6.94, but quickly gave up the gains and turned negative by the end of night trade. Friday’s CFTC Commitment of Traders report showed non-commercial traders trimmed their net short in CBOT wheat to 25,402 contracts as of Tuesday, a cut of about 14,000, but far less than many had been expecting.

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Over the weekend Crimea strongly voted to join Russia with a 96% approval rating at the polls. While the geopolitical risk continues, trade with Ukraine continues to be largely unaffected. Last week Ukraine had its largest weekly corn exports of the season with nearly 700,000 MT shipped. Despite the situation in Ukraine and Russia, the export activity remains strong in the Black Sea area. However, the activity remains disappointing for the wheat as only 10,000 MT were shipped during the last 15 days. Even if wheat availabilities remain real in Ukraine, international buyers give the priority to Russian origins. Nevertheless, wheat stocks inside harbors are abundant at 300,000 MT.

Overnight, China's top agriculture bank urged Beijing to speed up the sale of its state grain and cotton reserves, now at record high levels, to help ease the bank's mounting debts. There has already been pressure on beans in the past week from China canceling soybean deals with Brazil, so if the world’s #1 buyer continues to balk at purchases, the soybean market could be in for a rough ride lower.  

China Bean Cancelations Could Escelate

Mar 13, 2014

 Grain prices found modest support overnight with wheat continuing to lead the complex to the upside. In the night trade, May wheat posted a 6 cent advance while corn was up 3 cents. Soybeans were modestly higher following Wednesday’s sharp selloff, gaining 1 cent a bushel in overnight trading.

In wheat, prices continue to be supported by unrest in Ukraine as well as logistics problems in Canada. International grain traders are looking at French wheat as a possible replacement for Ukrainian supplies should shipments from one of the world's top exporters get held up by political turmoil over Russia's moves in Crimea. The Western Canadian Elevator Association reports that there is currently a 55,000 rail car shortfall, with half of it destined to the U.S. and domestic markets. The USDA attache says the Canadian milling industry in Eastern Canada is reporting delays of three to four weeks which have resulted in some mill locations in Canada to shut down. Exports out of the Vancouver port are also constrained. There are reportedly a record 50 ships waiting for grain on the West coast. Lost sales, contract penalties and demurrage costs continue to escalate according to the attache.

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On Wednesday, Brazil's government crop supply agency slashed its forecast for the 2013/14 soybean harvest by 5% to 85.44 MMT, citing an adverse climate late in the growing period. The agency, Conab, also reduced its estimate for the season's corn crop to 75.18 MMT from 75.47 MMT. However, beans have been under pressure from talk of China canceling bean cargos as a result of weakening crush margins.  Chinese soybean importers have cancelled up to 600,000 MT of soybean cargoes they booked from Brazil and Argentina for shipments between March and May, two trade sources said. Buyers are negotiating with suppliers to delay or cancel more shipments amid poor demand and negative crush margins. They have canceled 10 panamax cargoes and want to cancel 30 more cargoes according to traders.

In corn, weekly ethanol crush was off 25,000 BPD to the lowest production levels since January 10th. A strengthening DDG market helped to support the ethanol crush margin, now sitting at $3.09 per bushel in Eastern Iowa. Considering the seasonality of ethanol production and a crush margin once again above $3.00 per bushel, we would expect weekly production figures to improve moving into April.

Bean Prices Tumble below $14 Overnight

Mar 12, 2014

 Nearby soybean prices tumbled below $14 for the first time since the end of February, as front-month May futures gave up 26 cents in overnight trading.  Corn was also lower giving up 1 cent a bushel, while wheat was firmer adding 4 cents to Tuesday’s close.

In soybeans, rumors of China canceling South American bean purchases has put a bearish slant back on the bean market. Weakening crush margins for Chinese processors is said to be reducing the demand for soybeans. In Brazil, bean basis has slumped 25-30 cents in three days. On the production front, the Rosario Grain Exchange estimated the Argentine crop at 54.7 MMT, down slightly from their previous estimate of 55.0 MMT but still higher than USDA’s projection of 54.0 MMT. Goldman Sachs lowered its forecast of US soybean plantings in 2014 to 81 million acres vs previous forecasts of 83 million acres, but still well above actual plantings in 2013 of 76.5 million acres.

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For corn, the Rosario Grain Exchange increased their forecast of the Argentine corn crop to 22.7 MMT but that is lower than the USDA forecast of 24.0 MMT. Farmer selling in the U.S. is said to be slowing after two weeks of active deals on higher prices. Gulf basis levels continue to hold up after falling in the first part of March. In international deals, a South Korea feed buyer rejected all tenders to buy 60,000 MT of corn.

In wheat, dry weather in the Plains continues to support the market as does the unrest in Ukraine. USDA's weekly state crop reports showed wheat condition ratings improved in Kansas and Texas but crop conditions declined in Oklahoma. The best chance for showers in the Plains wheat will be in OK this weekend, while the rest of the belt lacks significant rains in the next 2 weeks. This will keep soil moisture shortages a concern in over half of the hard red winter wheat belt. , Ukraine's agriculture minister said on Tuesday that most of the spring grain area in Crimea is unlikely to be sown this year due to a lack of fuel caused by turmoil in the region. Grain output in Ukraine's Crimea region totaled 765,000 MT in 2013, or 1.2% of Ukraine's overall harvest. The government had said the harvest could reach 1.2 million MT of grain in 2014. 

Corn Hits $5

Mar 07, 2014

 Grains were sharply higher overnight as strong export demand and weather problems continue to boost prices. Soybeans and wheat gained 20 and 16 cents, respectively while corn was up 8 cents a bushel in the night session.

May corn has climbed this morning to a six-month high of just shy of $5 and is up 8.5% since the end of last week. The conflict between Russia and Ukraine over the Crimean peninsula is continuing to give corn a lift. According to the Ukrainian minister of agriculture, foreign trading companies are not concluding any new grain export contracts at present due to the tensions. The USDA currently estimates that Ukraine will export 18.5 million tons of corn in total in the ongoing 2013/14 crop year. As such, Ukraine is the third-largest corn supplier worldwide after the US and Brazil. According to the US Grains Council, which represents the interests of US grain exporters, Ukraine has exported 15 million tons of corn to date, meaning that a further 3.5 million tons of corn would be available for export. The problems in Ukraine are likely to increase demand for US corn.

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For soybeans, old-crop supplies in the US look to be tightening as export sales continue to be unexpectedly strong for this time of year. Thursday’s USDA report showed 772,000 MT of sales pushing total commitments for the marketing year to 44.1 MMT versus USDA’s annual forecast of 41.1 MMT. In Brazil, logistics problems and a slow harvest are keeping their supplies off the world market for the time being. On Thursday, the Buenos Aires Grain Exchange estimated the Argentina 2013/14 soybean crop at 54.5 MMT, up from the previous estimate of 53.0 MMT.

In wheat, Thursday’s export report showed reasonable business for old-crop. Net sales of 556,100 MT for delivery during the 2013/2014 marketing year were up 52 percent from the previous week and 10 percent from the prior 4-week average. 

Huge Corn Export Sales

Mar 06, 2014

Grains were mixed overnight with soybeans adding 10 cents a bushel to the front-month May contract. Corn and wheat came under pressure with 2 and 4 cent declines, respectively.

Nearby corn prices hit a 6-month high yesterday on continued unrest in Ukraine and the potential for improved US export deals. China is beginning the process to approve Syngenta’s MIR162 genetically modified corn after the firm submitted additional material to authorities in November. Vice Agriculture Minister Niu Dun said "The approval process would go through very quickly," the Minster went on to say it could be approved in the first half of 2014, depending on the agriculture ministry's biosafety committee. In Ukraine, farmers are holding grain to hedge against a devaluing currency. In addition, trading houses are becoming reluctant to enter into new contracts and as a result, the instability could create opportunities for additional U.S. exports to North Africa, the Middle East, and China. In ethanol, weekly US production was off 11,000 barrels per week to the lowest levels since early January. Production levels are still seasonally very strong, and we tend to see weekly production increase into the summer months. Even though production was lower on the week, crush margins were actually up 30 cents this week to $2.81 per bushel. These are the highest levels since Chinese cancellations of US DDG shipments slashed domestic crush margins in early January. Old-crop corn export sales released this morning were huge at 1.5 MMT for the week, nearly doubling the high end of trade projections.

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For soybeans, prices continue to consolidate above $14 on the nearby May contract. The recent move has seen an intra-day high of $14.45 but prices are building around the $14.30 level this morning. On Wednesday, USDA announced China had cancelled 245,000 MT of US bean purchases. However, weekly sales were still strong for old-crop and beat expectations

In wheat, prices have come down three days in a row after a strong rally helped push large fund traders to cover their short positions. Dry weather in the Plains and Australia give some impetus for the price increase, as does the unrest in Ukraine. However, Ukraine is mostly done for the season on wheat exports with much of their activity going towards corn.

WEEKLY EXPORT SALES (in thousand metric tons)

 

Actual OC

Expected OC

Actual NC

Expected NC

Corn

1,518

600-850

164.5

0-200

Soybeans

772.7

450-750

256.7

300-450

Wheat

556.1

250-450

44.4

100-200

 

Wheat Tenders Active Overnight

Mar 05, 2014

Grains were relatively subdued overnight with prices off slightly from the strong close on Tuesday.

On Tuesday, beans were up thanks to a lower South American production forecast by private firm Informa. They cut the Argentina crop estimate to 54 MMT, off from 57 MMT in their previous forecast, and trimmed the Brazil crop to 88.8 MMT from 88.9 MMT previously. Bean oil continues to be leading the complex higher as shortfall in veg oil supplies keep prices on the offensive.

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For corn, Informa pegged Brazil’s 2013 corn production at 65.45 MMT, 1.1 million less than their previous forecast. Corn continues to find strength from export business and ongoing concerns about tensions in Ukraine. Although an imminent military conflict seems unlikely, the market continues to be edge with a great deal of uncertainty about how this will play out. For now, grain flows continue as normal from the Black Sea region. In the US, basis levels continue to be pressured with each move higher in the futures market. On Tuesday, spot bids as well as new-crop bids saw basis levels weaken as farmers continue to do some selling on the recent rally. Rumors are supporting corn that the Environmental Protection Agency is poised to release revised estimates for the US ethanol mandate, still indicating a cut in the level which needs to be blended into gasoline, but not to the originally proposed range of 12.7-13.2bn gallons.

In wheat, the drought in the US Plains has given prices more strength. On Monday, state crop condition reports from Texas to Nebraska showed declining winter wheat conditions as compared to the previous month. Overnight, there was a bit of tender activity with Lebanon tendering for 25,000 MT of optional origin milling wheat and Tunisia's state grains agency issued a tender to buy 92,000 MT of optional-origin milling wheat. On Tuesday, Algeria's state grains agency OAIC bought between 300,000 and 350,000 MT of milling wheat in a tender but did not release origin details.      

Tension Ease, Grains Pullback Overnight

Mar 04, 2014

Corn and wheat came under selling pressure overnight after Monday’s meteoric rise fueled by tensions in Ukraine. Corn and wheat gave back 4 and 7 cents a bushel, respectively while beans posted a 3-cent advance in the night session.

Russian President Putin said on Tuesday that there are no plans to make Ukraine’s Crimean peninsula part of Russia. He said ousted Ukrainian leader Viktor Yanukovych is the legitimate leader of the nation, and the country's interim government is the result of an "anti-constitutional coup." In the grains, ADM and Bunge said operations in Ukraine were business as usual with processing and export movement continuing without issue. Ukraine’s newly appointed ag minister said on Monday that the government will do all it can to assure that there is no reduction in spring sowing area there. However, he did note that some traders were reluctant to enter into contracts for grain.

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In corn, new export business was announced by USDA Monday morning with Japan buying new-crop corn while South Korea bought old-crop corn. Weekly export inspections came in strong with 1,044,300 MT for the week versus trade expectations of 625,000 to 775,000 MT. On Monday, the cash market came under pressure on basis with heavy farmer selling seen for old- and new-crop delivery.

For wheat, Australia’s ag department predicts a step drop in Australia wheat production next year as lingering drought leaves soils parched. The agency pegged 2014 wheat production at 24.8 MMT of from last year’s crop of 27.0 MMT. In the US, state ag statistics offices from Nebraska to Texas saw declining winter wheat crop conditions in their states. In Oklahoma, monthly crop conditions fell from 36% good to excellent last month to 31% good to excellent this month. Weekly US export inspections were strong at 609,867 MT versus trade expectations of 300,000 to 425,000 MT.

In soybeans, prices were under pressure on Monday in contrast to corn and wheat. Rains are expected to ease in Brazil’s key production area of Mato Grosso. Weekly export inspections of 984,181 MT were below trade expectations of 1,000,000 to 1,200,000 MT. Farmer sales were limited on Monday but basis levels continue to fall at many markets around the country. 

Wheat Skyrockets on Russia Military Moves

Mar 03, 2014

 Wheat and corn were up sharply in the overnight trade as tensions between Ukraine and Russia escalated over the weekend, sending waves of concern about war and the impact on grain trade flows. In the night trade, wheat was up 24 cents a bushel, corn was up 9 cents a bushel, and soybeans posted a 10-cent advance.

Over the weekend, news that Russia’s military had seized control of Ukraine’s Crimean peninsula was met with grave concern by world leaders. Ukraine's new leaders accused Russia of declaring war, while Russia warned that blood could be spilled amid growing instability. As a result, grain markets shot higher on Sunday’s open with Russian and Ukraine accounting for about 17% of world wheat trade, and Ukraine accounting for about 16% of all world exports of corn.

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So far, Ukraine has not seen any easing as far as export shipments, and the new government certainly needs the export shipments to continue to go out to generate hard currency. So there is a definite incentive to keep the business going out the door. According to traders there, wheat exports have been done for about a month now and they have switched over to corn. Corn is currently being shipped into the Chinese market and some of the Asian markets. Those are traditional customers that the U.S. could capture, if an export issue developed.

In soybeans, support continues to come from poor weather in Brazil which has been deluged with rains in key soybean areas. On Friday, Brazilian analyst Safras E Mercardo cut its soybean forecast to 86.1 MMT, down from its previous projection of 91.8 MMT.  China is expected to see falling soybean imports for February and March according to the ag ministry there. They expect February imports to be 5.05 MMT and March imports to be 3.49 MMT, both being off from the January imports of 5.9 MMT.  

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