EHedger Afternoon Grain Commentary 8/14/12
Aug 14, 2012
It was a choppy, two sided market for corn and soybeans while wheat had double digit losses again. NOPA Crush came in at 137.38 million bushels in July which surpassed the average estimate by 7 million. Despite this favorable news soybeans remained heavy which may have been from the forecasted rains and a slight increase in the crop conditions. The ethanol mandate is still under the spotlight which is keeping corn relatively stable for now. The decline in the gulf basis as exports have slowed has also been a factor holding corn back. The wheat market had the largest setback today. Egypt reportedly bought 60,000 MTs of wheat from Russia and another 60,000 MTs from Ukraine both for September delivery. The discount to the US markets may have been cause for today’s wheat setbacks.
The USDA lowered the corn yield to 123.4 versus their July estimate of 146. For soybeans the yield was reduced to 36.1 down from the July estimate of 40.5. Corn harvested acres was also lowered to 87.361 giving us a total production estimate of 10.779 billion bushels. For soybeans, harvested acres were lowered to 74.635 giving us a total production estimate of 2.692 billion bushels. There were no major surprises in the wheat numbers as world carryover was in line with estimates at 177.17 million tons. US wheat production was also in-line with estimates. The thought now is that we turn to the European wheat crop as weather has troubled the Russian crop. The Russian wheat export numbers were lowered by 4 million tons while production was cut to 43 million tons from 49 million tons in the July report.
There were some interesting world numbers to discuss. Chinese corn production was raised to 200 million tons up 5 million tons from the July estimate as good rains have occurred over the last month through key growing areas of China. As a result of better than expected production the Chinese corn imports were lowered 3 million tons to 2 million tons. Both Argentine and Brazilian corn production was raised along with exports. All said, the world numbers certainly point to helping ease the tight balance sheet that is occurring in the USA.
The soybean world production numbers were raised by 3 million tons in Brazil causing exports to be increased by 2 ½ million tons. Chinese soybean imports were lowered 1 ½ million tons.
Where do we go from here? The early reaction from the market was to take corn to new all-time highs of $8.49 before settling back to trade lower just minutes after the report. It hasn't been a secret that the weather has hurt the corn and soybean crop. The last week and a half we have received timely rains throughout the corn-belt and this should be helping the soybean crop. It seems as though the market may have been estimating yields below current USDA projections. What will continue to drive this market? In the next couple of weeks more and more corn will begin to be harvested and we will start to dissect the actual yields from across the country. The market will be very sensitive to yield reports as we go forward. The midday forecast did not call for any major changes. Favorable rains are expected Wednesday/Thursday for the western belt and Thursday/Friday in the eastern belt. Next week another system is expected to come in Tuesday-Thursday.
This Thursday morning we can expect the weekly export sales at 7:30 am, Friday there will be a cattle-on-feed report. Please contact EHedger at 866-433-4371 if you would like to try our proprietary farm management software called AMMO. Thanks and have a great week!
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