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November 2012 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.

 

Wheat Ratings Worst on Record

Nov 20, 2012

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Grain prices held mostly steady Monday night and Tuesday morning with limited news to drive prices off their strong close from Monday’s session.

USDA reported a slightly lower than expected winter wheat crop condition on Monday afternoon. According to their weekly Crop Progress report, USDA pegs 34% in good to excellent condition, below analysts' expectations of 35% and last week’s estimate of 36%.  The ratings are a record low for November and should keep a bullish undertone to new crop futures prices. 

On the export front, traders still look for wheat export business to return to the U.S. with Ukraine and other Black Sea markets running out of wheat, and a recent run-up in the Euro making French wheat less favorable.  

In the corn market, prices remain mostly unchanged around the $7.40 benchmark. Monday’s export inspections for the week of 14 mb were at the upper end of trade expectations, but still a sharp distinct from previous years when totals of 50 mb or more were common.  For soybeans, export inspections of 63 mb were above trade guesstimates and continue to suggest higher exports than what USDA has factored in.

Grain markets should continue to be range bound in this holiday shortened week.  Corn and wheat continue to look for signs of any significant demand news, which has mostly been limited in recent months. This must be what demand destruction looks like! For soybeans, eyes continue to be focused on South America weather and any potential hint of business from China on soybeans. Until we get some surprises one way or the other, markets may continue to hold their ground. 

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Grains Higher in Overnight Session

Nov 19, 2012

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Grains improved Sunday night with soybeans leading the move higher. January soybean futures at one point eclipsed the psychologically important $14 mark.

On Sunday night, China announced that they will temporarily halt regular state soy sales from this week as they will begin to stockpile beans in an attempt to improve margins for soy plants and spur imports.

The suspension is to stop traders and crushers selling their purchases from regular state sales back to the government as Beijing starts buying soybeans from the market at higher prices, said the China National Grain and Oils Information Center.

Corn was also higher in the overnight session, posting 6 cent gains as Asian buyers are seeking more U.S. cargoes due to a delay in deliveries of more than 1.5 million metric tons from Brazil to East Asia, trade participants said.  Both Taiwan and Japan are starting to look sat U.S. purchases as attempts to get corn from Brazil have been delayed and cargoes were taking up to two months to be loaded at ports due to heavy congestion.

Wheat prices were also higher, but failed to keep up with corn and beans over night. Chicago wheat was showing 4 cent gains while Kansas City wheat was up 2 cents a bushel.  Traders continue to expect wheat export business to start to hit the U.S., as Black Sea region wheat is expected to dry up. However, recent business from millers in Middle East and North Africa have been going to India where wheat prices are cheapest and export volumes may increase if India’s government releases more from reserves.  

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Beans Get Bearish on China Cancellations

Nov 16, 2012

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Beans were down 20 cents in the overnight session following an announcement that China had cancelled 600,000 tonnes of export bookings from the United States. Poor crush margins in China are forcing their domestic crush industry to idle some production capacity, with reports suggesting some plants are running at 50% of their normal capacity.

Soybean futures are off 20 cents this morning, with the benchmark January 13 contracts trading around $13.80 printing their lowest level in over 4 months. Critical support sits around $13.70 which would test the long-term uptrend that has been intact for over a year.

Adding fuel to the fire, Argentina gave their first soybean area estimate of the 2012/13 season. The Agriculture Ministry said 19.4 million hectares will be sown in the weeks ahead versus 18.7 million hectares in 2011/12. However, this is below the 12% expected acreage increase that USDA has pegged in their latest WASDE report.

In the corn market, new was mostly quiet overnight but prices slipped 5 cents lower following beans. High corn prices are finally starting to show a reduction in key livestock numbers, with weekly broiler chick placements showing a 3% drop in placements.

Wheat markets were 3 to 4 lower in quiet trade. News out of the EU showed strong export business, with the EU announcing weekly export licenses of 696,000 tonnes of Soft Wheat bringing their total to the year of 6.5 MMT.

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