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January 2013 Archive for Cash Grain Insights

RSS By: Kevin McNew,

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.


Beans Sharply Higher Overnight

Jan 30, 2013

 Soybean futures shot higher overnight breaking out of its narrow trading range of recent sessions. Nearby March futures eclipsed the $14.70 mark, adding 20 cents in the overnight session. Corn was pulled higher by 7 cents while wheat managed a 4-cent gain.


South American weather continues to underpin the soybean market with rains in Brazil delaying harvest, while dry weather forecasts in Argentina put the developing bean crop still at risk. Furthermore, the record-large Brazilian crop may find trouble getting to global users anytime soon. As many as 126 vessels were scheduled to load 6.2 million metric tons of soybeans and corn as of yesterday. That compares with 72 ships carrying 2.8 million tons a year earlier and 47 vessels with 1.5 million tons in 2011. The wait at Santos, the country’s biggest port, may be as many as 35 days, while the wait in Paranagua may be 15 days.

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In corn, news continued to point to cut backs in ethanol as a Texas plant halted production on Tuesday, while Abengoa, Poet and Valero have announced 6 plants idling in the past week. EIA will announce their weekly ethanol production number today, which is likely to show continued weakening in the weekly grind.

For wheat, the market has been inching higher in recent sessions but as of yet there has been little reaction to the poor wheat conditions in the Plains. Kansas showed only 20% of its wheat crop in good to excellent condition in January, while Oklahoma is a dismal 5%. Based on these conditions and the historical relationship between January conditions and yields, we would expect Oklahoma to have an 18 bushel yield vs last year of 36, while Kansas would be at 31 vs last year of 42. If realized, we think this makes it difficult to achieve normal US yields of 46 for wheat and would likely put new-crop 2013/14 ending stocks in the low 600 MB range, off from 716 MB currently forecasted by USDA for the 2012/13 crop year. 

Grains Looking for Direction

Jan 29, 2013

Trading was quiet overnight in the grain markets as prices continued to stay in a tight range.  Corn, soybeans and wheat were all up about a penny a bushel on limited news.

Reports from USDA’s state office in Oklahoma and Kansas on Monday show the depths of the poor wheat crop. Kansas showed only 20% of the crop in good to excellent condition, versus last year’s reading of 49%, while Oklahoma had a mere 5% of the crop in good condition (none in the excellent category). With Kansas and Oklahoma between them typically responsible for about 20% of US wheat production, the drought - which has a firm grip on the likes of Colorado and Nebraska too - has raised fears for the 2013 harvest, particularly of the hard red winter wheat prevalent in the worst-affected states. On the export front, weekly export inspections came in at 22 mb on par with last week’s number. India announced there are offering for export 125,000 MT of milling wheat for Feb/Mar delivery.

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For beans, export business has been relatively quiet of late. Monday’s export inspections for the previous week totaled 40 mb versus 48 mb last week. In Argentina, light showers are expected over the next few days but will provide little relief from the recent turn to a drier pattern while most of Brazil is enjoying at least satisfactory crop weather.

In the corn market, ethanol margins have shown signs of improving of late as corn prices have stalled while ethanol and distillers grain prices have been moving higher. Weekly export inspections were 22 mb this week versus 11 mb in the previous week’s report. 

Grains Give Back Early Gains Overnight

Jan 28, 2013

 Grains were higher at the start of the overnight session with beans leading on a 12-cent advance reaching the critical $14.50 area, but pulled back to the $14.45 range. Beans were up 4 cents, while corn posted a 2-cent change. Wheat was modestly lower.

Weather in Argentina continues to be a focus of the trade as concerns about excessive dryness has the potential to cut into record-large crops there.  With Argentine soybeans 77% planted by a December 20 date which marks the end of the ideal window, and only 74% of corn, one-fourth of Argentina crops are at risk of drought stress from shallow rooting.  And the crop may face significant deterioration if fears prove justified that a fresh La Nina is emerging, as some conditions, such as cooler Pacific water temperatures, indicate could be on the way. If La Nina materializes, not only does this bode poorly for Argentina’s dry streak continuing, but also drier-than-normal conditions are likely to persist in the US southern Plains.


For wheat, weather forecasts call for continued dryness in the southern Plains but some chances of rain in the upper Plains. Export tenders overnight were encouraging with Jordan and Bangladesh looking to import sizable wheat shipments from optional-origin sources.  Last week’s US wheat export numbers came in above expectations at a combined 647,500 MT for old- and new-crop. If export demand continues to be strong in the coming weeks and no sizable moisture events in the Plains, wheat prices should show more upside potential.

In corn, lackluster ethanol demand and sluggish exports continue to keep prices drifting lower. Furthermore, the prospect of a jump in 2013 corn acreage keeps new-crop Dec futures on the defensive as well. However, the potential of sharply lower prices from here seems remote with exceptionally tight old-crop stocks and the threat of continued drought problems into 2013. As such, corn may be a follower to what transpires in the wheat market in coming weeks.   

Cash Grain Continues to Flat-Line

Jan 27, 2013

 Corn and soybean basis saw little movement again this week as tight crop inventories mixed with struggling demand keeps basis levels treading water. For the week, US average corn and soybean basis levels averaged only a 0.3 cent a bushel increase.

For corn, Thursday’s EIA ethanol number showed the slump in production continued as weekly ethanol production was only 792,000 barrels per day. Grain Hedge still looks for lower corn used for ethanol than USDA’s projection of 4.5 billion bushels for the year.  Tight crush margins continue to force some plants to curb production, and this week we saw key plants in Eastern Nebraska lower their basis by a nickel or more. On the export front, Friday’s weekly tally came in at 138,500 MT versus expectations that ranged from 200,000 to 450,000 MT.  Basis levels at the Gulf slipped 4 cents a bushel for the week while river terminals were unchanged on average thanks to lower barge rates.

spotcorn2013 01 25


In beans, export business continues to be white hot, although much of the business is being directed at new-crop 2013/14 sales. As such, basis levels continue to be relatively flat. Weekly export business totaled 978,000 MT, above the high end of expectations at 950,000 MT although 595,000 MT was for new-crop delivery. At the Gulf, basis levels firmed a modest 2 cents a bushel.  Crushing plants were unchanged on average across the sector.

spotsoy2013 01 25

Beans Continue to Retreat Overnight

Jan 24, 2013

 Soybean futures lost more ground overnight weighed by profit-taking and signs of potential rains in Argentina. Front-month March futures sank to $14.27, off 13 cents over night while corn and wheat were off 4 cents and 1-cent respectively.

March futures failed to hold above its 200-day moving average near $14.47 a bushel on Wednesday which helped kick in selling pressure. Weather models are beginning to point to better chances of rain in coming days for dry parts of Argentina. In Brazil, light rains are expected over the western region in coming days as harvesting picks up pace, while the southern producing states remain mostly dry.


In corn, the market will closely watch EIA’s weekly ethanol number which is to be released this morning. The EIA's report last week showed U.S. ethanol production had slowed to a 2-1/2 year low at 784,000 barrels per day.

For wheat, overnight the Taiwan Flour Millers' Association issued a tender to purchase 78,670 tons of milling wheat to be sourced from the United States. The US Southern Plains shows little change in the persistent drought gripping the region with the next 48 hours likely to bring no meaningful precipitation from Texas through Nebraska. In Australia, temperatures of 104 degrees are causing concerns about excessive dryness during wheat planting.

Grains Higher After Holiday Weekend

Jan 22, 2013

Grain prices shot higher on the open of the overnight session as dry weather concerns continued to persist over the three day weekend. Overnight, nearby soybean futures were up 18 cents a bushel while corn and wheat futures added 5 cents a bushel.

Weather conditions in South America continue to draw the eye of the trade as precipitation in much of Argentina’s grain belt continues to be limited. The forecast for the next week to 10 days calls for limited chances of rain in Argentina.  March soybean futures got as high as $14.48 before dipping slightly lower.


In the wheat market, dryness in the US Plains shows no signs of letting up. The latest drought monitor report shows 100% of Oklahoma and Kansas having abnormally dry, while Texas had 91% of the state at that level. With dormancy likely to be broken in the next 2 to 3 months for these key states it seems likely that much of the HRW wheat crop will be in duress around this critical time.

For the corn market, limited export news occurred over the weekend.  A Kuwait grain buyer purchased 40,000 tons of South America corn which continues to underpin the lack of competitiveness of US corn in the global marketplace.

Basis Levels Stagnant on Futures Rally

Jan 21, 2013

 Both corn and soybean basis levels saw limited movement this week, as futures markets climbed on renewed concerns about short supplies. For the week, US average corn and soybean basis were unchanged.


In the corn market, higher than expected feed use reported in last week’s USDA report cut the old-crop ending stocks forecast below trade estimates. But, continued lack of business in the export market and ethanol sector has kept basis levels stable to weaker. For the week, ethanol plants lowered their basis by 1-cent a bushel. On Wednesday, EIA showed ethanol production took a hit for the week as production averaged 784,000 bushels per day, the lowest level since the agency started releasing weekly data in June 2010. Grain Hedge still expects final corn use for ethanol to fall short of USDA’s current target of 4,500 MB as weak margins for ethanol producers should limit production.

spotcorn 2013 01 18

For the soybean market, Gulf basis levels were off 9 cents a bushel which pushed river terminals down by 3 cents a bushel. Export sales continue to be on a torrid pace as this week’s total of 1.6 MMT was a marketing year high thanks to aggressive Chinese purchases.  Domestically, soybean crushing margins have started to weaken but still remain exceptionally high compared to historical norms. For the week, soybean plants increased basis by nearly one-cent a bushel.

spotsoy 2013 01 18

Grains Recover on Light Overnight Trading

Jan 18, 2013

 Grain prices were modestly higher across the board overnight helping erase part of the losses from Thursday’s day session.

After a steep runup following last week’s fresh supply and demand data, grain markets turned lower on Thursday even in the face of seemingly bullish news. Soybeans ht a marketing year high 1.6 MMT of export business for the weeks led by aggressive soybean purchases by China. In addition, USDA announced a daily sale of 240,000 MT of beans to unknown destinations on Thursday. Corn even fared well posting a 393,000 MT week after successive sub-100,000 ton weeks of late. Wheat managed a good showing as well with 536,000 MT for the week.


The soybean market continues to try to balance exceptionally strong near term demand with the prospects of a record large crop in South America. Nearby March futures has traded up to key resistance at $14.50 in recent sessions but has backed off and currently sits at $14.35. It will be important for this market take out that level to keep the bullish enthusiasm in check.

For corn, it too has stalled out at key resistance of $7.34 but we think ultimately it needs to trade back to the $7.60 mark of the fall on March futures to curb demand. With livestock feed use being stronger during Sep-Nov than expected by USDA, it seems likely that prices need to eclipse the $7.60 mark that was traded during that time period.

In the wheat market, dryness in the U.S. Plains continues to keep prices supported, but competition from India keeps prices from running too far. India’s government has burdensome stockpiles of wheat that it needs to unload on the world market before the next harvest.  Indian wheat is cheapest at the moment and it has very successfully replaced Australian wheat in the animal feed market. India is poised to triple wheat exports this year to a higher-than-expected, record 6 million tonnes, helping plug a shortfall in lower-quality grain supplies and keep a lid on global prices.


Grains Dip Lower Overnight

Jan 17, 2013

 Grains took a break from their recent run-up as overnight trade saw mostly lower prices across the complex.

Traders continue to watch weather conditions in South America, as dry weather seems to be a key feature of most forecasts over the next week.  Agronomists and farmers in Argentina say the corn crop needs rain by the end of the month to achieve the record-high crop forecast of 28 MMT. Rains have been limited lately and meteorologists see only sparse showers on the horizon.


In the corn market, little in the way of export business seems to be materializing. On Wednesday, EIA showed ethanol production took a hit for the week as production averaged 784,000 bushels per day, the lowest level since the agency started releasing weekly data in June 2010. Grain Hedge still expects final corn use for ethanol to fall short of USDA’s current target of 4,500 MB as weak margins for ethanol producers should limit production.

For wheat, dryness in the Plains continues to ve a focus of the trade. But, India’s competition in the global marketplace seems to be putting a damper on the wheat market. India offered 200,000 tons of wheat for export overnight, and for the year they are expected to export 6.5 MMT, up from  0.9 MMT last year.  Crop forecaster Lanworth on Wednesday cut its estimate of U.S. wheat production by 500,000 tonnes due to persistent drought in key production areas of the U.S. Plains states. Lanworth pegged U.S. wheat production for the 2013-14 crop year at 53.8 MMT compared to its previous outlook of 54.3 MMT.


Grain Rally Continues Overnight

Jan 16, 2013

 Grains moved higher again over night as dryness in South America and the US Plains has traders concerned about crop prospects. Soybeans were up 10 cents, while wheat advanced 5 cents. Corn managed a 3-cent gain in the overnight session.

Weather forecasts call for drier conditions in Argentina which had been plagued by early-season flooding and late-planting. As such, a sudden turn to hot and dry conditions could put the late-planted corn and bean crops at risk. In Brazil, they have seen some improved rainfall as of late, but forecasts point to an early end to the rainy season.

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Dry weather is also likely to continue in the U.S. Plains hard red winter wheat region for at least the next week which will further drawdown already disastrous soil moisture reserves.

On the export front, crushers in China were thought to be aggressive buyers of soybeans in the last week buying around 30 cargoes from the U.S. or South America. This compares with a usual weekly average of 10 cargoes to 20 cargoes.

Grain Advance Continues

Jan 15, 2013

 Grain futures continued their rally overnight led by soybeans which at one point reached as high as $14.36 before pulling back to the $14.27 area. Corn and wheat both advanced overnight, with corn up 2 and wheat up 5.

Monday’s export inspections report showed another strong week for soybeans with weekly inspections totaling 39 mb. For the year, total export inspections are at 856 mb which compares to 640 mb this time last year. Based on Friday’s supply and demand data, USDA still expects export this year to be on par with last year. For corn, export inspections were only 9 mb while wheat totaled 10 mb for the week.

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On Monday, Brazilian crop analyst Celeres raised its forecast for the soybean crop to 80.4 MMT compared to last month’s forecast of 79 MMT. This forecast is lower than USDA’s latest number of 82.5 MMT for Brazil. Weather in South America is mostly favorable, although conditions are starting to turn drier and hotter which is helping give some weather premium back to the soybean market.

Wheat futures continue to be buoyed by dry and cold conditions in the Plains, although it is unlikely that the recent cold snap had any lingering effects on the wheat crop. The biggest concern continues to be the widespread drought conditions in the heart of winter wheat territory. Although there have been some moisture events in the past week, total precipitation was mostly less than an inch for much of Oklahoma, Kansas and Nebraska were the drought is most severe.


Is Grain Rally Sustainable?

Jan 14, 2013

 Grain futures continued their positive response in the overnight session after USDA’s supply and demand data on Friday helped shift sentiment on the state of the markets.  Soybeans led the charge higher overnight posting a 20-cent advance, while wheat and corn prices were up 16 and 14 cents, respectively.

Friday’s USDA corn forecast was probably the biggest shock to the market, as traders were surprised by the high level of feed use in corn for the first quarter of the marketing year.  As a result, domestic ending stocks fell to 602 mb from the previous reported forecast of 647 mb and a trade expectation of 667 mb. The lower than expected stocks highlight the ongoing tight stock situation, and should help lift futures back to the mid $7 level in the near term. Furthermore we think $8 could be attainable as long as livestock numbers continue to show few signs of softening.  Broiler production continues to run at or above last year’s total while the dairy cow inventory and pig inventory remained nearly unchanged from last year. Only cattle on feed seem to be showing any signs of seriously cutting back with the latest numbers showing a 6% drop in cattle on feed numbers.

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In the wheat market, traders were surprised by lower than expected winter wheat seedings. The USDA pegged winter wheat seedings at 41.8m acres, 867,000 acres fewer than investors had expected. In light of terrible growing conditions in much of the Plains, we would expect actual wheat acres to fall more as abandonment becomes a serious option this spring. USDA made only a minor adjustment to the domestic balance sheet, raising feed use slightly and the world wheat stock-to-use ratio continues to exceed 26% which is a reasonably comfortable number. However, we think there is still room for upside movement in wheat prices as drought conditions in the plains take center stage in the coming months.

For soybeans, higher domestic crush helped offset some of the higher production that USDA penciled in for the balance sheet, as the net result was a slightly higher ending stocks number of 135 mb.  Still, they left exports unchanged even with a blistering pace in sales and shipments so far this year.  In the near-term look for front-month March futures to reclaim $14 with a good shot at the $14.30 area. But, with what looks to be a record large South American soybean crop on the horizon, it may be a tough chore for soybean prices to sustain those levels into the spring.

Egypt Demand Spurs Wheat Higher

Jan 10, 2013

 Wheat led the grains higher overnight as new demand from Egypt’s GASC helped lift wheat prices by 7 cents. Corn was up 4 cents, while soybeans were up 1 cent on the overnight trade.

Egypt’s GASC announced a tender for a 115,000 tons of wheat. Most expect the US to get the lion’s share of the deal after US wheat prices have come down in recent weeks and are more competitive than most key foreign sellers. Wheat also was bolstered by news of the drought in the Plains. USDA on Wednesday issued an emergency disaster making growers in large portions of four major wheat-growing states - Kansas, Colorado, Oklahoma and Texas - eligible for low-interest emergency loans.


In the corn market, Wednesday’s EIA ethanol production number came in at 826,000 barrels per day, 19,000 barrels per day higher than the previous week.  Since September 1, ethanol production is running 10.4% below the same period last year. USDA has forecasted a 10% drop in corn used for ethanol in the current marketing year. In world markets, a South Korean buyer rejected all tenders for corn citing high prices as the reason for not buying any shipments.

For soybeans, expectations of record-high South American production combined with strong nearby demand keep traders in a tug of war about price direction. On Wednesday morning, USDA announced China had bought 120,000 tons of optional-origin soybeans for the new-crop 2013/2014 marketing year.  

The  next USDA Supply and Demand report will be issued Friday, January 11 at the new time, 11 am CST.

Brazil Increases Grain Output

Jan 09, 2013

Grain futures were mixed overnight as traders await key economic data for further price direction.  Corn and beans were off 1 to 2 cents, while wheat managed a small gain of one cent.

Estimates from Conab, the Brazilian crop bureau, put the soybean crop at 82.7 MMT vs 82.6 MMT from their forecast in December, while they pegged corn at 72.2 MMT vs 71.9 MMT last month.  Both estimates are higher than what USDA had projected in their latest December report. On the demand front, concerns continue to grow that China may substantially slow their soybean purchases. Some analysts look for China to scale back soybean purchases in January and February by more than a third after buying unusually high amounts at the end of 2012, as a drop in poultry consumption may limit protein needs.

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However, in the wheat market, China has been noted to be a buyer of late, acquiring several cargoes of high-protein wheat from the U.S. and Canada. Chinese wheat business could increase as their domestic supplies stay tight until May, when the new harvest hits the market.

In corn, tight stocks combined with sluggish demand have kept prices fairly range bound over recent sessions.  Over the last several days, key South Korea grain buyers have been acquiring corn but most of the business has thought to be garnered by South America.  A Reuters survey of analysts shows most expect the December 1 quarterly corn stocks to be around 8.28 billion bushels. But in recent years USDA has been showing higher stocks on December than what analysts’ have guessed.  

Soybeans Lose Ground After Monday’s Gains

Jan 08, 2013

 Soybean prices were lower overnight after technically-led buying on Monday helped lift prices out of their steep slide.  Wheat was modestly higher in the overnight session while corn was mostly unchanged.

Soybeans continue to come under pressure as South America’s growing conditions continue to point to favorable weather. Analysts still mostly seem to expect higher production by Brazil at 83 MMT versus USDA’s December forecast of 81 MMT.

In wheat, India’s government announced their wheat stocks were substantially higher than the target level of reserves.  India's wheat stocks at government warehouses on Jan  1 were 34.4 MMT, more than four times the official target of 8.2 MMT, which has led to active participation by India in the global wheat trade as of late.  In Ukraine, the winter grain crops are projected to be 92% in good or satisfactory condition versus 60 percent a year earlier.  Analyst UKAgroConsult  projected Ukraine’s 2013 grain production at 51.85 MMT, up from  45.15 MMT in 2012.

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For corn, Monday saw some renewed export activity as USDA announced an export sale of 102,200 metric tons of corn for delivery to unknown destinations during the 2012/2013 marketing year. Corn has fallen 70 cents since early December weighed down by lack of export business and a slow pace of ethanol production. One wild card remains domestic feed and residual use, which USDA will provide a glimpse of in Friday’s Quarterly Stocks Report.  Current projections by USDA call for a 9% drop in feed use for the current marketing year, but wide-scale liquidation and downsizing of the livestock sector doesn’t seem apparent.  The latest hogs & pigs number shows a herd size that is virtually unchanged in the last year, while broiler production and dairy cow numbers remains on par with last year. Only feeder cattle show any sizable reduction, posting a 6% loss from last year based on the latest USDA data. So, if feed use is going to be curtailed it is going to have to come through alternative feed substitution.


Grains Post Overnight Gains

Jan 07, 2013

 Grains found buying support overnight as bargain hunting following weeks of selling lifted prices from six-month lows. Soybeans were the leader to the upside posting a 9-cent gain, while corn and wheat were up 4 cents.

Fund selling has been heavy in recent weeks helping fuel the price selloff in recent weeks. The market continues to bank on strong production out of South America this year with the soybean crop expected to be record large, cutting into US export business. However, year-to-date US soybean export commitments stand at 84% of the annual target by USDA, which suggests that weekly export sales for the remaining 8 months of the marketing year need to average 179,000 MT a week to meet USDA’s forecast. Last week, sales totaled 434,000 MT. Furthermore, strong domestic crush margins in the US should underpin demand

In wheat,  we still expect US export business to continue to pick up in the latter half of the marketing year as foreign competitors have limited supplies. In addition, the widespread drought in the US Plains continues to pose a risk for the winter wheat crop.

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In their long-range weather outlook, Planalytics calls for a warmer and drier pattern in the next 90 days for much of the Western Cornbelt, bringing little relief for the drought.  For Nebraska, Iowa, and western Kansas, the precipitation deficit combined with existing drought severity suggests wheat will remain in stress for much of season.  Meanwhile, improved snowpack for New Mexico, and precipitation across Oklahoma and Texas suggests a relatively better season.



Corn Exports Non-Existent

Jan 04, 2013

Grains continued to languish overnight as fund selling and prospects of slow demand kept prices weighed down in the overnight session. 

Overnight, South Korea was an active buyer overnight purchasing corn, feed wheat and soymeal. However, the majority of the purchases were from non-US sources, except corn which was optional origin from either South America or the US. 

Soybeans continue to trade south of $14 after China canceled a 315,000 MT shipment from the US. In addition, the USDA attaché to Brazil raised their soybean projection to 83 MMT on good growing conditions, higher than the latest USDA official estimate of 81 MMT.

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This morning’s USDA export sales report provided more evidence of just how bad corn demand is as weekly sales totaled 49,000 MT, significantly lower than trade expectations of 200,000 to 350,000 MT. Soybeans and wheat managed to hold par, being in the range of analyst estimates . Wheat sales for the week came in at 400,400 MT versus expectations that ranged from 350,000 to 550,000 while soybean sales of 434,900 were at the upper end of pre-report guesses, which ranged from 250,000 to 450,000.

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Selling Continues to Hit Grains in New Year

Jan 03, 2013

Corn and soybean futures were hit hard by selling overnight as prospects for a bumper South American crop continue to loom over the market. As of 6 am CST, front-month corn was off 5 cents while soybeans were off 12 cents. Wheat was mixed overnight following yesterday’s steep selloff.

Corn broke below long-held support of $6.88 over night and now seems poised to fill the gap left from July 3rd at $6.83. Struggling export business continues to underpin the market. Overnight, Kuwait purchased 30,000 tons of corn from South America.

For wheat, more bearish news came out as Egypt’s GASC announced  it had purchased enough supplies from local and international sources to last until June 17 and expects to get an additional 5.5 months' of stocks from increased local wheat supplies.  India also sold wheat into the world market at a price of $318/mt or $8.65 a bushel.  By comparison, US Gulf HRW wheat is trading around $9 a bushel.


In soybeans, weather conditions continue to be favorable in South America with only small areas of extreme dryness or overly wet. All totaled, traders see little to stand in the way of a record large soybean crop from South America. Overnight, March futures traded to their lowest level since November, touching $13.72. 

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