Oct 1, 2014
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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.

 

Grains Continue Lower in the Overnight

Oct 01, 2014

 Grains have continued to drift lower in the overnight session with corn down a penny, soybeans down three, and Chicago wheat off three. 

 

Rains have moved through some areas of the western corn belt within the last 24 hours. Western Iowa, the Dakots, and Southeast Nebraska have all received 0.25 to 0.50 inches as the system moves east. By Saturday the system should be bringing 1.0 – 1.5 inches of rain to portions of the eastern grain belt. Harvest delays are expected as crops are reaching maturity. Monday’s crop progress report showing 12% of corn and 11% of soybeans harvested.

 

A positive story may be developing for the U.S. wheat market following strong domestic demand in Russia. Reuters is reporting that strong domestic demand within Russia has "priced one of the world’s leading suppliers out of export markets far earlier in the season than usual". The major beneficiary of this is expected to be European wheat prices as they will be the primary source for end users in the Middle East. Last week we saw the first U.S. sale of wheat to Egypt in many months, signaling to traders that U.S. wheat prices may have moved low enough to compete with Europe.

 

Weekly ethanol figures will be out this morning. Last week’s figure showed a sharp week-over-week decline in production although this is typical during the early stages of the new marketing year. Crush margins have moved lower in recent weeks as corn future declines have slowed and the price of crude oil as eased. Crush margins remain historically very strong and weekly production has outstripped the last 4 years as we begin the 2014/15 marketing year. We continue to see ethanol facilities aggressively bidding spot and forward corn deliveries as a result of these crush margins.

Quarterly Stocks Report Expectations

Sep 30, 2014

 ALERT: USDA Grain Stocks Report at 11:00 AM Central Time Today

 

In the overnight session some of yesterday’s gains have been erased as corn fell 1 ½ cents, soybeans fell 5 ½ cents and wheat dropped 4 ¾ cents as the U.S Dollar index rallied again this morning, up nearly ½ a percent. This morning Ukragroconsult raised their Ukraine 14/15 wheat export forecast by 5.3 percent, up to 10.0 million metric tons.

 

Today’s Quarterly Grain Stocks Report will be the focus for traders. Analysts expect September 1st stocks of soybeans to be reported at 1.185 billion bushels and soybean stocks at just 126 million. Soybean stocks will be watched the closest considering the exceptionally tight stocks during the 2013/14 marketing year. Historically this report has been volatile for prices, but today’s reaction should be quelled by the large 2014/15 crop which is expected to replenish tight stocks of corn and soybeans, in particular.

 

Rain across the Midwest may slow harvest over the next 6-10 days but is coming at a time when some corn and soybean stands have not yet reached maturity. Monday’s crop progress report had 69% of soybeans dropping leaves and 60% of corn mature. Conditions actually improved for soybean by 1 percent compared to last week. Corn’s good-to-excellent rating was unchanged. Harvest has been moving forward over the last week, but not as much as analysts were expecting with only 12% of corn harvested compared to estimates of 15%. For soybeans, 11% was reported harvested compared to estimates of 11%. Both corn and soybeans are behind the 5 year average harvest pace. 

Market Eyes Grain Stocks

Sep 29, 2014

This morning the grains are mixed with corn up ¾ of a penny, soybeans down ¾ of a penny and wheat trading higher in the overnight session, up 4 ¼ in the overnight session. The U.S Dollar is trading slightly lower this morning, taking some of the pressure off the grain market. 

Crop progress and conditions will be released at 3:00 pm central time following the market close. Conditions are expected to remain unchanged for corn and soybeans. Harvest pace should be near 10% for soybeans and approaching 20% for corn.

September 1st quarterly grain stocks will be released tomorrow at 11:00 AM central time. This will have important implications for 2013/14 balance sheet as it indicates how much corn and soybeans remained in stocks at the end of the old crop marketing year. In a poll released by Reuters, traders expect the USDA to report September 1st corn stocks at 1.185 billion bushels and soybean stocks at just 126 million.

Precipitation over the weekend helped out soil moisture in the northern plains. The weather this week should be, for the most part mild with some rains expected throughout the Midwest in the second half. Corn and soybean harvest should pick up its pace this week with some disruption as precipitation starts in the western grain belt and moves its way east. A freeze is expected in the 11-15 day forecast according to the latest weather models, but there are no real expectations for significant damage.

Dollar Up as Grains Sink...Again

Sep 26, 2014

 In the overnight session corn dropped another ¾ of a cent, soybeans fell 8 ¼ cents and wheat fell 4 ¼ cents as more selling pressure continues to weigh on the market. The U.S dollar is higher again this morning which will continue to weigh on commodities. This morning a sale of 59,309 tons of U.S corn was sold to Mexico for new crop delivery and 47,879 tonnes of corn was sold for 15/16 delivery.

China has delayed approving a GMO strain of soybeans, citing "low public acceptance". It is unclear which variety of soybeans has been delayed in approval but we will continue to monitor the Chinese GMO soybean situation. Corn was pressured last year after the Chinese rejected several shipments of MIR 162 corn developed by Syngenta. Several of these corn cargo shipments were loaded in Louisiana by Cargill, and last week it was announced that Cargill is suing Syngenta over the rejected shipments. This will be a land mark case for grain shipments as the legal system will have to determine if seed providers or grain merchandisers are liable for rejected export shipments.

Australian wheat production could fall to as little as 24 million tonnes from the current USDA estimate of 25.5 million tons after a lack of rains in the western region and spotty rain in its eastern growing region damaged the crops potential. Western Australia’s output could drop by 20 percent from a year ago according to CBH Group, Australia’s biggest exporter. The conditions in Australia have been for the most part factored into the market.

The next big reports for grain traders will be on September 30th, when the USDA releases their September 1st grain stocks report. This will have important implications for 2013/14 balance sheet as it indicates how much corn and soybeans remain in stocks at the end of the old crop marketing year. In a poll released by Reuters, traders expect the USDA to report September 1st corn stocks at 1.185 billion bushels and soybean stocks at just 126 million.

Today is the last trading day for short dated October options. Any options in-the-money at the close will be assigned futures positions. If you have questions about assignment or liquidation please contact our office.

Strong Export Sales

Sep 25, 2014

 The grains are mixed here this morning with corn up ¼ penny, soybeans up ¼ penny and wheat down 3 ¾ cents as we move into the morning pause in trading. The USDA released a number of reportable export sales this morning including 115,000 tonnes of soybeans sold to China for 2014/15. Nigeria purchased 120,000 tonnes of HRW wheat indicating that export demand is returning to the U.S wheat marketing as today’s sale follows an Egyptian sale earlier in the week.
 

Export sales were reported this morning with corn and soybean reporting strong while wheat continues to struggle as it reports sales on the low side of analyst expectations. Corn sales were reported at 836,400 metric tons with over half the sales this week going to Mexico. Soybean sales were reported at 2,565,600 metric tons of which 92% of the sales went to China. Soybean sales were especially large this week after a Chinese delegation toured the Midwest making significant purchases last week. Wheat sales were reported at 396,300 metric tons which was an improvement of 26 percent compared to last week but still managed to come in on the low side of expectations which were between 350,000-500,000 metric tons.

The U.S. dollar index surged another leg higher overnight now trading at 84.465. This is up 7% from July lows and has been a contributing factor to weakness in the grain market. Expectations for increasing interest rates in 2015/16 have contributed to strength in recent weeks.

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