Jul 11, 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.

 

Market Higher in the Overnight

Jul 10, 2014

 Alert: USDA report out at 11:00 central time tomorrow

 

Grains markets are finding some strength in the overnight session. Corn is up a penny, soybeans up 6 cents, and Chicago wheat moving 4 cents higher. This move higher looks largely technical, as this morning’s export sales report largely met trade expectations. 

 

Yesterday’s ethanol production report showed that production was down week-over-week at 927,000 barrels per day. Stocks continued to grow and are once again at levels seen in early 2013. Seasonally we would expect ethanol crush to slow from July moving forward, but crush margins remain very strong relative to the last 5 years. Basis opportunities continue to exist at ethanol facilities across the grain belt, even as corn basis has sagged in recent days.

 

September corn has now been trading below four dollars for two full sessions. Bearish sentiments continue to weigh on the market in recent weeks as open interest continues expanded in Tuesdays down day, indicating that new short positions are being added. Forecasts continue to show ideal weather looking out two weeks as the crop enters a critical yield determining phase of pollination. Also weighing on corn was the announcement out of Brazil yesterday that it’s better than expected corn yields are expected to produce 78.2 million metric tons compared to last month’s estimates of 77.89 million metric tons.  


Fridays report is will be focused on soybean demand revisions for the 2014/15 crop after the June 30th report showed acreage 3.6 million acres higher than last year. With the crop conditions for soybeans at a 20 year high it is expected that 169 million bushels could be added to total supply since just last month’s WASDE report and up 425 million bushels from last year.  Traders will be watching how the demand numbers are adjusted with surge of supply hitting the market this fall. The average analyst expects ending stocks to be reported at 418 million bushels which would imply a demand increase of nearly 76 million bushels from June’s report. Much of the demand increase is expected to be seen in the export column which seems to be more responsive to large supply increases.  


Export sales this morning came in slightly below trade expectations for wheat only booking 338,100 compared to expectations of 400-635 thousand metric tons. Corn met expectations booking 363,000 metric tons of old crop corn and soybeans met expectations adding 56,300 metric tons of soybeans to old crop sales. This morning the USDA announced that 60,000 metric tons of old crop soybeans was sold to unknown destinations which was part of a larger 126,000 metric ton reportable sale which also included new crop soybeans. China also purchased 118,000 metric tons of new crop soybeans in the same announcement this morning. Prices for old crop soybeans have fallen nearly $1.33 in the last week and a half which should start to trigger some buying interest from importers. 

Export Sales Reported as Prices Slide

Jul 09, 2014

 Grain futures drifted lower in very light overnight news. No change in the 6-10 day forecast and little demand side numbers to report. Corn is down 3 cents, soybeans are down 6 cents, and Chicago wheat is off 3 cents.

Friday, July 11th, will bring the July USDA report. This will be the first report to use planted acreage expectations from the June 30th Planted Acreage report. That report shocked the soy complex, with 2014 acres projected at 84.8 million acres. Traders expect soybean carryout to be projected at 418 million bushels in the coming marketing year. This market has sold off significantly since June 30th, but a 400+ million bushel carryout implies there is still great downside risk in this market. Next area of technical support lies at $10.95 on the November 14 soybean contract.

 

Grain export sales have been being reported on a relatively regular basis as prices continue to ratchet lower. This morning two reportable U.S corn sales were sold to Japan (101,600 MT) and unknown destinations (107,696 MT) for new crop delivery. Also, Egypt’s GASC issued a tender yesterday for 55,000-60,000 metric tons of U.S wheat, Ukrainian milling wheat, Russian milling wheat and Australian standard white wheat. The price of Chicago wheat has dropped sharply since May 9th when the local U.S supply concerns were eventually trumped by growing global stocks. Since the open of trade on that Friday, the September wheat contract has fallen $1.89 cents.

Crop Conditions Weigh on Market

Jul 08, 2014

 Grain futures are trading mixed following Monday’s sharp selling. Corn is unchanged, soybeans down a penny, and Chicago wheat off 2 cents. News in the overnight session was very light following yesterday afternoon’s crop conditions report. 

 

The USDA released crop conditions yesterday afternoon which showed little changes from the previous week. Corn is still rated 72% good to excellent while soybeans held steady at 72% good to excellent. At this week in the growing season this is the highest rated corn crop in 15 years and the highest rated soybean crop in 20 years. Winter wheat is now 57% harvested and the spring wheat crop is rated 70% good to excellent. The 6-10 day forecast from Planalytics is showing wet conditions across the eastern corn belt and dryer conditions in Iowa, Minnesota, and North Dakota. Mean temperatures should be cooler than normal beginning July 13th, just as a large portion of the corn crop will be silking. In yesterday’s report the USDA showed 15% of the corn crop in the silking stage.

 

Saskatchewan and Manitoba farmers incurred damage to both newly planted fields and stockpiled grain as heavy rains of up to 10 inches soaked and flooded Canada’s main growing region last week. Estimates on the total damage ranged significantly with some analyst guessing 1 million acres ruined while others suggested up to 6 million acres of crops were ruined across Canada due to the excessive rain this season. Much of the Eastern Saskatchewan and Western Manitoba recorded record amounts of precipitation since April 1st leaving many farmers with flooded and damaged crops. This year Canadian wheat crops are well behind their normal development due to the cool and excessively wet weather this year.  

 

Active International Tenders

Jul 07, 2014

 Alert: Grain markets open at 8:30 central time this morning

Rain over 4th of July holiday was mixed, with majority of the grain belt receiving small amounts of precipitation. Michigan, Missouri, and Nebraska saw the heaviest rain with some areas receiving 1-3 inches.  The 6-10 day out look projects a drying pattern developing over the central and northern grain belt, while Indiana and Ohio will continue to see precipitation. Crop progress and conditions will be updated this afternoon by the USDA and few changes are expected following a week of good growing conditions. Last week the USDA projected 75% of corn and 72% of soybeans rated good to excellent.

There were three notable tenders on the international market this morning with Jordan issuing a tender to buy 100,000 metric tons of optional origin hard milling wheat, Turkey issuing a tender to purchase up to 235,000 metric tons of milling wheat as well as 200,000 metric tons of feed barley and the United Arab Emirates issuing a tender to purchase 100,000 metric tons of corn along with 30,000 metric tons of feed barley and 15,000 tons of soymeal.

There has been some talk over the weekend that U.S crushing facilities have been looking for South American soybeans for August and September delivery. Last week we did observe basis at river terminals and crushing facilities outperformed the rest of the market significantly, increasing 6 cents from June 25th- July 2nd

Markets Stabilize in Light Volume

Jul 03, 2014

 ALERT: Grain Markets close at noon central today, markets re-open at 8:30 AM on 7/7/2014

Corn and soybeans have finally found bottom after 2 days of follow-through selling. Overnight corn futures are up ½ cent, soybeans up 3, and Chicago wheat up 3.

 

Export sales were released this morning showing that old crop corn and soybean sales met expectations while wheat sales came in better than expected. Despite meeting analyst expectations this week the 290,000 MT of 13/14 corn sales and 40,600 MT of 13/14 soybean sales wasn’t enough to move either grain any further ahead of pace to meet USDA forecasts. According to our models, corn slipped to 137 million bushels ahead of pace, down 7 million bushels from last week’s projections. Our soybean models also slid 6 million bushels to 102 million bushels ahead of pace to meet USDA expectations. New crop sales for both corn and soybeans were adequate with both grains recording sales within expectations. Wheat sales of 567,500 MT beat analyst expectations with a significant amount of sales going to Brazil. Strong wheat sales may provide some support to the market which has experienced hard directional selling since the beginning of May. 

 

Port workers in Argentina have begun an indefinite strike at the key grain terminal of Rosario. Argentina is the world’s number 1 exporter of soymeal livestock feed and third biggest supplier of corn.  U.S. soymeal prices are currently leading the soy complex higher, helped out by the Argentinian news. South American port strikes are typically short lived and will not provide lasting support to the soy complex.  

 

Yesterday, we saw some international tenders announced from a corn processing association out of Korea for 55,000 metric tons of food grade corn and a Taiwan sugar corporation looking to buy 20,000 metric tons of U.S. corn and 15,000 tons of soybeans to be sourced from either the United States or South America. 

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