Friday Morning Markets
Nov 01, 2013
The grain markets are mostly lower this morning following yet another multi-year low close in nearby corn contracts yesterday. It should also be noted that the December ’14 corn contract posted a new contract low close and is trading below $4.70 per bushel this morning. The end of October marked the end of the "crop insurance floor" for many corn farmers. Risk in farm country is now heavily correlated with amount of on-farm storage available; data suggests that farmers have very little of this year’s corn crop priced relative to most years. Many factors suggest that a large portion of the crop is going into some form of storage, unpriced. Should a meaningful rally not occur between now and late summer, many farmers may be sitting on 2 years of unpriced or under-priced corn production. Cost of production will not be decreasing by much, if at all, in 2014. The final fall insurance averages were $4.39 ($5.65 spring) for corn and $12.86 ($12.87 spring) for soybeans. It will certainly be interesting to monitor the market’s action ahead of next Friday’s USDA Crop Production / WASDE report. There are many wildcards including a potential acreage decline due to the extensive prevent plant that occurred this past spring, yield per acre for corn and soybeans, as well as the entire demand side of the balance sheet. The 2-month lag time between reports could make for some big volatility on and near report day.
The USDA released Export Sales data for the period from October 4 – 24 yesterday. Corn sales were enormous and well above expectations at 4.55mmt; cumulative corn sales now stand at 66% of USDA projections vs. 46% on average. Soybean sales were also huge at 4.74mmt; cumulative bean sales stand at a whopping 86% of USDA projections vs. 58% on average. A record 36% of the US soybean crop has been sold into the export market vs. 23% on average. The trade is clearly banking on another record South American crop to offset some of the production shortfall and demand increase here in the US. South American weather risk in the bean market is certainly to the upside. Wheat sales totaled 1.31mmt and were below expectations; cumulative wheat sales now stand at 68% of USDA projections vs. 57% on average.
The USDA released its Cattle on Feed report yesterday after the close. October 1st All Cattle on Feed were seen at 92% of last year, slightly below expectations. September placements were seen at 101%, on par with expectations. Marketings were seen at 106% vs. pre-report estimates of 104%. The report was seen as being most neutral; cattle and feeder cattle futures are trading near unchanged this morning.
Informa will release production estimates this morning sometime around 10:30am CST. FC Stone will also release production estimates sometime this afternoon. Most expect both firms to ratchet corn and soybean production higher in light of better-than-expected yields in many areas of the country.
The Buenos Aires Grain Exchanges reported that recent rains could completely restore previously depleted moisture levels, meaning that potential for "big" corn and soybean crops still exists. Argentina weather has been a concern as of late. Brazil is in good shape.
Oftentimes, a new month equals new money; although it doesn’t seems as if the grain markets are seeing any big cash injection this morning. The path of least resistance seems to be to the downside, for the moment.
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