Too Much Corn, Not Enough Soybeans?

Published on: 15:53PM May 30, 2014


Market Watch with Alan Brugler

May 30, 2014

Too Much Corn, Too Few Soybeans?

While the market has been known to change its collective mind (fairly rapidly at times) the consensus coming back from the Memorial Day holiday was that we have too much corn coming this fall, but might not have enough soybeans.  How else do you explain a 2.6% drop in corn prices vs. a 1.5% drop in soybeans? This comes despite what is likely still a multi-million acre cut in US corn plantings for 2014 from 2013, and record large US soybean acreage. With the current weather pattern providing extra heat units to catch up from a late spring, and extra moisture in the Plains and WCB to ease drought conditions, forecasters are comfortable calling for record corn yields and record bean yields. Of course, they did the same thing last year, and in 2012 as the drought was unfolding for that matter.  The situation is much more complex, of course. Chinese import demand for soybeans is seen continuing to grow in 2014/15, perhaps to 2/3 of all global trade in beans.  The beans need to be there. Global corn ending stocks are seen reaching the highest level since 2000, although to be fair the stocks/use ratio is still likely to be tighter than the 2008/09 period.  Soybean stocks/use globally could be the second loosest in history, but the market currently isn’t trading as if those bushels are safely in the bin. 

Corn was down 2.56% this week, extending the 1.1% loss from the prior week . Ethanol stocks ballooned 500,000 barrels last week, mostly on the East Coast.  Daily production (and corn use) was up 2,000 bpd from the prior week. Weekly export sales were solid for old crop at 621,300 MT, but still sluggish at 90,900 MT for new crop.  Export commitments are 95% of the USDA forecast for the year, in line with the 94% average.  Unshipped sales are more than 4.2 MMT larger than average for this date. China continues to unwind old crop commitments, cancelling another 115,000 MT this week. They are beginning to auction off reserve corn. China sold 1.8 MMT of 3.5 MMT of reserve corn offered this week.  Some Northeast China areas are short on cash corn because so much of the corn was sold to the Chinese government under the support program.  Significant imports are not likely as they work off these Government stockpiles. Per the CFTC, the spec funds exited 5,550 longs but more importantly added 23,703 new short positions in corn during the week ending May 27, dropping their net long to 178,319 contract.

Soybean futures were 22 cents lower this week after a 50 cent bounce the previous week. Meal gave back 0.48% after being up 4.66% the week before. Soy oil plunged 4.66% , however, putting a lot of downward pressure on product value of the beans. USDA reported weekly exports sales of 881,000 MT, with a stronger than expected 60,300 MT of old crop. Old crop export commitments were 103% of the USDA full year forecast, ahead of the typical 100% pace for this date. The Commitment of Traders report on Friday afternoon showed the spec funds covering short positions. They trimmed 5,798 shorts and added 321 longs in the week ending May 27, boosting their net long position from     120,919 contracts to 127,037 lots..

Wheat futures were down again this week. KC was off 2.9%, while MPLS lost 2.6% and Chicago was down 3.9%. Rain makes grain.  It was too late to do much except add a little test weight in the southern HRW areas. Further north where the wheat is not yet headed should see more significant improvement in yield potential. An Illinois SRW tour projected yield there at 64.68 bpa vs. 61.6 bpa last year. SRW conditions overall are still worse than last year in the 18 major states. Weekly export bookings rose slightly to 531,500 MT of new crop, but we saw old crop cancellations/rollovers to 2014/15 delivery of 52,400 MT. The Commitment of Traders report showed the large spec funds more aggressively shorting Chicago futures. They were still net long 19,715 contracts of futures and options on May 27, but added 5,153 new shorts for the week and only 432 new longs.  

Cotton futures were down 0.43% this week, a welcome halt in their freefall.  Speculative longs have been exiting, cutting another 11,740 contracts from their net long this week, bringing the CFTC total down to 35,664 as of May 27.  Export sales commitments are running 103% of the USDA forecast for the year. They would typically be 104% by now, due to business typically carried over to the following marketing year. US weekly export sales were much slower than the prior week’s 518,400 running bales. Upland sales totaled only 61,000 RB of old crop and 114,300 RB of new crop. Pima sales totaled 6,200 RB.















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Cattle futures were up 1.1% this week. Cash cattle trade was mostly steady at $144, with the north at $232.  Futures were supported all week by their discount to the cash cattle market.  Estimated weekly slaughter of 537,000 head was not comparable to last week or year ago due to the holiday. Beef production YTD is 5.9% below last year, with slaughter down 6.4%.  Average carcass weight is about even with year ago.  USDA reported weekly beef export sales were not expanding seasonally., coming in at a pedestrian 12,700 MT.  Wholesale beef prices were higher this week, with choice boxed beef up 0.3% and select boxes up 0.5%. 

June Hog futures were down 2.6% this week. They are still at a premium to the CME Index. Weekly FI slaughter was projected at 1.75 million head for the holiday shortened week, down from 1.973 million head last week and 1.873 million a year ago. Slaughter YTD is down 4.2% but pork production is only down 0.9% due to higher carcass weights. Carcass weights are up an average of 9 pounds per hog vs last year!  Weights are pulling back slightly as temps have heated up. The pork carcass cutout value was up 95 cents for the week, a0.83% advance. All of that came on Friday, when the pork belly primal erased a week of reported losses by rising $11.36/cwt.  Picnics were actually the big gainer for the week, up 4.6%.  Weekly pork export sales were down 22% from last week at 9,100 MT.

Market Watch

The calendar has turned to June.  It will be a light report week, with the usual USDA Export Inspections and Crop Progress reports on Monday, ethanol production on Wednesday and weekly USDA Export Sales on Thursday morning. Friday will mark the expiration of June live cattle options.

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