Grain Rally Fades Overnight
Feb 04, 2014
Tuesday sharp rally found little follow thru in the overnight session with March soybeans briefly hitting $13.20, but pulling back to $13.12, leaving it unchanged. Corn and wheat fell giving up 2 and 4 cents, respectively in the night trade.
Soybeans rallied 20 cents on Tuesday thanks to strong near-term demand for exports and soymeal. Hot weather in South America continues to linger. Southern Brazil looks to be hot and dry in the coming days with temperatures expected to hit the mid-90s and little signs of significant precipitation through the end of the week. On Tuesday, Informa lowered its Argentina bean crop to 57 MMT, off from 57.5 MMT from the previous month but still well above USDA’s latest projection of 54.5 MMT. For Brazil, Informa bumped up their forecast to 89.7 MMT, just slightly above USDA’s projection of 89 MMT. Although US export business has been slowing in recent days, the lack of export cancellations by China has given the market new life. Export sales to date are 43 MMT for beans, which surpasses the total for the year projected by USDA at 40.6 MMT. In addition, pipeline supplies are not picking up with the rally as farmer bean sales have been limited during the last few days of escalating futures.
For corn, it’s another story. Farmers have been actively selling their corn crop in recent days, and pipeline supplies are building leading to lower basis levels at key buyers around the country. CIF corn basis values at the Gulf fell on Tuesday by 3 cents to +77H. At a key processor in Blair, NE, corn basis fell for the fourth straight day to -8, its lowest level in more than two years. On the international scene, buying activity was limited overnight with no big tenders announced. Informa lowered their estimate for South American corn production, with Brazil and Argentina combined at 89.15 MMT, which is 3.4 MMT lower than Informa’s projection in January.
In wheat, Tuesday’s 20 cent rally helped push prices off their lowest level in 3.5 years. Stats Canada on Tuesday gave a slightly lower than expected wheat stocks estimate of 28.4 MMT, but it still represents a 38% increase over stocks last year. Oklahoma and Kansas reported deteriorating crop conditions for the winter wheat crop, as dry and windy weather took its toll on rating. Kansas reported 24% of the crop in poor to very poor condition in January, versus only 8% in December. However, the recent snow storm helped give needed moisture to the Plains as Kansas is expected to see nearly a foot of snow from the latest winter system.