Can Demand Continue to Propel Grain Prices?
Oct 14, 2015
Good Morning! Paul Georgy with the early morning commentary for October 14, 2015 at 5:15 am.
Grain markets are lower following yesterday's strength in the soybean market. Outside markets have crude oil slightly lower, and gold higher.
Demand was the main driver behind yesterday's rally in the soybean market. Export inspections were friendly at 1,831,696 tonnes of soybeans. Trade had been expecting 1,100,000 to 1,225,000. Additionally, the USDA reported the sale of 240,000 tonnes of 15/16 soybeans to China.
Further support for the soybean trade has been seen on dryness concerns in Brazil, and palm oil production concerns due to El Nino. Rich Nelson noted, "world vegetable oil supplies are not big at all when compared with our demand. Any shake in production this year could make the market a little jumpy."
Ryan Martin gave an El Nino forecast in our most recent Ag Leaders webinar. Listen to the recording here, free.
Demand support was also found for corn as South Korea was reportedly seeking 207,000 tonnes of corn for March and April deliveries.
Estimates were released late yesterday for tomorrow's 11:00 AM CDT NOPA crush report. The trade average estimate is for 129.24 million bushels crushed in September.
Corn export inspections were reported at 573,298 tonnes (625,000 to 750,000 was the estimate), and wheat was reported at 290,717 (500,000 to 625,000 expected).
U.S. harvest continues at a good pace. The USDA reported corn 42% complete vs. last week's 27%. Soybeans were reported 62% complete vs. last week's 42%.
Trade will be watching the FSA acreage data out this morning to help shape the U.S. acreage viewpoint and for hints at future USDA acreage adjustments.
Chart watchers have their eyes on the soybean market after the November contract broke through the 50 day moving average, and took out the September high of 9.02 1/4. The next target being cited is 9.26 1/2.
The economic calendar is busy this morning with PPI (-0.3% estimate), and retail sales (0.2% estimate) due at 7:30 AM CDT. Business inventories (0.1% estimate) are out a 9:00 AM.
California Governor, Jerry Brown has signed into law a requirement for a stricter use of antibiotics in meat production effective January 2018. Industry groups will pay close attention to the implementation of the law by state agencies.
Discussions in the hog industry about the coming drop in cash hog prices continue to circulate. So far though it has not been seen. The Iowa/Minnesota trade actually pushed to 72.58 on the afternoon report. That broke the September 30 small peak and is the highest price since August 27. This is important for us to monitor as we come tomorrow's noontime expiration of October futures and options.
The midday beef report showed 2.63 and 4.16 for choice and select respectively. While this is great to see, it likely won't be market moving. The story with these type of significant bottoms could be that futures rally first, followed by cash cattle, then cash beef.
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