Morning Comments - A rising tide lifts all boats

Published on: 09:12AM Jul 24, 2014



Everyone was expecting markets to pop back at some point but no one was sure where it would begin but as it turned out, beans led the way.  I guess that should not be terribly surprising as beans have been the demand leaders all year and are still exposed to the most yield uncertainty moving forward.  At this point it would appear that wheat is pretty much along for the ride as fundamentally there is little to support an extended run at this time.

There is more and more discussion about the wet condition in Europe delaying harvest and creating quality issues.  For the most part, this is not positive US markets as it just means there is more feed quality wheat and the Europeans are very adept at feeding wheat.  The French harvest stands at 30% complete and Germany 15%.  Moving farther east through, ideas for the size of the Russian crop continue to grow and there is talk now that it could be in the 57 to 60 MMT range compared with the latest USDA estimate of 53 MMT. 

The export market continues to belong to the Black Sea.  Yesterday it was reported that Egypt purchased 235,000 MT split between Russia, Ukraine and Romania and Iran is in that market for an additional 50k MT.  US sales did improve this past week as we sold 443,200 MT or 16.3 million bushels.  The primary purchasers were Japan at 92.8k MT, Nigeria at 71.3k and Singapore at 53.5k.  Year to date we have sold 8,931,000 MT or 328.2 million bushels, which is 27% behind the pace of last year. 

It is nice to see wheat rally for a second day but we are not out of the woods yet by any stretch.  The high in December futures last week was 5.84 ½ and we would need to push up and close above that level to confirm an intermediate bottom.


There is an old saying that a rising tide lifts all boats and that would appear to be the case in the corn market right now.  December futures were able to shake off the early pressure yesterday for a higher close and now this morning we have been able to bounce up enough to test the bottom end of the gap left on Monday between 3.76 ½ and 3.77 ½.  Dare we think it could be filled?  Regardless I do not suspect the corn market possesses much independent strength. 

The latest yield estimate has been published by Lanworth and you may recall, this is the company that uses satellite imagery for their predictions. Their current yield estimate is 172.8.  It is interesting to note that the rationale for the rally was partially attributed to drying conditions in the southwestern and northwestern sides of the corn belt and while there could be a case made for concerns in beans, I think it would be difficult to make that story stick for long in corn. The current forecast, which includes a few showers in those drier areas, calls for a continuation of the cooler than normal conditions which would mean that nearly all of the corn in the country will have pollinated with virtually no stress. 

Old crop export sales were disappointing as we fell below the lowest trade estimate but new crop were very solid.  For the 13/14 marketing year we sold only 291,500 MT or 11.5 million bushels.  That said, we have now sold 7 million more bushels than the 1.9 billion projected by the USDA but it looks a bit questionable if we will actually be able to get them out of the country before September 1st.  New crop sales totaled 1,143,400 MT or 45 million bushels.

The consistent performer all year has been ethanol, which was the case again last week.  For the week ending July 18th we produced 281,946,000 gallons for an equivalent of 101.4 million bushels of corn. Weekly stocks were unchanged.  It would stand to reason that the USDA could boost the current year usage figure another 25 million to 5.1 billion on the August report.

It is too early in the day to say with any level of confidence that corn will be able to maintain the early strength as the market is already faltering but if the other two markets can, corn may be able to hold as well. That said, rallies for now should be short in both time and price    


Beans are the rebound leader at this point and the rally yesterday was enough to deny the bear a second close below the July 11th low at 10.65.  Part of the strength appears to be stimulated by concerns of dry conditions in some areas of the western growing regions which I am having a hard time swallowing.  Not because I do not believe there are some areas that have not see rain recently but more so, with the rows pretty well covered and cool overall temperatures, that would not be the kind of condition normally associated with aborting pods. 

Lanworth also published their bean yield estimate, which is 45.2 b/p/a.  While that is basically unchanged from the USDA number, it still reflects a record yield for beans.  Taken a step further, the current record yield of 44 b/p/a was set back in 2009 and that was on 7.3 million fewer acres.  This rationale does not apply quite as well as it does in corn but it would stand to reason that the greater the number the acres planted, the greater the chance that some of them are less than the most productive soils. 

Export sales were actually quite solid for both old and new crop beans.  Granted, the old crop sales may ultimately be shipped in the new marketing year, we did sell another 226,700 MT or 8.3 million bushels.  Year to date sales are now 64 million bushels above the projected 1.62 billion.  We know during the past week that China and unknown destinations have been active buyers of new beans and that was confirmed this morning with sales of 2,451,100 MT or 90.1 million bushels. 

November futures have bounced enough this morning to fill the gap left on Monday at 10.82 ½ and even pushed above the January lows at 10.88 ¼ but if we can close above that point would now be the question.  If successful, we could have the door open for a bounce back against the breakaway level up around 11.30 into the end of the month.