Morning Comments - Report Day is Finally Here
Apr 09, 2014
Fundamentals – A combination of heightened tensions between Ukraine and Russia, the impending USDA report and the shut down of the Globex system at the CME, heightened the tensions and buying of traders as well. Note that even with the all this news about Russia amassing troops on the Ukraine border, grain trade in the Black Sea continues on as normal and there has not been any unusual move in prices, i.e., big rallies. Do they understand the situation better than our news outlets who would never miss the opportunity to inflate a story?
Wheat ratings were issued yesterday with no real surprises. For winter wheat the good/excellent category sits at 35%, which is 1% below last year at this time and the poor/very poor is at 29%, which is 1% better than a year ago.
We have been anticipating the supply/demand report now since the release of the stock figures and we will finally see these numbers at 11:00 central. Keep in perspective that this will only be an update for the 13/14-crop year, not a projection for 14/15. We will have to wait until the 9th of May for that. The average trade estimate for wheat ending stocks is 583 million bushels, which would be up 25 million from last month and world ending stocks are expected to be down .16 MMT to 183.65.
Fundamentals – As I commented above, the combination of the unrest in Ukraine, nervousness about the report and then the shutdown of Globex appeared to bring in a bit of panic buying yesterday and pushed the corn market into new highs for the swing. Basis levels at the Gulf have backed away in response.
We have been talking about the supply demand estimates Ad nauseam since the March 31st grain stock report and thankfully that will be history at 11:00 today. The average trade estimate for domestic ending stocks stands at 1.403 billion bushels, which would be down 53 million bushels from last month. The range of estimates stretches from 1.306 to 1.478 billion bushels. World ending stocks are expected to come in at 157.72 MT, down .75 MMT. You have to expect what has become the typical nonsense for the first minute or so after the numbers are released, but unless the report is at one extreme of the range or the other we should settle down quickly. There will be no estimates for the 14/15-crop so we are all left to crunch our own numbers until the 9th of May.
After the report, we can begin the focus on weather once again and once temperatures finally begin to warm, planters will be full steam ahead. It is looking more and more like we could see prices hold gains through the end of the month.
Fundamentals – With the strength yesterday and overnight, old crop beans are pressing towards recent highs and November futures have been able to press into higher highs. Hmmm, record bean acres and threats of a late spring to the north and new beans continue to advance? Makes sense to me?
Much of the focus for bean imports centers on bringing South American beans into the US be we cannot forget that they can come from other sources as well. Through February, we have imported over 11 million bushels of beans from Canada and that number has been growing. From all destinations, it is now estimated that through February we have imported around 20 million bushels of beans and for the year this number could more that triple that. Specifically how the USDA will reflect this in the report today is of course yet to be seen but if there is a place that we could find a surprise, it would most likely be in the beans numbers. Hopefully that is not the case. The average trade estimate for domestic ending stocks is 139 million bushels, which is only 6 million below March. The estimate for world ending stocks is 70.14 MMT, which would be down .5 MMT from March.
Ideally we do not uncover any shocking news in today releases. If that is the case, potentially we should see values gradually lose upward momentum and have our final high in place between now and the first week of May.