Morning Comments - Where did our corn demand go?

Published on: 08:43AM May 08, 2014

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Wheat

It would appear that we have a minor wave of profit-taking going on the wheat market and realistically there is little fresh positive news to entice buyers.  By no means has weather improved in the Southern Plains states but as a whole that was one of the vehicles that brought is to this party.  The other has been the explosive, no pun intended, situation in Ukraine and even there, tensions have settled down considerably.  Putin has called for Russian troops to pull away from the border between the two nations and has called for restraint and patience from the pro-Russian militants.  Ukraine is scheduled to hold elections on the 25th, which of course could mark a turning point or a flash point.

Wheat sales bounced back this week as we sold 320,500 MT or 11.8 million bushels.  This brings our YTD total up to 1.161 billion, just 14 million below the USDA target of 1.175.  There are four weeks left in the marketing year.   Sales for 14/15 came in at just 125k MT or 4.6 million bushels.

I would suspect semi-quiet trade into the reports tomorrow morning.  The average trade estimate for All Winter Wheat stands at 1.468 billion bushels, All Wheat at 2.046 and a projected ending stocks figure of 588 million for 13/14 and then 553 million for 14/15.  The domestic number that will be most closely watched will be Hard Red Winter and the average estimate is 782 million but there a number of analysts that believe this number could ultimately be below 700 million. The average estimate for the 13/14 World ending stocks is 185.95 MMT and for 14/15 184.53. 

Corn

The corn market was not able to extend higher yesterday and has seen a wave of liquidation now overnight and into this morning. Pressure in the wheat, a few bulls taking money off of the table in front of the report, good planting weather and now lousy export sales this morning have all conspired to take the wind out of the bull sails. 

Other than a few nuisance showers, planting progress is in high gear and it will should be very interesting to see the updated numbers next week.  The week prior we increased 10% to 29% complete with very questionable weather so pushing beyond the 50% mark now seems very believable.  The biggest concern will be the Northern Plains states where activity have been limited but there as well we should see great advances made. 

Ethanol production slipped a bit this last week as we averaged 894k barrels a day or 263.9 million gallons.  This should equate to just a touch under 95 million bushels of usage and keeps us at the 5 billion bushels pace.  After two weeks in a row of building stocks; up 53 million gallons, stocks were down 3 million. 

Conab released update Brazilian production number this morning with a couple minor adjustments.  Corn production is now estimated to be 75.2 MMT versus the previous estimate of 75.5 MMT. 

Export sales for corn were a very dismal 161,300 MT or just 6.4 million bushels.  There were two major large cancellations by China of 210k MT and unknown of 116.8k MT.  While this is only one week, we know that have been other cancellations already this week and seeing that export inspections have already lagged sales, the USDA could be conservative in boosting the export figures.  YTD we have now sold 1.739 billion bushels leaving only 11 million more to sell with 17 weeks left in the marketing year.  Sales for the 14/15 crop year came through at 121k MT or 4.8 million bushels. 

For the morning reports, the average estimate for ending stocks remains at 1.314 billion for 13/14. For the current crop year exports should be bumped up 25 to 50 million bushels balanced out by adjustments in the feed/residual numbers.  14/15 ending stocks are estimated to be 1.672 billion with the wild card there being the yield number that the government uses.  World ending stocks for 13/14 are expected to be 157.31 MMT and for 14/15 159.41 MMT. 

Soybeans

The soybean market has witnessed a little bounce overnight and into this morning with the emphasis on little.  Spot futures closed below key support at 14.60 yesterday and even with the rebound this morning, we have not quite been able to reach back to that point.  As the old saying goes it would appear that we can "put a fork in it" as this piece of meat (tofu) looks done.  This is not to say that we cannot bounce but with the bulls story evidently behind us the mentality should be one of selling rallies instead of buying breaks. 

Beans sales bounced back with the largest number in 4-weeks at 40,800 MT or 1.5 million bushels.  This moves us to 1.64 billion bushels and 96 million above the existing USDA estimate.  Sales for 14/15 were 14.2k MT or 500,000 bushels. 

Conab bumped their estimate for Brazilian production. They are now estimating a crop of 86.6 MMT versus the previous estimate of 86.1. 

We shall see what the USDA has in store for us tomorrow but most believe adjustments will most likely just be balancing of numbers.  If exports are bumped higher, so will imports.  The average estimate for the 13/14-crop year ending stocks is 134 million bushels, which would be down 1 million from last month.  Reflecting the huge projected acreage, the average estimate for the 14/15 ending stocks is 307 million bushels.  If correct that would be the largest ending inventory number since the 2006/07-crop year. In the World figures the trade is looking for 13/14 ending stocks of 69.77 MMT and for 14/15, 80.34, which as I mentioned yesterday would set a new record.

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