Weekly Cash Comments

Cash Commentary-

The cash markets were up this week, posting modest gains.

On average, corn gained 2 3/4 cents per bushel, securing the fourth week of gains. Ethanol plants saw positive movement as well up 5 1/2 cents. Ethanol production was off slightly by about 2,000 barrels at 1.01 MBPD. Stocks were lower as well, 504,000 barrels less than last week. Corn along the river gained 1 cent moving only slightly higher.

Soybeans gained an average of 2 cents per bushel. Crush facilities fell slightly by 1/2 cent this week. Palm oil hit a 4-year high on Thursday and continues to provide some support for soybeans.  Soybeans along the river regained last week’s losses gaining 8 3/4 cents.

Futures Commentary-

Grain futures closed November by moving lower. Corn was off 16 3/4 cents, soybeans off 4 1/2, and wheat down 28 1/4 cents.

On Monday, USDA’s crop condition for the US wheat crop held steady at 58 percent, unchanged from last week, but slightly better than last year’s reading of 55 percent. However, Plains states of OK/KS/TX saw declines in key HRW wheat conditions.

On Tuesday, USDA released their long-term forecasts for agriculture. Looking at their 2017 acreage numbers, expectations are for a big drop of 4.5 million acres in corn, while soybean acres are up only 1.8 million.

The forecast for the next week in South America will feature drier conditions in most crop areas as a strong high pressure system drives the weather pattern for at least five days. This high-pressure system will bring a brief pulse of moderately warm temperatures through Argentina and Brazil, but the strongest influence will be the suppressed rainfall as Argentina, Southern Brazil, and the eastern half of Center-West Brazil receive 0.4-1.2 inches below normal precipitation through the next 10 days.

Russia is expected to have another big grain crop in 2017, adding to a record crop this year and increasing pressure on prices, SovEcon told a conference on Wednesday. SovEcon also reported the first major industry estimate saying Russia could harvest 112.5 million tonnes next year compared with a record crop of 119.5 million tonnes expected this year.

On Wednesday, a state planner official reported China’s grain production will fall by 2.5%, or about 15 million tonnes, in the years leading to 2020 as the government withdraws severely polluted or degraded farmland for rehabilitation. Under the proposal, around 5 million hectares of land – about 4% of the country’s total arable land – will be taken out of production and either rehabilitated or turned over to forest or grasslands.

Palm oil was up overnight hitting a 4-year high on Thursday, while China soybeans posted modest gains but continues to be the highest it’s been in a year. China is reported to be doing most of its buying out of Brazil and only doing modest shopping with the US.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)

 

 

Morning Comments – December 02

Grains were higher in overnight trade trying to recover from two days of steep losses. In outside markets, crude oil reversed direction drifting back to the $50 mark and the US dollar dipped lower as well.

Wheat has been hammered this week as Southern Hemisphere production comes online. Australia is thought to have a bumper crop it’s harvesting with expectations north of 30 MMT versus USDA at 24 MMT. Argentina is offering new-crop wheat prices at 12.5% protein for export at $10 a MT less than US Fob prices for 11.5% protein.

Argentine growers have planted 46% of the 19.6 million hectares (48.4 million acres) expected to be sown with soybeans in the 2016-17 season with the country’s central farm belt enjoying good growing conditions, the Buenos Aires Grains Exchange said on Thursday.

Yesterday, USDA’s soy crush was reported to be at 175.9 MB a record large for October and for the first two months of the marketing year crush is up 3% over last year versus a USDA annual forecast of a 2.3% jump.

U.S. employers boosted hiring in November and the unemployment rate dropped to a more than nine-year low of 4.6%, making it almost certain that the Federal Reserve will raise interest rates later this month. Non-farm payrolls increased by 178,000 jobs last month. The solid gains in employment likely reflect rising confidence in the economy.

 

Morning Comments – December 01

Soybeans gained ground overnight, but turned sharply down on export sales news this morning. Wheat and corn continue to grind lower. Crude oil continued its climb advancing into the $50 range for the first time since October, while the US dollar was off in early trade.

Palm oil was up overnight hitting a 4-year high, while China soybeans posted modest gains but continues to be the highest it’s been in a year. China is reported to be doing most of its buying out of Brazil and only doing modest shopping with the US.

The forecast for the next week in South America will feature drier conditions in most crop areas as a strong high pressure system drives the weather pattern for at least five days. This high pressure system will bring a brief pulse of moderately warm temperatures through Argentina and Brazil, but the strongest influence will be the suppressed rainfall as Argentina, Southern Brazil, and the eastern half of Center-West Brazil receive 0.4-1.2 inches below normal precipitation through the next 10 days.

Japan’s Ministry of Agriculture bought a total of 158,514 tonnes of food quality wheat from the United States and Canada in a regular tender that will close late on Thursday. The global wheat market may came under pressure as Argentina and Australia’s wheat crop seems robust as harvest hits there. Argentina farmers are said to be eager sellers at harvest with big yields and no export taxes as in the past.

WEEKLY EXPORT SALES

Actual

Expected

Corn

761.6

900-1,200

Soybeans

1,399

1,000-1,400

Wheat

483.5

300-500

OPEC reached a deal to cut 1.2 million barrels per day in production. The cut of 1.2 was at the upper end of expectations (0.7-1.2 million bpd). An additional cut of 0.6 million bpd from non-OPEC countries could significantly add to what has been announced by OPEC.

 

Morning Comments – November 30

Grains swung back into positive territory overnight following Tuesday’s sharp selloff. Crude oil catapulted higher overnight gaining $3 a barrel on news OPEC would cut production.

USDA announces a sale of 123,000 MT of soybeans to China.

Palm oil was up sharply overnight but China soybeans and soymeal were off following the US lower from Tuesday. Crush margins and hog margins in China, but there is signs that they are starting to move to South America for supplies.

In the long-term China’s grain production will fall by 15 MMT, or about 2.5 percent, in the five years to 2020, as the government withdraws severely polluted or degraded farmland for rehabilitation, a state planner official said on Wednesday. Under the proposal, some five million hectares of land – about four percent of the country’s total arable land – will be taken out of production and either rehabilitated or turned over to forest or grasslands,

On Tuesday, USDA released their long-term forecasts for agriculture. Looking at their 2017 acreage numbers, call for a big drop of 4.5 million acres in corn and soy acres up only 1.8. Traders expect a much bigger swing high in beans and a less dramatic drop in corn. Yesterday was FND-eve, sending longs exiting heavily in Dec corn and wheat which contributed to widening of spreads to March and a sharp plunge in flat price.

Crude oil got a jolt as top oil producer Saudi Arabia said a deal was close despite some loose ends. Iran, which is considered crucial to a breakthrough because its output has been rising after western sanctions were lifted, said it was also “optimistic”.

 

Morning Comments – November 29

Grains were lower overnight led by soybeans which gave up most of Monday’s strong gains. In outside markets, crude oil fell sharply while equities and the US dollar sat in positive territory to start the trade day.

Yesterday, USDA’s crop condition for the US wheat crop held steady at 58% , unchanged from last week, but slightly better than last year’s reading of 55%. However Plains states of OK/KS/TX saw declines in key HRW wheat conditions. Egypt’s GASC was tendering for an unspecified quantity of wheat.

In Asian markets overnight, China’s Dalian Exchange soy futures were lower and palm oil took a breather from 6 days of advances. US basis levels continue to erode on the rally as end users showed sharp declines on Monday as farmer selling was active.

The CFTC report on Monday showed a continued expansion in fund longs in commodities and in particular funds at 15K contracts to soybean longs.  

In global markets, OPEC will meet in Vienna on Wednesday aiming to implement a deal outlined in September to cut output by around 1 million barrels per day from around 33.82 million bpd in October. But key OPEC members appear to disagree over details of the agreement and some analysts have suggested the meeting may fail to reach a deal or produce one that is unworkable.

Morning Comments – November 28

Soybeans started strong on the week holding on to double-digit gains overnight, but corn and wheat continued to sag. Outside markets saw crude oil trade both sides of unchanged but was heading into the day session in positive territory while the US dollar and equities were slightly lower.

Asian markets continued to show good strength as palm oil hits its highest market since 2012. China soybean futures were also up strong overnight posting a 26-cent advance. Meanwhile, in South America weather continues to be favorable with Argentina getting better than expected rains over the weekend as one third of the bean crop has been planted there.

In Brazil, rains hit 45% of the crop area there over the weekend and the 5-day calls for 50% coverage.  The longer-term forecast of 16-30 day forecast shows wet over northern Brazil and normal to below normal across southern Brazil and Argentina.

In global markets, Saudi Arabia has said they won’t attend meetings today & tomorrow ahead of the oil summit on Nov 30. There is some conjecture this may be signs of dissent in an oil output cut deal.

 

Weekly Cash Comments

Cash Commentary-

The cash markets saw relatively small gains this week with basis along the river beginning to taper off.

On average corn gained 1 1/2 cents per bushel, slowly grinding higher for the third week in a row. Ethanol plants saw gains as well up 2 1/4 cents. Ethanol production was off slightly, down 3,000 BPD. Even so, stocks remained high gaining 343,000 barrels. Corn along the river remained unchanged from last week.

Soybeans held onto last week’s numbers remaining unchanged both nationally and at crush facilities. Soy oil continues to get a boost from strength in palm oil market. Wednesday saw the largest movement higher for soy oil futures in the past year. Soybeans along the river saw relatively large losses this week, off 5 1/2 cents per bushel.

Futures Commentary-

Corn and soybeans saw strong movement from last week. Corn gaining 8 3/4 cents and soybeans surging higher with a 44 3/4 cent gain. Wheat was off 1 1/2 cents from last week.

Strong US exports and a robust demand from China sent soybean prices sharply higher on Monday. China’s October crush surged 24% year-on-year as the country continues to have a vigorous appetite for soybeans. China is said to be shopping for US beans to reduce shipping time from the US Gulf.

Looking at export competitiveness, US corn values were higher in against Europe, the Black Sea, and Brazil over the past week. In wheat, the US gained some competitive ground against Argentina and Europe, but fell against the Black Sea. US soybeans managed to improve on the week against Brazil and Argentina.

South African farmers are expected to bolster corn plantings by 35% over last year. South Africa’s Crop Estimates Committee (CEC) is expected to forecast the planted area at 2.62 million hectares, 35% higher than 1.947 million hectares planted last year, according to an average estimate of five trading houses polled by Reuters.

Brazil is expected to see favorable moisture over the next two weeks, while Argentina is expected to net drying in portions of the south and timely rain in the north late this week and into the weekend that will maintain favorable crop development conditions.

On Wednesday, the US Government announced finalized targets for bio-fuel use for next year, requiring that energy companies blend 19.28 billion gallons of renewables into the nation’s fuel supply. The Environmental Protection Agency (EPA) in a statement set the target for conventional bio-fuel, or ethanol, at 15 billion gallons and the advanced bio-fuel target at 4.28 billion gallons for 2017. The agency set the mandate for biomass-based diesel at 2.1 billion gallons for 2018. That compares with the total 18.8 billion gallons the Environmental Protection Agency proposed in May and would be up 6 percent from this year’s 18.11 billion gallons.

The USD got a boost from the US Durable Goods report which showed a pick-up in spending by 4.8% as expectations had been for only a 1.5% boost.

Crude oil got a boost to start the week on discussions by OPEC members with Iran to reach an output cut. Both sides discussed the prospects of upholding a production ceiling proposed in September in Algeria and, if it’s formalized, Iran’s oil minister said crude oil prices could rally up to 25 percent.

 

Morning Comments – November 25

Grains were closed overnight but will reopen for trade at 8:30 am CDT. In outside markets, the USD drifted lower while crude oil was off in early trade and equities were higher.

Lower output of palm oil into early next year and tight supplies of rival soybean oil are likely to bolster prices for the tropical product in the short term after they hit a four-year high this week. Higher mandates for biodiesel production in the United States and Indonesia will further squeeze inventories of palm oil, used in products ranging from candy to cosmetics and cooking oil. Palm oil futures rallied 1% overnight and is up 5.7% on the week.

Russia’s food safety watchdog said on Thursday it would have to introduce a quarantine that could hit agricultural exports if there were more outbreaks of African Swine Fever (ASF) at pork breeding facilities in the southern Krasnodar region. The watchdog said on its website a quarantine could affect, for example, grain exports. Analysts said this would be due to concerns ASF – a highly contagious hemorrhagic fever among pigs – could be transmitted via animal feed.

The dollar retreated against its major currency peers on Friday, a pullback in U.S. bond yields spurring some profit-taking as it headed for its best run in almost two years. Expectations of rises in U.S. inflation and interest rates have driven the greenback to a more than 6 percent gain over October and November, its strongest showing over a similar period since early 2015.

WEEKLY EXPORT SALES

Actual

Expected

Corn

1,668

900-1,200

Soybeans

1,898

1,200-1,500

Wheat

712

350-550

Morning Comments – November 23

Soybeans took a break from their two-day rally, giving up a dime in overnight trade. This drug down wheat and corn as well. In outside markets, the USD shot higher, making new highs on the move and reaching its highest point in 14 years; crude oil slipped in early trade.

The USD got a boost from US durable goods orders this morning.

Overnight a South Korea feed buyer bought 55,000 MT of optional origin corn but it is thought to be sourced from the US. Indonesia hopes to stop importing corn in 2017, an agriculture ministry official said on Wednesday, referring to a national program aimed at achieving self sufficiency in basic foods. “We’re making a nationwide corn development program, with the hope that from 2017 we no longer import corn,” Nasrullah, director of animal feed at the ministry, told Reuters.

In soybeans, spec funds are said to be extending their length in this rally, all the while spot basis levels continue to erode. US Gulf export basis is off about 5 cents in the past few days, and is trading 30 cents a bushel below the same time last year.

The USD got a boost from the US Durable Goods report which showed a pickup in spending by 4.8% as expectations had been for only a 1.5% boost.

In export competitiveness, US corn values were higher in against Europe, the Black Sea, and Brazil over the past week. In wheat, the US gained some competitive ground against Argentina and Europe, but fell against the Black Sea. US soybeans managed to improve on the week against Brazil and Argentina.

 

Morning Comments – November 22

Grains were mildly lower overnight although prices in China continued to surge. The two-day gain for Chinese soy prices is +38 cents and soymeal up $14. In outside markets, bonds, equities and the US dollar were in positive territory while crude oil gave back some of the $2 a barrel gains from Monday.

USDA reported 30,000 MT of soybean oil to China.

Strong US exports and a robust demand from China sent soybean prices sharply higher on Monday. China’s October crush surged 24% year-on-year as the country continues to have a vigorous appetite for soybeans. China is said to be shopping for US beans to reduce shipping time from the US Gulf.

South African farmers are expected to bolster corn plantings by 35% over last year. South Africa’s Crop Estimates Committee (CEC) is expected to forecast the planted area at 2.62 million hectares, 35% higher than 1.947 million hectares planted last year, according to an average estimate of five trading houses polled by Reuters. The CEC will announce the data on Thursday.

OPEC experts discussing how to implement a plan to cut oil output are likely to reach agreement later on Tuesday, a Nigerian delegate said, a possible sign of progress in finalizing the group’s first supply-limiting deal since 2008. The key issue before the committee is how to implement a September agreement by the OPEC Countries to reduce production to between 32.5 million and 33 million barrels per day in an effort to prop up prices.

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