Weekly Cash Comments

Cash Commentary-

Basis levels were generally firmer this week, although variability in basis movement has picked up on a fast-moving futures market. For the week, US average corn basis was up 1.5 cents while soybean basis bounced up 2 cents.

Bean basis showed the most volatility this week as there was a distinct difference on basis movement by end user. Soy plants as a group moved basis higher by 4 cents a bushel as crush margins improved although soymeal cash offerings are still running weak. At river terminals, however, basis levels were off 4 cents a bushel with losses of 5 to 10 cents fairly typical in some regions. Gulf basis has been weakening suggesting a potential slowdown in export movement.

For corn, basis levels were generally firmer this week. Ethanol plants as a group were up 2.3 cents a bushel as farmer selling is non-existent on recent price weakness and busy planting activities.  At river terminals, basis was up 1.5 cents although the Gulf was slightly weaker on the week.

Futures Commentary-

Grains were mixed this week with corn and wheat losing 14 cents a bushel, while soybeans held a 6-cent advance but seemed poised to move lower in coming weeks.

US early season growing conditions continue to be nearly ideal. Planting progress for both corn and soybeans sped along last week with US corn planting reaching 45% complete as compared to 30% in the previous week, while soybeans are at 8% planted versus only 3% last week.

Winter wheat crop ratings also continued their uptrend hitting 61% good-to-excellent versus 59% previously. This week the Kansas crop tour found a bumper Kansas crop in spite of lower acres there. They pegged the state’s crop at 382.4 MB, up from 321.9 MB. Export business for wheat has been non-existent as US wheat continues to find few buyers with cheap French and Australian wheat continuing to gain the market share.

In soybeans, Argentina’s crop losses from flooding continue to be a topic keeping the market on edge. Analysts have projected losses ranging from 4 MMT to 9 MMT with most of the consensus at this stage pointing to a 5 MMT loss. Weekly export sales for soybeans were robust with old-crop of 800,000 MT and new-crop of 443,000 MT, but prices quickly turned lower on Thursday as rumors of the Chinese government releasing 5 MMT of soybeans from reserves to auction into the domestic market. If confirmed, the 5 MMT figure is ironically about the magnitude of the crop loss in Argentina that is currently being projected by most analysts. Also, export bids from the Gulf were off sharply this week at +15N versus +38N normal for this time of year.

In corn April’s dry weather for Brazil has likely cut into yields for their 2nd season corn crop there. Brazilian analyst AgRural cut its forecast for Brazil’s winter corn crop by 10 percent on Thursday to 48.9 MMT due to damages from hot, dry weather in the center-west. But, US export demand has turned a bit light. Weekly old-crop sales were at the low end of analyst expectations coming in at just over 700K MT versus expectations of 700-1,100K MT, but new-crop sales were dismal at only 60K MT booked.

Morning Comments – May 06

Grains took a breather from yesterday’s sharp selloff to recover a few cents in overnight trade. In outside markets, crude oil dipped lower and equities were trading down on weak employment data this morning.

Yesterday started with strong export sales for soybeans with old-crop of 800,000 MT and new-crop of 443,000 MT, but prices quickly turned lower yesterday as rumors of the Chinese government releasing 5 MMT of soybeans from reserves to auction into the domestic market. If confirmed, the 5 MMT figure is ironically about the magnitude of the crop loss in Argentina that is currently being projected by most analysts.

In wheat, the Kansas wheat tour wrapped up pointing to a bumper Kansas crop in spite of lower acres there. They pegged the state’s crop at 382.4 MB, up from 321.9 MB. In news this morning, Stats Canada pegged all wheat stocks there at 13.8 MMT, in line with analyst expectations going into the report.

Stock markets slid sharply on Friday and the dollar fell after U.S. non-farm payrolls numbers came in well short of forecast, adding to concerns over the pace of economic growth that have weakened investors’ appetite for risk globally. Futures prices showed Wall Street set to open as much as half a percent lower while stock markets in Europe deepened morning falls, sending global indices towards their worst weekly losses since early February.

Morning Comments – May 05

Grains posted gains in the overnight session with soybeans leading the complex higher. Corn and wheat were mostly flat in the night session with listless trade.

On Wednesday, soybeans saw an early morning run into the $10.45 territory that was previous highs before heading lower into the $10.30 mark. The market continues to mark time waiting for more bullish news on Argentina’s soy crop but nothing has materialized of yet. In Brazil, currency values there have reversed higher in the last two trade sessions after moving 3% lower at the start of the week. Meanwhile, the US dollar continues to recover from its week of losses, now in its third day of recovery. The basis at the US Gulf was off 6 cents yesterday.

In wheat, news from the Kansas crop tour continues to show a solid wheat crop. Tour participants continue to see average yields in the 45 bushel per acre range, well above last year. Wheat is suffering from a lack of solid export business and even with decline in the US dollar, US wheat continues to trade  continues to trade at a $32/MT premium to French wheat, only slightly off the highs of a $35/MT premium when the US dollar was 6% higher.

WEEKLY EXPORT SALES

OC-Act OC-Exp NC-Act NC-Exp
Corn 769.3 750-1,100 60.5 150-350
Soybeans 815.8 400-600 430 200-400
Wheat 178.9 0-300 140 200-400

 

Morning Comments – May 04

Grains continued to move lower following yesterday’s sharp selloff. Corn hit fresh weekly lows, while soybeans got closer to short-term support in the $10.18 to $10.20 area. In outside markets, crude oil posted modest gains after yesterday’s steep slide while the US dollar index continued to drift lower.

Yesterday brought heavy selling to soybeans as a sharp drop in the Brazilian Real and Argentina crop estimates that were not as bad as expected. Informa on Tuesday pegged the Argentina soybean crop at 55 MMT. Early in the week Argentina’s state weather agency suggested a crop of 51 MMT.  Another analyst, Dr Cordier who specializes in South America, said the crop could come in at 53 to 54 MMT but it is still too early to tell.

In wheat, the Kansas crop tour on Tuesday found above average yields in much of Northern Kansas. Recent rains have boosted crop prospects following excessively dry weather earlier in the year but also raised the threat of diseases such as the stripe rust that was detected in some fields surveyed by crop scouts.

In corn, Brazil saw no rain in the last 18 hours. Brazil rain forecasts remain mixed. Private analyst Celeres trimmed their estimates of Brazil second crop corn production by 10% from prior to 52.8 mmt – a call echoed today by Agroconsult.  A boost in Brazil rain is still needed from Goias into Minas Gerais and northern Sao Paulo.

In crude oil, prices were awaiting direction from the weekly EIA crude stocks report later this morning. Analysts expect a 1.2 million barrel build in stocks on the week, which would mark another weekly inventory high. The American Petroleum Institute, an industry group, said late Tuesday that its own data for that week showed a 1.3-million-barrel increase in crude supplies. In addition, a gauge of China’s manufacturing industry reported Tuesday by Caixin Media Company Ltd. and Markit Economics fell in April, marking the 14th straight month of contraction.

 

Morning Comments – May 03

Soybeans climbed to new heights overnight while corn and wheat posted modest gains. In outside markets, the US dollar index was making a run at 7 days of losses while equity futures and crude oil were also weaker.

Soybeans got a boost overnight when news late Monday suggested crop losses in Argentina were going to be around 9 MMT versus previous estimates of 5 MMT.  In other South America news, crops analyst Celeres sharply lowered its forecast on Monday for Brazil’s second annual corn crop by 10 percent to 52.8 MMT from the previous month due to bad weather over the main growing areas.

However, US early season growing conditions continue to be nearly ideal. Planting progress for both corn and soybeans sped along last week with US corn planting reaching 45% complete as compared to 30% last week, while soybeans are at 8% planted versus only 3% last week. Winter wheat crop ratings also continued their uptrend hitting 61% good-to-excellent versus 59% previously.

In currency news, Brazil’s Real took a second day to the downside, giving up nearly 3% from the high’s set on Friday. Monday’s closing prices for Brazil & US port export prices for soybeans showed Brazil at a $10/MT premium to US beans. Two weeks ago US soybeans were $3/MT more expensive than Brazil.

Oil futures dropped on Tuesday, with renewed fears of a supply glut hitting investor confidence ahead of weekly inventory data that are expected to show an increase in crude supplies. Reports said on Monday that energy data provider Genscape reported a weekly climb in crude stockpiles of more than 800,000 barrels at Cushing.  API weekly crude stocks will be released this afternoon.

Morning Comments – May 02

Grain markets were subdued overnight with grains showing modest losses in fairly limited trade. In outside markets, the US dollar hit fresh lows late in the morning session while crude oil was weaker on the night but was coming back closer to unchanged.

On Friday a number of analysts trimmed the Brazil corn crop estimate as heat stress has taken its toll on the 2nd crop there. Analyst AGR BRASIL reduced its Brazil 2015/16 corn forecast to 79.6 MMT from 85.1 MMT in March. Meanwhile analyst Franca pegged it at 79.5 MMT versus 87.1 MMT in March.

Most of this week will be dry in Brazil’s main agricultural areas. Some random showers will occur near the coast from Minas Gerais and Rio de Janeiro to eastern Bahia and a few may occur infrequently from northern Mato Grosso to Tocantins. The impact will be one of net drying for most of the nation and immature second season corn production areas will slowly dry out once again, but many crops will be in favorable condition because of rain that fell last week.

In Argentina, A favorable weather pattern is expected through the next ten days with restricted rainfall and mild to warm temperatures. The environment will favor better harvest conditions as time moves along. No meaningful rain is expected through Thursday morning. Some showers will evolve Thursday afternoon and Friday in portions of the nation. Some of the shower activity will linger into early next week.

Oil prices edged back from 2016 highs on Monday as rising production in the Middle East outweighed a decline in U.S. output and a sliding dollar. Crude production by the Organization of the Petroleum Exporting Countries rose in April to 32.64 million barrels per day (bpd), close to the highest level in recent history. Iraq’s April exports from southern fields increased, as did seaborne exports from Russia, the biggest exporter outside OPEC.

 

Weekly Commentary

Grain basis was flat this week with both corn and soybean basis holding steady at week ago levels.

However, the river markets continue to push basis levels higher as export demand continues to be robust, especially for this time of year. Corn basis at river terminals averaged a 2-cent advance on the week while soybean basis was up only modestly.

End users as a group were relatively flat this week with no significant change in corn or soybean plant basis on the week.

Futures Commentary-

Market volatility increased in grains this week with front-month soybean futures hitting fresh highs on the bull run but finished the week unchanged. Wheat was off 18 cents while corn was up 1.5 cents.

USDA’s crop progress report showed a big jump in corn plantings this week with 30% of the US crop planted, up from 13% last week and a 16% 5-yr average. The first reading for soybeans was 3% planted, slightly better than the 2% planted rate which is normal for this time of year. Winter wheat conditions improved 2% to reach 59% in good-to-excellent condition. Most of the improvement was in HRW states from TX to SD which saw ratings jump 3 to 4% on the week.

Corn continues to find strength from yesterday’s big export sales report showing 2.6 MMT combined for old- and new-crop deliveries, the highest weekly total in 4 years. The weakness in the US dollar continues to make US grains more attractive. Argentina’s port price is running at $6 a MT higher than the US price versus in December when Argentina’s price was $7 a MT cheaper than the US.

In weather, rains will favor much of the Plains hard red winter wheat belt, with weekend showers reaching much of the central/southern Midwest and Delta. The Midwest/Delta then will see favorably dry weather for seeding in nearly all areas for most of next week, with a return of 11 to 15 day rain posing the next interruption to fieldwork. Overall, planting should remain at a favorable pace, and any concerns with excess moisture will remain localized.

In South America, Argentina was dry on Thursday, with lows in the mid-30s to low 40s. Unseasonably cold air lingers this weekend, but frost threats remain minimal for double-crop soy. Mostly dry weather now looks likely to persist through much of the next two weeks, allowing corn/soy harvest to recover. Second season corn in Brazil from Mato Grosso through southern Goias to Sao Paulo and Parana will not receive much precipitation over the next week. Brazil showers this weekend will produce 0.10 to 0.75 inch of rain from far northeastern Sao Paulo, Rio de Janeiro and Minas Gerais to northern Goias and parts of Tocantins.

Morning Comments – April 29

Corn found more strength overnight while soybeans was off slightly but improved from its lows on the nights. Wheat was higher as well. In outside markets, crude oil continued to climb getting above $46 a barrel while the US dollar came under pressure.

Corn continues to find strength from yesterday’s big export sales report showing 2.6 MMT combined for old- and new-crop deliveries, the highest weekly total in 4 years. The weakness in the US dollar continues to make US grains more attractive. Argentina’s port price is running at $6 a MT higher than the US price versus in December when Argentina’s price was $7 a MT cheaper than the US.

In weather, rains will favor much of the Plains hard red winter wheat belt, with weekend showers reaching much of the central/southern Midwest and Delta. The Midwest/Delta then will see favorably dry weather for seeding in nearly all areas for most of next week, with a return of 11 to 15 day rain posing the next interruption to fieldwork. Overall, planting should remain at a favorable pace, and any concerns with excess moisture will remain localized.

In South America, Argentina was dry yesterday, with lows in the mid-30s to low 40s. Unseasonably cold air lingers this weekend, but frost threats remain minimal for double-crop soy. Mostly dry weather now looks likely to persist through much of the next two weeks, allowing corn/soy harvest to recover. Second season corn in Brazil from Mato Grosso through southern Goias to Sao Paulo and Parana will not receive much precipitation over the next week. Brazil showers this weekend will produce 0.10 to 0.75 inch of rain from far northeastern Sao Paulo, Rio de Janeiro and Minas Gerais to northern Goias and parts of Tocantins.

 

Morning Comments – April 28

Grains were mixed overnight with corn and soybeans posting small losses while wheat posted a modest gain. In outside markets, the US dollar continued to sink while crude oil had a modest drop after hitting fresh highs in the previous session.

On Wednesday, Argentina’s grain exchange said one third of soybean farms remain swamped after early April storms, with crop loss estimates at 5 MMT as harvesting starts in areas dry enough to support field work. The exchange estimates this year’s crop at 59 MMT, a forecast that is likely to fall in the weeks ahead as the sun comes out and farmers measure flood-related losses. Last week the Buenos Aires Grains Exchange chopped its harvest forecast to 56 MMT from 60. The first cold front of the Southern Hemisphere autumn hit Argentina on Sunday, ending the rains. Mostly fair weather is expected in May, which should allow harvesting machines to get to farms left isolated when floods washed out the poorly maintained roads that crisscross the Pampas.

In the US, the Midwest is slightly drier Sunday. Abundant rains in central and southern areas through the weekend will slow corn and soybean planting, but will improve soil moisture, especially in western areas. The 6-10 day outlook is warmer in northwestern areas. The Plains are wetter in northwestern areas in the 6-10 day period. Additional widespread showers through the weekend will continue to build moisture and winter wheat conditions. The rains will be most beneficial in southwestern areas.

Saudi Arabia’s main state grain agency, the Saudi Grains Organization (SAGO), said on Thursday it was seeking 550,000 MT of hard wheat in a tender.   The wheat should contain 12.5 percent protein and will be for shipment from July to August, SAGO said in a statement.   The deadline for offers is Friday, it said.

The Federal Reserve kept interest rates unchanged on Wednesday but signaled confidence in the U.S. economic outlook, leaving the door open to a hike in June.   The U.S. central bank’s policy-setting committee said the labor market had improved further despite a recent economic slowdown and that it was keeping a close eye on inflation.   It added that global economic headwinds remained on its radar, but removed a specific reference from its last policy statement to the risks they posed. The US dollar initially reversed its recent slide on this news but continued lower in the night session, giving up 0.5%. The US dollar index has lost 5% of its value since March 1.

WEEKLY EXPORT SALES

OC-Act OC-Exp NC-Act NC-Exp
Corn 2,160 1,000-1,300 440 200-400
Soybeans 226 400-600 720 300-500
Wheat 351.9 75-175 454.7 300-450

 

Morning Comments – April 27

Grains were weaker overnight but seemed to finding some pullback heading into the morning break. Meanwhile, crude oil continues to hit fresh highs on this rally, posting a $1 a barrel gains going into the day while equity futures were sharply lower.

On Tuesday, South Africa was said to expect a 7.054 million tonnes of maize crop in 2016, 29.1 percent less than the 9.95 million tonnes reaped last year because of a drought and late plantings.   The forecast harvest, which the Crop Estimates Committee (CEC) said would be the smallest crop since 2007, is 5.3 percent above market expectations of 6.7 million tonnes, according to a Reuters’ poll of traders.

Also on Tuesday, Brazil has given grain trading companies an initial quota of 100,000 tonnes of tariff-free corn on purchases outside of the Mercosur trade bloc, the trade ministry stated in the official gazette on Tuesday. However, Brazil food processor BRF says it has imported corn from Mercosur countries and does not expect to import from outside countries.

Rains were heavy across the Southern Midwest yesterday bringing 1 to 3 inches of rain. The Central and Southern Plains continue to see rains as well. In South America, Argentina was dry in the past 18 hours while Brazil continued to see good rain coverage helping aid dry soils there.

In crude oil, API stocks data on Tuesday showed a drop in crude stockpiles of 1.07 million barrels on the week, while traders had been expecting a 0.8 million barrel build. Official government data from EIA will be released at 9:30 am CDT today and is expected to show a 2.366 million barrel build.

 

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