December 17 – Morning Comments

Wheat prices continue to climb as the market monitors the effect of certain restrictions that have been imposed by the VPSS.

In the overnight session corn, soybean and wheat are all trading higher. Corn improved 3 ¼ cents, soybeans is up 3 ½ cents and wheat is trading 13 ½ cents higher this morning. The wheat market is continuing focus on the developments in Russia as yesterday’s announcement that the Veterinary and Phytosanitary Surveillance Service has restricted grain export certificates for some countries.

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Yesterday was a strong deviation within the grains with corn trading a few pennies lower, wheat showing strength and soybeans sliding 16 cents by the close of the session. Soybeans which traded lower on Monday following a disappointing NOPA crush report saw more disappointment in export sales after 6 major Chinese buyers bought just over a million metric tons of soybeans for delivery in 2015.  Traders viewed these sales as routine considering how widely publicized the sales were. In the overnight session January soybeans went as low as $10.16.

Yesterday there was talk that China has approved a genetically modified strain of corn developed by Syngenta. This has not yet been confirmed with an official announcement, but the implications of the strain being approved could foreshadow stronger demand for corn or corn based products out of the U.S.  Last week Chinese firms bought 900,000 metric tons of DDG’s from the U.S. for delivery between December and March.

Note: Friday Informa Economics will issue its 2015 acreage update.

December 16 – Morning Comments

Corn and soybeans are trading lower this morning with corn down 2 ¾ cents, soybeans down 9 ¾ cents and wheat trading 6 ¾ cents higher. Wheat continues its move higher as Russian policy aims at curbing exports.

Yesterday, NOPA crush numbers were released at 11 AM CST and came in on the low side of analyst expectation with 161.211 million bushels crushed in November. The average expectation for this report was 165.404 million bushels compared to last year’s November total of 160.145. Analysts ranged from 161 to 176 million bushels. It is important to note that near term demand has been the force lifting soybeans since the beginning of October. Today, more demand news is expected from Chicago as six major soybean buyers from China are expected to sign large purchases. With the first of two major demand stories behind us, soybeans may have a tough time maintaining strength into the end of the week.

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Export inspections yesterday showed that Wheat outperformed analyst expectations with 385,974 metric tons inspected for export. Corn disappointed the market with only 546,515 metric tons inspected and soybeans met analyst expectations with 1,820,364 metric tons inspected for export.

This morning wheat prices continue to rise on news from the Russian Agriculture minister after he stated a plan to buy 3.5 million metric tons of grains for state stocks in an attempt to raise Russian grain prices. Yesterday, the slide in the ruble was the largest one-day fall since 1998 and triggered the Russian Central Bank to raise its key interest rate to 17 percent from 10.5 percent. The ruble hit a record low of 80 rubles per dollar.

 

December 15 – Morning Comments

Grains started the week in mostly positive territory with soybeans advancing 5 cents while corn was up 3. Wheat was fractionally lower in the night trade.

Corn was bolstered in the night session after Friday’s announcement by Syngenta that it was close to approval by China for its MIR 162 variety that has caused US corn trade to China to come to a standstill. The U.S. Grains Council said late Friday it hopes for confirmation of approval “in the coming days.” Although China has had limited imports of corn in recent years, if approved it would give the market a psychological lift.

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In wheat, Russia’s ag minister reiterated overnight that the country has no plans to restrict its wheat exports. In Ukraine, the weather shows signs of a warming trend where cold weather has been the norm. Well-below normal temperatures have been in control across the Ukraine winter wheat region since the crop was planted back in September. Forecasts call for near to above normal temperatures through much of next week.

For soybeans, traders will be watching today’s monthly NOPA crush estimate. Industry analysts expect a large crush estimate, which is expected to show a record high of 165.4 MB for November. In South America, production prospects still look promising for a bumper crop. Although USDA left their soy crop estimate for South America unchanged in last week’s report, private analysts continue to predict higher production levels. In Brazil, rainfall across the region has been above normal over the past 30 days.

 

Geo Grain Weekly Comments – December 12

Weekly Cash Commentary-

Higher futures prices and aggressive farmer selling helped keep soybean basis unchanged for the week, while US average corn basis rose 2 cents a bushel.

For soybeans, river terminals were hard hit this week slipping 5-cents a bushel as weakness at the Gulf combined with an uptick in barge rates pushed basis levels lower. For soybean plants, basis levels were mixed as some plants in the Eastern Cornbelt raised basis levels while some in the West lowered their basis.  On average, soybean plants as a group were off 2 cents a bushel for the week.

In corn, river terminals were also hard hit by weakness at the Gulf and higher barge freight with basis levels 4 cents lower for the week. Ethanol buyers continue to bid aggressively for corn as spot ethanol prices continue to defy the steep sell off in crude prices. Crush margins for ethanol producers continue to be favorable and this week’s production figure of 988,000 barrels per day was a marketing year high and putting year-to-date production 4.6% above last year’s tally. Basis levels for ethanol buyers were up 2 cents on average, although some plants were lower on the week thanks to increased farmer selling.

Weekly Futures Commentary-

For the week ending Thursday December 11th, the grains closed higher with corn up 8 ¾ cents, wheat up 7 ¾ cents and soybeans up 31 ¾ cents. The highlight of this week was the release of the USDA Supply and Demand report on Wednesday which showed a larger revision in soybean ending stocks than analysts were expecting.

Soybean ending stocks were revised lower by 40 million bushel from the November forecast. Ending stocks were reported below the average trade guess of 427 MBU coming in at 410 million bushels this month.  All 40 million bushels came from an increase to export sales which have been running ahead of pace this year. According to our models at Grain Hedge export sales for soybeans have already booked 40.5 MMT which is well ahead of the 33.8 MMT of seasonally expected sales needed to meet USDA expectations. Despite the strong demand in export sales, ending stocks are still expected to be the highest we’ve seen since the 2006/07 marketing year.

Ending stocks for corn fell below 2 billion bushels this report with 1,998 million bushel ending stocks which surprised analysts who were expecting an increase in ending stocks by 19 million bushels. The 10 million bushel decrease in ending stocks was a sole result of Food, Seed and Industrial column. Export sales and ethanol production were both unchanged in the December report. According to our models, export sales are running ½ a million metric tons behind the pace needed to meet the existing USDA expectations. Ethanol production continues to be strong this week with the EIA reporting 988,000 BPD of production, another marketing year high. Crush margins are fat in the short term, but the longer term outlook for ethanol margins looks gloomy with oil now under $60 per barrel.

Wheat ending stocks met analyst expectations exactly with ending stocks being raised 10 million bushels to 654 MBU. The increase in supply on the balance sheet came from a revision in imports. The market was trading lower going into the report and had a negative reaction immediately following the release of the report. On Tuesday, the Deputy Prime Minister of Russia stated that they are not discussing export restrictions which pressured the market lower following the release of that statement.

Next week we will see important demand numbers in the Soybean complex with NOPA crush numbers scheduled for release on Monday. Expectations are for a record 165.404 million bushels of crush and soyoil stocks seen at 1.156 billion lbs. according to a Reuter’s poll. Export sales will be important next week with six Chinese soybean buyers expected to sign agreements with U.S. exporters to buy an unspecified amount of soybeans. During a similar signing ceremony back in September 4.8 million metric tons of U.S. soybeans were purchased.

December 12 – Morning Comments

Grains extended their gains in the overnight session with front-month March wheat futures climbing above $6 a bushel but hitting resistance at $6.10. Corn and soybeans were also up posting 5 cent advances at the end of the night trade.

On Thursday, Egypt’s GASC announced the results of their wheat tender with Russia garnering most of the business. Prices came in around $252 per MT and were $30 lower than the only US SRTW wheat offer. Nonetheless, US interior values continue to be robust. Millers in Illinois continue to bid aggressively for wheat with basis levels for spot delivery about 50 cents a bushel higher than normal for this time of year.

For soybeans, the market continues to be buoyed by strong export demand. Current export commitments for US soybeans have eclipsed 40 MMT while USDA has pegged total exports for the year to reach 47.9 MMT. Traders also look for a large crush estimate in Monday’s monthly NOPA release, which is expected to show a record high of 165.4 MB for November.

In corn, export business was on par with expectations last week, but overall commitments year-to-date are on par with the pace needed to reach USDA’s annual forecast. Ukraine is said to be having problems meeting corn contracts signed with China in. Private feed mills in China signed contracts in October to 1.1 MMT but the Ukraine supplier is unlikely to be able to ship all of the contracted volume before the February deadline.

December 11 – Morning Comments

Grains were mixed overnight with wheat once again pushing lower with 6-cent losses and trying to add to its three day losing streak.  Corn and soybeans were up modestly with one and three-cent advances, respectively following yesterday’s sharp sell-off.

Wednesday’s USDA report on supply and demand provided little shift in trader’s opinion on pushing prices lower. Even though USDA came in with lower US corn and soybean carryout than had been expected by industry analysts, prices still fell sharply on an outlook of growing world supplies.  USDA left their forecast unchanged for South American soybean production, but private analyst groups continue to point to higher production than USDA. The weather outlook shows southern and western Argentina favored for occasional showers next 10 days and the potential for rain in Brazil in the coming days. Precipitation during the growing season has been about 30% below normal.

In corn, USDA increased slightly their projection for industrial corn use in the US by 10 MB which helped trim ending stocks. But, ethanol continues to be running ahead of last year’s production thanks to favorable processing margins. Year-to-date production of ethanol is 4.6% ahead of last year’s mark for this time of the year, but the prospect of falling ethanol prices down the road might curb production.

For wheat, Egypt’s GASC issued a call for wheat tenders on Wednesday but the US will likely be shut out of the business with French & Russian wheat expected to be more competitive. Industry insiders continue to suggest that Russia will not curb its wheat export business. SovEcon has not issued an official forecast for 2015-16 wheat production, but director Andrey Sizov’s personal estimate is for 50 to 55 MMT of wheat, down from 59 MMT this year.

WEEKLY EXPORT SALES (in thousand metric tons)-

Estimates Actual
Corn 800-1,000 963
Soybeans 700-1,000 810
Wheat 250-450 442 OC / 84 NC

 

 

December 10 – Morning Comments

Grain markets were mixed overnight with wheat continuing to come under selling pressure, losing 5 cents a bushel and off 30-cents from last week’s high. Soybeans found strength in the night trade posting a 2-cent advance while corn was down 2 cents a bushel.

Traders will look for better guidance today when USDA releases their monthly Supply & Demand Report at 11 am CDT. Analysts as a group expect USDA to increase corn and wheat carryout projections in this month’s report compared to the November forecast. But, for soybeans, the average trade estimate shows analysts looking for a cut in US carryout from 450 MB in November to 427 MB this month. Strong export demand for soybeans is helping fuel expectations of slimmer stocks. On Monday, representatives of six Chinese soybean buyers said they would sign an agreement later this month with U.S. exporters to buy an unspecified amount of soybeans. China, the world’s largest soybean importer, is forecast by USDA to buy 74 MMT of the oilseed from global suppliers this year. A similar signing ceremony in Milwaukee, Wisconsin, in September yielded purchase agreements for 4.8 MMT.

PRE-REPORT US ENDING STOCK ESTIMATES (in million bushels)

Analyst Estimates USDA Nov Forecast
Corn 2,027 2,008
Soybeans 427 450
Wheat 654 644

Overnight, CONAB pegged Brazil’s soybean crop at 95.8 MMT up sharply from their previous forecast in November of 90.5 MMT. This compares to analyst estimates of 93.4 MMT going into the USDA report this morning. For corn, analysts expect USDA to cut their output projection for Brazil to 74 MMT from last month’s projection of 75 MMT. A late soybean planting season has analyst’s looking for a smaller second-crop of corn in Brazil this year.

In wheat, Russia’s assertions that it has no intention of resorting to export restrictions appear to be having a calming effect. Previously, it had been feared that Russia might attempt to increase the quantity of wheat available in the country by prohibiting exports. Domestic demand for wheat is growing in Russia because of the Russian ban on EU imports, yet drought and cold weather are posing a threat to young plants in the 2015 crop. Overnight, Farm office FranceAgriMer raised its forecast for French soft wheat stocks at the end of the current 2014/15 (July/June) season to a 10-year high of 4.55 MMT from 4.3 MMT estimated last month.

December 9 – Morning Comments

Going into the morning pause in trade corn is down 3/4 of a cent, soybeans is up 1 3/4 cents and wheat is down 7 3/4 cents after the Russia deputy prime minister says Russia is not discussing grain export restrictions.

Wednesday, the USDA Supply and Demand report will be released at 11:00 AM CST. In a survey of 20 analysts by Reuters these are the average analyst expectations.

Corn ending stocks are expected to increase by 19 million bushels in the U.S. to 2.027 billion bushels of carryout for 14/15. World grain stocks for corn are expected to decline slightly to 191.42 million metric tons compared to a November forecast of 191.5 MMT. Wheat ending stocks are expected to rise by 10 million bushels in the U.S. to 654 million bushels while the global ending stocks are expected to fall by just over 1 MMT to 191.75 MMT compared to 192.9 MMT in November.

Soybean ending stocks are expected to decline by 23 million bushels to 427 MBU reflecting strong export demand and crush numbers. Global ending stocks are expected at 89.70 MMT down from 90.28 MMT.

Argentina and Brazil will be in focus as both countries are early in their growing season. Expectations are for increased corn production in Argentina by .7 MMT to 23.07 MMT, while in Brazil corn production is expected to decline from Novembers report by nearly 1 MMT to 74.01 MMT. Argentina is expected to increase soybean production by .45 MMT to 55.45 while Brazil is expected to reduce its soybean production by .6 MMT to 93.39 MMT.

December 8th – Morning Comments

In the overnight session corn is trading up 1 ½ cents, soybeans fell 4 ¾ cents and wheat slipped 3 ¼ cents lower. This morning two reportable sales were announced including 136,000 metric tons of corn to Japan and 130,000 metric tons of soybeans to Spain. Both sales were for delivery in this marketing year.

There is some talk about Chinese buying interest in DDG’s this morning, with more than two boats of U.S DDG’s arriving in south China without any issues so far. U.S DDG’s had been rejected earlier this year due to an unapproved strain of corn, but tighter supply in canola meal out of Canada and the slow start to U.S soybean harvest may have depleted DDG supplies. If there are no problems with these U.S shipments, this might signal a loosening policy toward DDG imports in China.

No significant weather problems have developed in South America yet this growing season. Brazil looks to see drier weather in the 6-10 day forecast which will limit the risk of excess moisture in that region. Argentina will be getting more precipitation in the 6-10 day outlook with the majority expected in the northern part of the country.

Broader economic concerns were introduced to the market after the General Administration of Customs showed that imports dropped 6.7%, and exports rose only 4.7% from last year. Imports unexpectedly dropped the largest amount since March leaving market participants concerned that this may signal a slowdown in the world’s second largest economy.

Weekly Comments – December 05, 2014

Cash corn basis was up strongly this week advancing 5 cents a bushel on average across the country while futures prices remained relatively flat on the week. In beans, basis levels moved higher but by only 3 cents a bushel.

Barge rates continued to move lower this week but appear to be reaching a level of stability after sliding nearly 60 cents a bushel in the past 6 weeks. Lower barge rates helped lift basis levels along river terminals this week. Corn basis along the river was up 5 cents a bushel, while bean basis was up 6 cents a bushel.

End users also were up on basis this week as ethanol plants as a group gained 5 cents a bushel. However, double digit basis gains of 10 to 15 cents a bushel were fairly typical in the Western Corn belt this week.  For soybean plants, basis level gains were more subdued, posting only a 3 cent advance on the week. While some plants did have 10 cent or better advances, there were a fair number of plants dropping basis by a dime in the Western Corn belt.

Wheat outperformed in the grains this week improving 27 cents, compared to corn which fell 1 ¾ cents during the same time period. Soybeans lost 36 ½ cents for the week ending 12/4/2014. The wheat market moved sharply higher on Monday after Russia introduced new regulations which are likely to curb grain exports out of their country. With the Ruble declining and a bumper crop harvested last year, exports have been thriving, increasing around 30% over last year’s exports at this time. Now Russia is trying to take steps to ensure enough supply is available for domestic use. The Veterinary and Phytosanitary Surveillance Service (VPSS) introduced new regulations to check grain quality, storage facilities and machinery which will most likely result in declining grain exports as it slows the movement and increases the cost to export.

Weather in Ukraine and Russia is also helping to support wheat prices. Freezing conditions in the Volga valley are damaging wheat crops which have already been stressed by a lack of moisture this fall. Falling temperatures and limited snow cover has created winter kill scenario’s that could impact as much as 15% of FSU wheat.

Ethanol production and stocks numbers were reported on Wednesday showing a slight drop in production week over week. Last week was a Holiday shortened week and production numbers were still very strong, but analysts are concerned about longer term demand with the crude oil outlook expecting a depressed pricing environment in the future. Last week ethanol production numbers declined 20,000 barrels per day week over week to 962,000 barrels per day. Ethanol stocks increased 217,000 barrels per day to 17.29 million barrels.

Export sales this week showed wheat sales came in on the low side of expectations only booking 319,200 metric tons for delivery in 2014/2015, down 26% from the week before. Corn booked 1,170,700 metric tons, an improvement of 24% over last week and much higher than expectations which ranged from 600,000-800,000 metric tons. Soybean sales also beat analyst expectations booking 1,179,700 metric tons compared to expectations between 650,000-850,000 metric tons. Soybean export sales fell 16% compared to last week’s totals but was still considered to be a positive sign of strong demand.

Soybeans completed a head and shoulders reversal pattern in the daily chart on Tuesday which is generally considered bearish. However, follow through selling on Wednesday was non-existent as prices found support on the 50 day moving. As prices moved back above $10 per bushel we may see an increase in short covering as traders who established short positions that were triggered by the completed head and shoulders get stopped out of their positions. Fundamentally, Grain Hedge still expects soybean prices to be pressured lower over the next few months.

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