Morning Comments – February 16

In the overnight session the grains traded lower with corn down 1/4 to 3/4 of a cent, Soybeans are down between 1/4 to 1 cent, Chicago wheat is down 3 3/4 cents with Kansas City wheat down 3 1/2 cents.

US soybean futures edge higher on Friday and are poised for its biggest weekly gain in seven months as dry weather threatens production of the oilseed in Argentina. Corn edged higher, while wheat firmed nearly 0.5 percent to be on course for a weekly gain of more than 3 percent.

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The Buenos Aires Grains Exchange announced that 58 percent of its corn crop and 56 percent of its soybean crop has been damaged by the drought. The exchange’s forecast for soybean harvest this season is at 50 million metric tons of soybeans (USDA @ 54 MMT) and 39 million metric tons of corn (in line with USDA). The Argentina weather forecast has not changed much this morning. Erratic showers and thunderstorms are expected today throughout the weekend leaving some areas with meaningful precipitation and other areas dry and under continued crop stress. Brazil weather continues to be favorable to crop development with some dryness in Rio Grande do Sul.

Brazil’s Agricultural minister reported today that Brazil’s crop this year could surpass last years record. Blairo Maggie said “There were no losses whatsoever. The planting of the second corn crop was delayed slightly but everything is going normally. I think there will be a repeat of last seasons super crop.” The latest USDA projection of Brazil’s 2017/18 corn crop estimates a 95 million metric ton harvest which compares to the 98.50 MMT produced last year. The USDA has 2017/18 soybean production projected at 112 million metric tons compared to 114.10 MMT last year.

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Morning Comments – February 15

In the overnight session the grains were mostly positive with March corn up 3/4 of a cent, March soybeans up 1 cent, March Chicago wheat up 1 3/4 cents and Kansas City wheat up 4 1/4 cents.

Ethanol production dropped this week to 1.016 million barrels per day from 1.057 mbpd the previous week. The decline in this weeks ethanol production was a surprise since ethanol margins have been relatively stable as of late. This weeks drop in production marks the fourth week since mid-December that weekly production fell below year ago levels. Ethanol stocks declined this week to 961 million gallons from 987 million gallons the previous week. Ethanol stocks are still very strong and are the second largest on record for this week of the year.

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Strategie Grains, an agricultural consultancy, reduced their forecast for European Union soft wheat exports to 21.4 million metric tons from 21.7 million metric tons last month. The reduction was made because wheat from the Black Sea region and Argentina are more competitive on the global market.

Export sales this week beat expectations for corn and were on the high side of trade expectations for wheat and soybeans. Wheat sales were down 21 percent this week booking 311,100 metric tons. Soybean sales were within the range of expectations but were down four percent from the previous week. Corn sales were up 12 percent from last week and 14 percent above the four week average with 1,974,500 metric tons sold this week.

Weekly Export Sales-

Actual

Estimated

Wheat

311

200-450

Corn

1,974

1,000-1,500

Soybeans

650

450-750

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Morning Comments – February 14

In the overnight session the grains traded lower with corn down 1 ½ cents, soybeans down 2 ½ cents, wheat down 4 ½ cents and Kansas City wheat down 3 ¾ cents. After a few days of positive price gains the market is taking a breather with selling across the grain complex.

The latest weather report shows that the southern plains is expected to stay dry over the next couple weeks, but excessive moisture is expected in the central and northern Delta. Argentina will continue to struggle through hot dry weather until this weekend when spotty showers are expected to pop up throughout the country. Brazil weather will continue to be positive for crop development but rain next week will cause some delays to harvest in the south central and west central parts of the growing region.  

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The National Oilseed Processors Association (NOPA) crush numbers are due out on Thursday and will show the number of bushels crushed by the 13 member companies for the month of January. A Reuters poll of 8 analysts estimates the report will show 165.51 million bushels were crushed. If realized this would be the second largest crush on record. Analysts are expecting oil stocks to be 1.603 billion pounds.

The latest report from France’s Ag Ministry revised its wheat output lower for the third time this year. SRW wheat production was estimated at 36.6 million metric tons down from 37 million metric tons forecast by the organization in December. The revision was due to smaller harvested area.

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Morning Comments – February 13

In the overnight session the grains traded mostly mixed with March corn down 1/4 of a penny, March soybeans up 3 1/2 cents, Chicago wheat down ½ a cent and Kansas City wheat down 1 1/4 cents.

The most recent weather model keeps the forecast unchanged in Argentina where hot dry weather has the corn and soybean crop under significant stress. Late this week and into the weekend there are chances of thunderstorm activity which is expected to be spotty and not widespread. Some showers may develop in the southern growing regions and move north between February 19th-21st. The weather model then suggests drier weather for the remainder of the month with chances of erratic showers.

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The wheat market pulled back slightly in the overnight after a sharp gain in yesterdays trade. Weather in the Southern Plains is expected to stay dry over the next couple weeks which provides support to the market. The latest drought monitor shows the Texas Panhandle, western Oklahoma and southwestern Kansas in extreme drought. Although crop conditions now are not entirely correlated of the final production, moisture will be needed as we move toward Spring.

Export inspections were within expectations or better for corn, soybeans and wheat. Corn inspections however, were on the low end of the range with 835,131 metric tons compared to expectations which ranged from 800,000 to 1,100,000 metric tons. Soybeans export inspections beat the range of estimates with 1,319,038 metric tons inspected for export. Soybean inspection estimates ranged from 800,000-1,100,000 metric tons.

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Morning Comments – February 08

In the overnight session the grains are trading higher again with March corn up 1/2 a cent, March soybeans up 2 1/2 cents, March Chicago wheat down 2 3/4 cents and Kansas City wheat down 2 cents this morning. The February WASDE report will be released at 11 AM CST today.

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Ethanol production increased this week by 311 million gallons a week to 1.057 million barrels/day. This weeks EIA report shows this week’s production is on par with last year during the same week. Over the last six weeks, ethanol production has run 1 percent behind last years pace. Ethanol stocks increased last week to 987 million gallons from 968 million gallons. Seasonally, it is typical to see stocks continue to grow until March as the summer driving season begins to utilize more ethanol. Ethanol stocks are currently the third highest of all time.

On Thursday the Brazilian government lowered their forecast for 2017/18 corn production to 88 million metric tons from 92.34 million metric tons in their January forecast. The reduction is a result of growing conditions in the southern part of the country and a reduction in planted acres for the second corn crop. Conab increased its soybean production estimate to 111.55 million metric tons from 110.4 million in their January report.

Export sales were strong this week with all three grains meeting expectations on the strong side of the range. Wheat export sales were up 36 percent from the previous week booking 393,400 metric tons. Corn sales were down 4 percent from last week but managed to book 1,769,600 metric tons which was well above the four week average. Today the Agricultural Ministry of China increased their 17/18 forecast for corn imports by 300,000 metric tons to 1.5 million metric tons. The revision in China’s forecast is a result of Beijing’s probe into alleged sorghum dumping by the United States.   Soybean sales were up strongly from last week with 743,200 metric tons sold.

Weekly Export Sales-

Actual

Expectations

Wheat

393

200-500

Corn

1,769

1,300-1,800

Soybeans

743

400-700

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Morning Comments – February 07

In the overnight session the grains were mixed with March corn up 1 cent, March soybeans down 1/4 of a cent, March wheat up 5 1/4 cents and Kansas City wheat up 4 1/2 cents. Temperatures are cold throughout Kansas and Oklahoma and the Texas Panhandle with temperatures at 5 a.m. ranging from 5 to 23 degrees Fahrenheit throughout the two wheat growing states. The forecast for the Southern Plains shows continued dryness over the next couple weeks.

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The corn spreads between March and the deferred months have tightened since the start of the rally with the H8/N8 spread moving to $-.145 from $-.17 just two weeks ago. The spread has not seen this level since October 18th, 2017.

On Thursday at 11 AM CST the USDA will release its February Crop Production and WASDE report. In a Reuters survey of analysts the average trade estimate for corn ending stocks is 2.468 billion bushels compared to the January report of 2.477 billion. The average estimate for soybean ending stocks is 486 million bushels compared to January’s number of 470 million bushels. Wheat stocks are expected to be at 990 million compared to 989 million bushels in the January WASDE report.

The trade is expecting South American production to be revised lower in Argentina but higher for Brazil soybean production. The average trade guess is looking for Argentina corn production to be revised down to 40.68 MMT from 42 MMT in January due to the crop stress caused by hot dry conditions throughout critical growing regions. Argentina’s soybean production is also expected to be revised lower to 54.06 MMT from 56 MMT in January. The average analyst estimate for Brazil corn production is 93.73 MMT compared to 95 MMT in the January WASDE, but Brazil soybean production is expected to be revised higher to 111.20 MMT compared to 110 MMT in the January WASDE.

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Morning Comments – February 06

In the overnight session the grains were mixed with March corn down 1/4 of a penny, March soybeans up 5 3/4 cents, March Chicago wheat down 1/4 of a penny and Kansas City wheat up 1/4 of a cent.

The latest South American weather model showed little change from the previous days forecast. Thunderstorms and showers will move from southern Argentina into the central production region starting Wednesday and more widespread precipitation is expected between Friday and Sunday. The Brazil forecast expects conditions to stay favorable to crop development.

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On Sunday, the Chinese Ministry of Commerce announced an Anti-dumping and anti-subsidy investigation on Sorghum imports from the United States which could result in tariffs. The reaction in the US was a sharp decline in basis values between 20 and 80 cents on Monday as a result of the news. The news from China was released only a couple weeks after the US announced that tariffs will be added to solar panels and washing machines from China. The action by both the US and China has analysts concerned of a US and China trade war.

U.S export inspections released on Monday showed that wheat met expectations with 428,557 metric tons inspected for export. Corn and soybeans both beat analyst expectations with inspections totaling to 1,073,868 metric tons for corn and 1,303,723 metric tons for soybeans. Some analysts see the possibility for demand to shift into corn if tariffs are applied to sorghum.

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Morning Commentary – February 05

In the overnight session the grains are lower with corn down 3 ¾ cents, soybeans down 7 ¼ cents, Chicago wheat down 6 ½ cents and Kansas City wheat down 7 cents. Weather forecasts show rains are expected in Argentina for the second half of this week and temperatures in the central Plains in the U.S should not be enough to cause winterkill.

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Last week was hot and dry in Argentina which depleted topsoil moisture throughout the country and triggered price volatility in the futures market. Over half of the crop production area is now experiencing crop stress with serious stress occurring from La Pampa into western Buenos Aire, Northwest Santa Fe and southeast Santiago del Estero. Precipitation is expected in Argentina in the second half of this week bringing scattered thunderstorms and showers to around 20% of the growing region. More rain is expected from Friday to Sunday which is likely to cover some of the driest areas and bring between .3 and .8 inches of precipitation. Temperatures are also expected to cool into the 70’s and 80’s in the southern growing regions. Despite the forecast for moisture in the second half of the week, Argentina crops will still be under stress over the next couple days and there is no guarantee that the forecast will materialize in the regions that need it most.

Last week’s commitment of Traders report showed that for the week ending January 30th managed money reduced their net short position to 130,942 from 219,676 in the previous week. The latest COT report showed one of the largest week of short covering outside of the growing season. Soybeans also saw significant short covering moving from a net short position of 81,538 to 21,849 contracts short. Money managers also decreased their net short position in wheat from 15,962 to only 1,897.

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Weekly Commentary

Cash Commentary-

In the cash market basis levels stagnated this week showing no broad trends in the market thanks to the recent lift in flat prices. On the week US average corn and soybean basis was unchanged.

End buyers were mostly steady to weaker this week as pipeline supplies continue to be well-stocked thanks to the recent run in futures. However, buyers in the KS/TX/NE region have held pretty firm during the futures rally. Strong cattle feed demand thanks to bigger numbers and poor winter wheat grazing conditions has helped support a stronger pull on cash basis in this area. For soy plants, baring the exception of a few East Coast Plants, the majority of processors were weaker with the 45-plant average down 2 cents on the week.

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At river terminals the basis was mostly steady this week with export points and barge freight keeping the status quo from last week.

With futures taking it lower into the weekend and cold/snowy weather making a return to the Western Corn belt early next week, basis levels should start to turn higher.

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Futures Commentary-

Wheat was the leader to the upside this week with Kansas City up 24 and Chicago up 10. This helped support corn which ended the week 5 cents higher. But in soybeans the weight of maintaining $10 futures in the face of burgeoning supplies was too much causing early gains in the week to be erased by the end of the week leaving the soy board unchanged.

The wheat market got a renewed round of buying enthusiasm following Monday’s release of state crop conditions. Key growing areas of KS and OK are showing a horrible state of the crop with only 14% and 4% of the crop in good-to-excellent condition.  Meanwhile in the Northern Plains SD/ND/MT have seen conditions ratchet higher in the last months thanks to frequent winter storms bringing needed moisture. While poor January conditions are helping fuel the rally, there is little correlation between conditions in January and final yields. Mar/Apr/May rains can save a dismal crop.

For corn, it continued to find modest strength tied to short-covering, dryness in Argentina and an uptick in export sales. Export sales were quite strong for corn for a third week running.  Net new corn sales of 1,850,600 MT for 17/18 were up 28% from the prior week.  That brings YTD commitments to 32.25 MMT versus 40.25 MMT last year, which is a 20% shortfall. USDA expects only a 16% cut for year-on-year exports.

In soybeans, all eyes are on the dry and hot weather in Argentina.  This week the Buenos Aires exchange pegged the soy crop there at 51 MMT versus their previous forecast of 54 and USDA at 56. However, late week weather models showed better chances of rain into next week for Argentina which spooked the soy complex. USDA census crush for December came in at 176.4 MB in line with expectations, but soy oil stocks at 1.588 bln pounds vs. 1.740 bln pounds avg. trade guess were substantially lower. Soymeal stocks on the other hand ballooned 498,000 MT from 362,000 last month. Soybean sales were anemic at 410,000 MT, off 59%from the 1,000,000 mark of business in the recent 4-week average.

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Morning Comments – February 02

Grains were down in the overnight; March corn was down 1/4 of a cent, March soybeans were down 6 1/4 cents and March wheat was down 4 cents.

Exporters sell 195,000 metric tons of corn for delivery to unknown destinations during the 2017/2018 marketing year. Exporters sell 170,000 metric tons of corn for delivery to Egypt during the 2017/2018 marketing year. Exporters sell 108,860 metric tons of soybeans for delivery to Mexico during the 2017/2018 marketing year. -USDA

Chicago wheat and soybean futures slid for a third session on Friday, with abundant supplies and stiff export competition tempering concern about harsh crop weather in the US and Argentina. Concern about drought damaging the US winter crop, which drove prices to a multi-month high this week, were still underpinning prices, but analysts said it was too early to assess potential damage.

US soybean export sales fell to a seven-month low last week, according to government data, as stiff competition from rival exporter Brazil and concerns over lower US crop quality dented demand from key buyers such as China. The poor weekly sales tally has raised concerns that overseas shipments could contract further than expected, sending futures prices down sharply at the Chicago Board of Trade.

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The world sugar market is set for a larger surplus than previously expected in the 2017/2018 season, followed by another year of oversupply, according to a Reuters survey of 12 traders and analysts. Sugar prices are seen remaining roughly unchanged in the first quarter of 2018 and recovering slightly by the end of 2018, though still posting a yearly decline.

Egypt’s state grain-buyer, GASC, has lowered the minimum required protein content for Russian, Romanian, and Ukrainian wheat to 11.5 percent from 12 percent, a tender document seen by Reuters on Friday showed. Egypt, the world’s largest wheat buyer, is set to hold a purchase tender today for March 5-15 arrival with results expected later today. Egypt requires various protein content levels from suppliers it considers in its tenders based on origin.

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