Morning Comments – May 22

Grains started the week in positive territory supported by cool wet weather and a continued slide in the US Dollar.

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Overall the weather pattern in the US continues to suggest cool and wet weather for much of the country. Wetness will continue for the next two weeks with much of the precip hitting the already soaked areas of MO/IL/IN/OH. Temperatures for the next 5 days should be well below normal in the Western Cornbelt but should return to normal for much of the country after that.

Corn planting is expected to be about 85% planted in USDA’s crop progress report released this afternoon. But wet weather and re-planting issues will likely be talked about in coming days. Crop condition ratings won’t be released until next week, but early states results in IL showed only 42% of the crop in good-to-excellent condition while MO was 49%.

Russian wheat export prices rose last week, supported by a state purchase by Egypt, the largest buyer of Russian wheat, and expectations that the rouble currency would rise further against the dollar, analysts said on Monday. Black Sea prices for Russian wheat with 12.5 percent protein content were at $185.50 a tonne FOB at the end of last week, up $1 from a week earlier, Russian agricultural consultancy SovEcon said.

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Weekly Cash Comments

Cash Commentary-

Grain basis found some upside this week with corn advancing 2.2 cents on average for the week while soybeans garnered a 2.5 cent move higher.

Corn found strength as farmers stay tied to their planters which limited pipeline supplies. Areas of Western Kansas continued to show some buoyancy as for the 2nd week in a row the region showed strong basis gains. Also, river terminals along the MS/IL river system were also generally higher with gains of 3 to 5 cents on the week being fairly typical, and on average river buyers were up 3.5 cents. Ethanol plants as a group managed only a 1.5 cent advance on the week although some facilities did record 5 to 8 cent gains.

For soybeans, basis levels were also generally higher albeit with soy crushing plants doing most of the higher bidding this week with a collective 3.2-cent gain for the week. There were a fair number of Western Cornbelt plants raising their basis by a dime. River terminals, on the other hand were bucking the overall trend as finished the week about 1-cent lower. The late week selloff in bean futures seemed to trigger a risk-off attitude as river buyers became wary of slowing exports in the face of Brazil’s sharp currency devaluation on Tuesday.

The corn competition landscape saw only modest changes this week as ADM Cedar Rapids won back its territory by bidding up basis a nickel on the week to -10N. ADM Columbus used a basis improvement on Thursday to -16N to improve its drawing area after slipping in size early in the week.

Soybean competition was mostly stable in IA/IL this week as plants here mostly kept basis unchanged. However, ADM Deerfield, MO bumped its basis by a dime to -10N, helping expand the plant’s drawing region into Eastern KS.

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Futures Commentary-

Grains were lower on the week led by a 21 cent slide in soybean prices while corn and wheat suffered a 3-cent and 8-cent setback.

On Thursday, news broke that Brazil’s president Temer gave his blessing to pay a potential witness to remain silent in the country’s biggest-ever graft probe. If accurate, this could pull Temer into a corruption scandal that has already entangled several of his closest allies and advisors. Leading lawmakers and a third of Temer’s cabinet have already been caught up in an investigation of systematic bribery in return for political favors and contracts with state-run enterprises. Investors dumped Brazilian assets in foreign markets after the news broke late in Brazil. The Brazilian Real plunged 7%, which immediately sent US soybean prices down nearly 3%. Brazilian farmers have been holding tight to their mammoth soy crop as the Real has climbed nearly 10% since the first of the year. The plunge led to a mass selling wave from Brazilian farmers. On Thursday, Brazil farmers were reported to have sold anywhere from 2 to 5 MMT of their crop. Even so, Brazilian soy farmers have sold only half of their record 2016/17 crop by Friday, compared to 67 percent sold at this time last year and a 5-year average of 65 percent of sales, independent consultancy Safras & Mercado said.

In the US, weather continues to be mostly favorable as corn planting raced forward in the past week hitting 71% planted vs 70% for the 5-year average. US weather through the end of May in the Cornbelt should be cooler than normal with daily averages coming in 10 to 15 degrees below normal. Rainfall is expected to be on the topside of normal with KS/MO expected to see totals of up to 4 inches through this weekend. While it is not yet a threat to yield potential, the cool and wet growing degrees will likely slow corn development and push the pollination window later in the season, making it more prone to summer heat stress. Early predictions on the summer weather forecast are pointing to a potential drought in the Eastern part of the grain belt. Private forecaster Lanworth put the odds of this season’s weather to be near normal to hot/dry. They suggest a strong ridge with a “ring of fire” setting up in the middle of the country. This would potentially set the stage for hot/dry to the East while areas to the upper West like IA/MN would see more moisture. The timing of the event is still unclear but the odds seem to favor June rains giving way to July heat and dry conditions which could potentially have a more pronounced impact on beans versus corn, or late-developing corn.

Monday saw weak soy crush data released by NOPA. According to NOPA, soy plants crushed 139 MB of soybeans in April, off from 147 for the same month last year and well below trade expectations of 145. Year-to-date crush data is up 0.8% from the same 8-month period last year, but USDA expects crush for the entire year to grow by 2.1%.

Morning Comments – May 19

Soybeans recovered overnight trying to pair back the 30-cent losses from Thursday. Corn and wheat were also firmly in positive territory to start the day.

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US weather in the Cornbelt through the end of May should be cooler than normal with daily averages coming in 10 to 15 degrees below normal. Rainfall is expected to be on the topside of normal with KS/MO expected to see totals of up to 4 inches through this weekend.

Brazilian farmer sales were said to be massive yesterday following the collapse of the Brazilian Real. Reports vary from 2 to 5 MMT were sold yesterday alone as farmers raced to cash in on the currency swing lifting their farm-gate prices. Even so, Brazilian soy farmers have sold only half of their record 2016/17 crop by Friday, compared to 67 percent sold at this time last year and a 5-year average of 65 percent of sales, independent consultancy Safras & Mercado said.

The condition of French soft wheat declined slightly last week, with 75 percent of crops rated good or excellent as of May 15, down from 76 percent a week earlier, farm office FranceAgriMer said on Friday. The ratings slip reversed a small improvement in the previous week, and may indicate that growing conditions in the European Union’s biggest cereal producer remain mixed despite rainfall and warmer temperatures this month that broke a dry, cold spell in April.

Morning Comments – May 18

Soybeans were hammered overnight as Brazil’s economy was thrown into a tailspin on potential political corruption by the President. In outside markets, US equities continued their slide and crude oil was off in a risk-off start to the day.

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Late yesterday news broke that Brazil’s president Temer gave his blessing to pay a potential witness to remain silent in the country’s biggest-ever graft probe. If accurate, this could pull Temer into a corruption scandal that has already entangled several of his closest allies and advisors. Leading lawmakers and a third of Temer’s cabinet have already been caught up in an investigation of systematic bribery in return for political favors and contracts with state-run enterprises. Investors dumped Brazilian assets in foreign markets after the news broke late in Brazil. The Brazilian Real plunged 7% in overnight trade, which immediately sent US soybean prices down nearly 2%. Brazil farmers have been holding tight to their mammoth soy crop as the Real has climbed nearly 10% since the first of the year. This plunge should lead to a mass selling wave of Brazilian farmers.

In other news, overnight Japan bought 80,000 MT of US wheat in its regular tender activity while Canada garnered 35,000 MT of the total 115,000 MT deal. Private analyst Strategie Grains cut its EU wheat estimate by 1.1 MMT to 142.7 MMT. This still would be up 5% from last year’s crop. Likewise, they trimmed their corn estimate by 0.3 MMT to 60.1 MMT. If realized, this would be up 0.3% from last year.

USDA’s weekly export sales were decent this week as the data came in mostly on the high side of analyst expectations. Under normal circumstances this might be a positive stimulus for the market that has struggled with export business, but this will take a backseat to the situation in Brazil. The risk could be substantial to the downside for soybeans, and perhaps even corn.

Export Sales-

Actual

Estimated

Wheat – OC

247

0-200

Wheat – NC

393

200-400

Corn – OC

705

500-750

Corn – NC

168

50-250

Soybeans-OC

355

200-400

Soybeans-NC

41

0-200

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Morning Comments – May 17

Grains were higher overnight with modest gains supported by a US Dollar falling to its lowest level since the November elections.

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Overnight, Egypt’s GASC was in the market tendering for wheat although their most recent request called for higher protein wheat which could restrict access to France. The remainder brought in the lowest offer by the US for $185/MT FOB for HRW.

Yesterday Lanworth came out with their summer weather forecast, which suggests the Eastern part of the grain belt could be prone to drought. They put the odds of this season’s weather to be near normal to hot/dry. They suggest a strong ridge with a “ring of fire” setting up in the middle of the country. This would potentially set the stage for hot/dry to the East while areas to the upper West like IA/MN would see more moisture. The timing of the event is still unclear but the odds seem to favor June rains giving way to July heat and dry conditions which could potentially have a more pronounced impact on beans versus corn.

The US Dollar and stock indices were lower to start the day as the political firestorm over Trump’s dealings with former FBI Director Comey come to the surface. The US Dollar reached its lowest level since the November elections, which is supportive for grain prices.

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Morning Comments – May 16

Corn and wheat continued to be pressured overnight while soybeans held on to some minor gains going into the day session.

USDA reported a 132,000 MT sale of soybeans to unknown destinations for 2016/17.

Yesterday saw weak soy crush data released by NOPA for April which helped stall the soy rally that at one point had reached a 10-cent advance. According to NOPA, soy plants crushed 139 MB of soybeans in April, off from 147 for the same month last year and well below trade expectations of 145. Year-to-date crush data is up 0.8% from the same 8-month period last year, but USDA expects crush for the entire year to grow by 2.1%.

After the close of trading, USDA crop progress data showed a huge gain in plantings. Corn planted hit 71% vs 47% last week, and now sits 1% above the 5-year average pace for the first time this season. Soybeans also advanced sharply hitting 32% vs 14% last week and on par with the 5-yr average. For wheat, crop conditions slipped to 51% good-to-excellent from 53% last week. Most of the losses occurred in MT, IL & SD.

In export markets, foreign prices have generally held firmer as US prices have slipped in the past week. Corn from Argentina FOB is now $9/MT above US prices vs last week at only a $3.8/MT premium to US prices. Wheat vs France was the only major weakening this week as French prices have fallen harder over the past week than US prices.

WORLD EXPORT PRICE SPREADS RELATIVE TO US

Crop

Country

Today

Last Week

Last Year

CRN

ARG

+$9.0

+$3.8

+$7.0

CRN

BRZ

-$15.1

-$17.3

-$8.5

CRN

EUR

+$5.4

+$4.7

-$15.1

SBN

ARG

-$8.0

-$10.3

-$1.7

SBN

BRZ

+$4.4

+$0.5

+$8.3

WHT

ARG

+$17.2

+$15.4

+$17.5

WHT

EUR

-$16.9

-$14.2

-$46.5

Export spreads represent a foreign country price minus US price at export destinations, in USD per metric ton.  A higher spread indicates the foreign price has risen relative to US prices, making the foreign country less competitive and the US more competitive.

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Morning Comments – May 15

Corn and wheat drifted lower to start the week while soybeans were posting modest gains going into the morning break. In outside markets, crude oil shot higher by $1.50 a barrel while equities and the US Dollar were slightly lower.

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On Friday, Informa economics released new US acreage projections, pegging soybean plantings at 89.7 million acres vs USDA at 89.5, while corn acres were expected to be 89.7 as compared to 90.0 by USDA.

Today will bring the release of NOPA crush estimates for April. Traders expect a 145.7 MB crush estimate which would be off from the same month last year at 147.6 MB. The last two months have seen actual crush estimates miss analyst estimates to the downside by 4 MB.

Rains over the weekend were mostly confined to the Southeast and Mid-Atlantic region with the rest of the grain belt seeing dry weather to aid in planting progress. However, this week should see rain hitting the Northern Plains and Western Cornbelt with two different systems expected to bring around an inch of rain during each event. Temperatures are expected to be warmer than normal, helping to aid drying between events.

Crude oil futures jumped to a two-week high on Monday after Saudi Arabian and Russian energy ministers in a joint statement said they back a nine-month extension to the current production cuts led by the OPEC members. That would keep current output caps in place through the first quarter of 2018 if agreed to by all parties at the coming May 25 OPEC meeting.

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

 

Weekly Cash Comments

Cash Commentary-

Grains were mostly weaker this week with soybeans losing 8 cents, wheat was off 4 and corn posted a modest two-cent advance.

After a stormy previous week that brought widespread rains and freak snow storms, this week’s weather turned more favorable for much of the country. Monday’s planting pace was surprisingly strong in spite of challenging weather with corn planting advancing 13% on the week and hitting the near midway mark of 46%. This week’s weather has been mostly dry in key growing areas, but wetness still plagues E KS, MO, S IL & S IN. There will likely be some replant decisions needing to be made in these areas due to heavy rains. Over the weekend, rains are centered in the SE part of the country up thru the Mid Atlantic but the heart of the grain belt looks dry.

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

Futures Commentary-

Grains were mostly weaker this week with soybeans losing 8 cents, wheat was off 4 and corn posted a modest two-cent advance.

After a stormy previous week that brought widespread rains and freak snow storms, this week’s weather turned more favorable for much of the country. Monday’s planting pace was surprisingly strong in spite of challenging weather with corn planting advancing 13% on the week and hitting the near midway mark of 46%. This week’s weather has been mostly dry in key growing areas, but wetness still plagues E KS, MO, S IL & S IN. There will likely be some replant decisions needing to be made in these areas due to heavy rains. Over the weekend, rains are centered in the SE part of the country up thru the Mid Atlantic but the heart of the grain belt looks dry.

This week also brought new data from USDA which released their forecast on the 2017 crop supply and demand balance sheet. Carry-out forecasts for corn and wheat were mostly as expected with USDA cutting the new-crop ending stocks by around 200 MB from the old-crop carry-out. In the case of corn, USDA expects a big drop in US exports in the coming year from 2,225 to 1,875 MB. The surprise in the report was USDA’s soybean carry-out number which came in at 480 MB, well below trade expectations of 555 MB. This was largely driven by a 100 MB increase in US soy exports to a record large 2,150 MB. However, early signs of new-crop soy deals are not nearly as robust. So far NC 2017 soy export sales have only tallied 2.8 MMT vs 3.4 MMT for the same time last year. In fact, this is the worst reading for NC soy sales since 2008, so hitting a record number for the year means we will need to see some sizable sales in the near future.

In international news, Brazil’s government agency CONAB raised their projection of the soy crop there to 113 MMT, up from their previous forecast of 111 and USDA’s forecast also at 111. Farmers there have been reported to be very slow sellers as slumping prices as a rising Brazilian real keeps them holding tight. They are reportedly only 50% sold which compares to a normal level of 68% for this time of year. Argentina farmers are also holding tighter to soybean supplies.  In November, export taxes on soybeans out of Argentina are expected to be ratcheted lower which will likely present a better economic picture for Argentina farmers. With the timing of this policy coinciding with the US harvest, it could spell problems for prices by next fall.

Morning Comments – May 12

Grains drifted in quiet trade heading into Friday’s trade with wheat showing positive gains while corn and beans continued to paint the negative side of the trade ledger.

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Today is the expiration of week 2 options on July futures. For corn, the time value on premium for an at-the-money 370 put/call is about 1 cent a bushel as the market has zero fear about market movements. With the market at 369.25, the put (OZC2K7 P3.7) is about 1 ¾ and the call (OZC2K3 C3.7) is ¾.

The wheat crop in France showed slight improvements after recent rains brought some relief. In its weekly crop report, FranceAgriMer estimated that 76 percent of soft wheat crops were in good or excellent condition as of May 8, compared with 75 percent a week earlier, breaking a run of four weekly declines.

Overnight, heavy rains continued to hit SE KS, AR, OK, MO, KY & TN which is a region plagued by wet conditions this planting season. The next 48 hours should see rains in the Southeast and heading up to the Mid Atlantic, but the remainder of the Cornbelt looks dry which should aid planting progress.

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Morning Comments – May 11

Grains were feeling weaker heading into the morning break as dismal export sales pushed prices lower.

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Yesterday’s USDA report did little to change the overall outlook of abundant US and global supplies. The first reporting of new-crop 2017 carry-out did show ending stocks being cut, but at 914 MB of wheat and 2,110 MB of corn, these are still historically high values. Soybean carry-out was smaller than expected at 485 MB vs 555 expected, but it was made possible by a huge 100 MB increase in exports which may be difficult to muster in an environment with massive South American supplies.

This morning, CONAB bumped their Brazil soy crop forecast to 113 MMT, up from a previous forecast of 110 MMT. Corn is expected to come in at 92.8 vs a previous estimate of 91.5 MMT. Yesterday, USDA pegged those crops at 111.6 and 96, respectively.

This morning’s weekly export sales report were disappointing as corn saw net cancellations for new-crop delivery and old-crop deals that were a paltry 277,000 MT vs 700-900,000 expected.

Export Sales-

Actual

Estimated

Wheat – OC

-24

100-300

Wheat – NC

273

150-350

Corn – OC

277

700-900

Corn – NC

-55

50-250

Soybeans-OC

381

300-500

Soybeans-NC

70

0-200

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

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