Apr 17 – Morning Comments

Grains climbed higher overnight with soybeans once again leading the charge for its 4th consecutive day of gains. In the night trade, front month May soybean futures were up 7 cents a bushel while wheat posted a 3 cent advance. Corn followed with a 1 cent gain.

Soybeans continue to be fueled by tight supplies in the US where strong exports and crush have cut into available supplies. This week’s sales showed only 19,000 MT of old-crop for the week, but the total commitments for the year still far exceed USDA’s projections. Total export commitments for old-crop stand at 44.6 MMT versus USDA’s projection of 43.0 MMT to be shipped for the entire year.

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In corn, weather conditions look fairly good for planting. The next few days look fairly dry across the Midwest, although a system is expected from Sunday into Monday. After that, the southern half of the Midwest through the Delta should be fairly dry in the 6-10 period. The 11-15 day, the last five days of April, looks dry across most of the central U.S. as well. Weekly ethanol production released on Wednesday by EIA showed strong levels at 939,000 barrels per day, up 45,000 from last week and the highest weekly total since December.

For wheat, weather continues to be a factor in the southern Plains. There might be some rain tomorrow, and then a better chance this weekend. But most areas are expected to see at most 0.5 inch of moisture, not enough to dramatically improve the situation. Looking ahead in the 6-10 and 11-15 outlook the region looks fairly dry across those areas

WEEKLY EXPORT SALES (in thousand metric tons)

  OC Actual OC Expected NC Actual NC Expected
Corn 601.9 550-850 192.6 0-150
Soybeans 19.2 -100-100 400.7 175-350
Wheat 438 50-250 359.9 225-375

 

Apr 16 – Morning Comments

Soybeans moved sharply higher in the overnight session with front-month May futures gaining 17 cents a bushel and new-crop November up 8. Wheat was also higher with a 3 cent advance, while corn was fractionally lower.

Yesterday brought bullish news for beans with NOPA monthly crush figures being released. For the Month of March, US crushers used 153.8 MB which was above trade expectations of 146.1 MB going into the report. With tight stocks and strong exports, the strong crush number suggests even more tightness going forward. While some imports have occurred of late to help alleviate tightness, it seems the US is well shy of reaching the 65 MB import projection to keep stockpiles from disappearing altogether by the end of the marketing year. Some crushers are boosting their basis sharply in recent days with +50K or higher becoming the norm across much of the Midwest with 2 weeks left until first notice day on May beans.

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For wheat, prices were weaker on Tuesday for the first time in three sessions, but recovered some of the losses overnight. Damage from the freeze in the southern Plains is still being debated. Oklahoma State agronomist Jeff Edwards said “Most of Oklahoma spent at least four hours below freezing last night and some areas spent an extended period of time below 28F. While temperatures in the wheat canopy might have remained slightly higher than reported air temperatures, they were still probably low enough to result in significant injury to wheat.”  In Ukraine, the situation is getting worse and more and more operators are challenging the ability of the country to properly produce and export grains. But no concrete impact can be observed for the moment.

In corn, the market continues to be somewhat of a follower of the wheat and soybean market. However, its own fundamentals remain supportive with export activity exceptionally strong, and ethanol margins running high. Today will bring the latest EIA ethanol production figures which should continue to show robust production for the ethanol producers.

 

Apr 15 – Morning Comments

Grains were mostly lower overnight following Monday’s rally. Nearby May soybeans was the exception, gaining 8 cents a bushel, while corn and wheat lost 2 cents each.

Cold temperatures across the southern Plains poses a threat to the wheat crop. According to Oklahoma State agronomist Jeff Edwards, wheat in Oklahoma ranges from just past jointing to late boot and if forecasts are correct wheat injury is likely. Given the limited moisture and limited time prior to harvest, Edwards thinks, it is not likely that the crop will recover from a complete loss of tillers. In Monday’s Crop Progress report, USDA saw ratings slip slightly, going from 35% good to excellent last week versus 34% good to excellent this week for the winter wheat crop.

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In corn, plantings got underway this past week with 3% of the corn crop planted according to USDA. That’s up from 2% last year, but behind the 5-year average pace of 6%. Export inspections for corn were strong, totaling 1.44 MMT, which was above the 1.350 MT upper end of trade expectations going into the report. It was also the highest weekly total going back to 2008.

For soybeans, export inspections were on the low side of trade expectations. Actual inspections came in at 267,000 MT versus analyst expectations of 325,000 to 450,000 for the week. Soybean cash basis bids are mostly steady at elevators and processors around the U.S. Midwest, a touch firmer on the Mississippi River.

Apr 14 – Morning Comments

Wheat jumped higher in the night session reacting to escalating tensions between Ukraine and Russia over the weekend. At the end of the overnight session, wheat was up 15 cents a bushel while corn and soybeans gained 4 and 6 cents, respectively.

Ukraine has given pro-Russian separatists a Monday deadline to disarm or face a full-scale anti-terrorism operation with full force. This has raised the risk of military conflict, with the market building in a premium for potential trade disruptions or production issues down the line. In the case of wheat however, Ukraine farmers planted their winter wheat and face little constraints, but the same is not true for spring planted corn where farmers are reported to be facing resource constraints. However, trade has not been noticeably impacted. Indeed, Russian agricultural consultancy SovEcon has raised its 2013/14 grain export forecast due to more active March shipments than previously expected, it said on Monday.  Global wheat prices have been rising in recent months on concern over grain supplies from the Black Sea, triggered by Russia’s annexation of the Ukrainian region of Crimea. Russia’s exports have been higher caused by global price growth and a weakening rouble. Russian wheat was the lowest offer in a tender from Iraq’s state grains board to buy at least 50,000 MT of wheat to be sourced from the United States, Canada, Australia, Ukraine or Russia.

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In corn, South Korea’s largest animal feed maker Nonghyup Feed Inc has purchased 193,000 MT of optional origin corn and 65,000 MT of optional origin feed wheat in a tender which closed on Monday.     The tender had sought September/October arrival. In Ukraine, a grains conference on Friday suggests that production there could fall sharply in the coming year with analysts looking for a 23-24 MMT crop as compared to 31 MMT last year.

For beans, export activity has been mostly quiet of late with most business occurring for new-crop delivery. At least one soybean cargo defaulted on by Chinese importers was sold by Japan’s Marubeni Corp, three sources said, as slowing demand and tightening credit in the world’s top importer hits oilseed trade. One Tokyo-based source with direct knowledge of the situation said Marubeni incurred a loss of $4 million on 4-5 soybean cargoes which were defaulted on by Chinese buyers as they could not get letters of credit.

 

Apr 11 – Weekly Wrapup

On Wednesday, the USDA released its monthly estimates for supply and demand.  In the reports, revisions were made higher for both soybean and corn demand.  The markets rallied following the reports, only to trade sharply lower off of the highs and continue selling Thursday.  As a result of the higher demand, ending stocks were moved lower than anticipated.  Wheat did not receive the same bullish report as corn and soybeans.  Weather will now be the main driver for the grain markets for the time being.

Corn received a bullish surprise in the April reports.  Ending stocks were moved lower by 125 million bushels, about 100 million bushels more than anticipated.  Export sales account for the entire revision as expected sales were raised 125 million bushels. Export sales were reported as 658,700 MT for ‘13/’14 this week.  Ethanol production was left unchanged despite continued strong crushings.  This week, ethanol production fell 26,000 barrels per day.  The first weekly Crop Progress report was released on Tuesday, but failed to show any corn planting progress.  Monday’s report will be heavily anticipated as traders await the first signs of planting.

Soybeans rallied sharply following the reports only to fall off of the session highs Wednesday and continue to move lower Thursday too.  Ending stocks were revised lower by 10 million bushels when only a revision of 2 million bushels was expected.  Export sales were moved higher by 50 million bushels despite relatively weak sales lately.  The week export sales were reported as 79,100 MT for ‘13/’14.  Crushings were reduced 5 million bushels due to tighter crush margins recently.  As with corn, no planting progress was reported this week and no progress is expected in next week’s report either.

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Wheat received a bearish report to continue to pressure this market.  Ending stocks were moved higher by 25 million bushels as feed and residual use was moved lower.  This revision was in line with expectations, however.  Competition on the world market will remain fierce as global stocks were bumped slightly higher.  Export sales for ‘13/’14 hit a marketing year low at 41,800 MT.

The USDA reports were taken mostly in stride despite ending stocks moving lower than anticipated for corn and soybeans. Wheat was right at expectations.  Crop Progress and Conditions reports will be a driving force in the coming weeks as will planting weather.

Apr 10 – Morning Comments

Grains were weaker overnight following Wednesday’s volatile trade from the latest round of USDA supply and demand data. In the night session, beans were down 10 cents while wheat and corn gave up 3 cents a bushel.

USDA’s supply and demand report released on Wednesday showed tightening US corn and soybean carryout. For corn, USDA raised US exports by 125 MB, which led to an equal decline in ending stocks at 1,331 MB, and below trade estimates going into the report of 1,403 MB. For soybeans, exports were raised by 50 MB over the previous forecast in March, but imports were raised 30 MB to a record high level of 65 MB if achieved. These adjustments, combined with a 5 MB drop in crush cut into the US carryout by 10 MB from the March forecast, and now stands at the razor thin mark of 135 MB.

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While the markets were spurred on immediately after the report, prices quickly eroded as sell triggers were reportedly hit and farmer selling was said to intensify. May corn breached below the $5 mark but managed to inch above it in the night session. Overnight there was chatter that several Chinese soy crushers were going to announce a default on soybean export deals in the wake of poor margins in China and this morning it was confirmed. Chinese importers have defaulted on at least 500,000 MT of U.S. and Brazilian soybean cargoes worth around $300 million, the biggest in a decade, as buyers struggle to get credit amid losses in processing beans. Three companies in the eastern province of Shandong had defaulted on payments for shipments as they were unable to open letters of credit with banks.

For wheat, prices continue to be dogged by ample world supplies. World wheat carryout increased from 183 MMT to 186 MMT in the latest supply and demand report. Also, logistics problems in Canada seem to be waning as CN Rail announced it would be meet the government target to move 500,000 MT of grain for the week in Western Canada. In the drought stricken US Plains, the weather looks dry over the coming days with only a modest chance of a rain even towards the beginning of next week. The next month should be critical for crop development there

WEEKLY EXPORT INSPECTIONS (in thousand metric tons)

  OC Actual OC Expected NC Actual NC Expected
CORN 960.6 700-900 37.9 0-200
SOYBEANS 66.2 0-150 19.3 100-300
WHEAT 336.4 250-375 310.5 150-300

Apr 9 – Morning Comments

MARCH USDA REPORT EXPECTATIONS
On Wednesday, April 9th at 11 AM CT, the USDA will release its most recent crop supply and usage reports. Corn exports will be a major focus of Wednesday’s report with both sales and expectations running strong during the month of March.
Traders expect the USDA to lower 2013/14 corn ending stocks by 50 million bushels inWednesday’s report. Export sales are one area to watch with our models indicating that U.S. corn sales to date are 258 million bushels ahead of pace to meet USDA expectations from March. Ethanol usage is another area that could be bumped higher as ethanol crush margins in eastern Iowa are at some of the highest levels going back to 2006.2013/14 US Ending Stocks (Million Bushels)

March
Reported
April 
Estimate
Corn
1,456
1,403
Soybeans
141
139
Wheat
558
583
Expectations are for soybean ending stocks to tighten slightly, down 2 million bushels from the March report. Our models show soybean sales running 200 million bushels ahead of peace to meet USDA expectations from March, but Chinese cancellations have been an issue in recent weeks. China has been a net-canceller of old crop U.S. soybeans 4 of the last 7 weeks. Demand destruction from domestic users is also a concern with spot soybean crush margins below breakeven for many processors.
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South American Production (Million Tonnes)
March
Reported
April
Expected  
Brazil – Corn
70.00
69.66
Brazil – Soybeans
88.5
87.43
Argentina – Corn
24
23.95
Argentina – Soybeans 54
54.15

Very few revisions are expected for the South American crop in tomorrow’s report. With Brazilian harvest nearly complete South American production issues will have little impact on old crop prices moving forward.

Apr 8 -Morning Comments

Grains were subdued overnight as traders wait on a delayed Crop Progress report this afternoon and the next WASDE report to be released on Wednesday. Corn and wheat fell 2 and 4 cents, respectively, while nearby May beans were unchanged in the night session.

On Monday, USDA failed to release their first Crop Progress report of the season, instead pushing the report to today at 3 PM CST. However, state offices in the Plains gave some key data on crop conditions there. Oklahoma and Texas saw another week of lower winter wheat conditions as both states fell by 2% in their good to excellent ratings as compared to last week. Kansas sees its winter wheat crop at 29% good to excellent while Oklahoma rated its crop at 15% good to excellent. Texas saw a modest improvement going from 11% last week to 13% this week.

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In beans, prices have been under pressure of late as traders look for an end to the strong export surge for old-crop delivery. News of a vessel of Brazilian soybeans arriving in the US Gulf over the weekend pushed prices down on Monday and have nearby May hovering around support at $14.60. On Monday, USDA announced a 120,000 MT sales of new-crop 2014/15 soybeans that were sold to China.

For corn, Monday saw a strong showing for export inspections with 1.3 MMT as compared to expectations of 1.00 to 1.25 MMT going into the report. China, the world’s second-largest corn consumer, has signed an agreement with Brazil to allow imports of corn from the South American country, the Chinese quarantine authority said on Tuesday. Brazil is the 2nd largest exporter of corn in the world market next to the US, who stands to lose business from trade restrictions on US GMO corn. However, in the near term US corn export bookings for old-crop have exceeded what USDA has penciled in for the entire year, with 5 months remaining in the marketing year. Total export commitments for the marketing year stand at 41.3 MMT versus USDA’s annual forecast of 41.2 MMT, which seems to suggest WASDE export forecasts will need to be revised higher.

Apr 7 – Morning Comments

Grains started the week on a quiet note with wheat and beans advancing 6 and 3 cents a bushel while corn slipped 2 cents a bushel.

Over the weekend, A bulk shipment of Brazilian soybeans arrived at the U.S. Gulf Coast on Saturday, one of several South American cargoes that will be imported this season to alleviate tight supplies in the world’s top soy producing country.  The Ocean Life, a 75,000-tonne capacity vessel that was loaded at Brazil’s Santos port in mid-March, entered the Southwest Pass shipping channel at the mouth of the Mississippi River early on Saturday morning, according to Reuters shipping data. USDA’s FAS shows US export sales so far this marketing year a MMT, much larger than what the USDA’s WASDE report shows as the annual export expectation of 41.6 MMT.

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For wheat, traders will be looking forward to the first USDA crop progress report for all key growing states to get a sense of crop conditions. In Oklahoma, Texas and Kansas the state offices there have shown poor conditions over much of the region.  Over the weekend, very light showers were reported in the Western Plains, which will provide only limited relief to the wheat crop there, where the drought has been severe.

In corn, China has still not approved a gene-modified strain of corn known as MIR162, the government said on Friday, prolonging a ban that has seen nearly 1 MMT of the U.S. grain turned away from Chinese ports since November.  Asked if its biosafety panel had made a final decision, the agriculture ministry said it was still evaluating materials related to the strain that had been submitted late last year by developer Syngenta.  In the US, Midwest weather looks to see warmer and drier patterns starting on Tuesday and into the weekend which could help get some seeding going in the Southern reaches of the Midwest.  Even as far north as Minneapolis, temperatures are expected to reach 70 degrees by Wednesday.

 

Apr 4 – Weekly Wrapup

The USDA released the heavily anticipated Planting Intentions and Quarterly Grain Stocks reports on Monday.  Most of the analysts’ pre-report expectations were close to what was actually reported.  Despite any large deviations from expectations, corn and soybeans did move sharply early in the week.  Wheat has slid further as demand weakness and precipitation prospects added pressure.  The markets will now be squarely focused on weather as planting nears.

Corn moved sharply higher following the reports as quarterly grain stocks were reported to be approximately 93 million bushels below analysts’ estimates.  Ethanol production moved higher again this week, adding 37,000 barrels a day of production to average 922,000 barrels per day.  Export sales are running about 258 million bushels ahead of pace to meet USDA projections.  This week sales were reported as 960,635 MT for ‘13/’14.  New crop contracts received a boost on Monday too with USDA’s estimate coming in 1 million acres below expectations at 91.7 million. With weather watchers calling for delays in planting this spring, there is the potential for a further decline in this number.

Soybeans rallied following the reports despite the reports being mostly neutral.  Old crop stocks were in line with expectations and anticipated acreage was only slightly larger than expected.  The stocks figure confirmed a tight stocks-to-use ratio.  There are some signs of demand slowing with US crush margins below breakeven prices and export demand shifting to South America.  Export sales are running about 209 million bushels ahead of the seasonal pace to meet USDA projections, but are slowing drastically on that pace in recent weeks.  Export sales were reported as a mere 66,175 MT for ‘13/’14.  The large acreage number reported Monday will weigh on new crop prices moving forward.

Wheat has rallied recently due to continued droughty conditions in the western Southern Plains and political unrest in the Black Sea region.  The situation in Ukraine has subsided for the time being.  The winter crop emerging from dormancy is seeing conditions worsening.  The dry conditions will continue to threaten the crops moving forward.  Providing a little pressure to prices was larger than anticipated stocks being reported on Monday.  The Crop Progress and Conditions report next Monday will be highly anticipated and closely watched.

The reports released Monday by the USDA were mostly in line with expectations.  Corn did rally as quarterly stocks were smaller than anticipated.  Soybeans received confirmation of tight stocks allowing the market to rally too.  Wheat has fallen as the political risk and weather premiums are being pulled out of the market.  Crop progress, conditions, and weather will be the drivers moving forward.

 

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