Morning Comments – December 15

In the overnight session the grains were mostly unchanged with corn up ½ a cent, soybeans up 3 ½ cents and wheat up ¾ of a cent. Soybeans traded sharply lower yesterday after recent weather models show improved precipitation in Argentina for the weekend. January soybeans are now trading near November 14th lows which may provide some support during the trading session in the short term.

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The NOPA crush numbers will be released today at 11 AM CST and are expected to show the strongest crushing rate on record for this month. Analysts are expecting to see 163.191 million bushels crushed in the month of November which would be a slight decrease from the 164.242 million bushels crushed in October. Analysts are expecting soy oil stocks to be reported at 1.269 billion pounds, up from 1.224 billion pounds at the end of October.

The US government announced that La Nina conditions forecast around an 80 percent chance of developing in the Northern Hemisphere throughout the winter of 2017-18. Expectations are for a transition to Enso Neutral by mid to late spring.

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Morning Comments – December 14

In the overnight session corn and wheat remain mostly unchanged but January soybeans is trading 5 ¾ cents lower as Argentina forecasts expect precipitation over the weekend that is likely to provide relief to much of the drought stricken areas of the country.

The Argentina state weather service forecast indicates showers throughout Buenos Aires, Santa Fe, San Luis, Cordoba and Entre Rios. The widespread rain over Saturday and Sunday is expected to greatly benefit much of the dry regions and provide necessary moisture to continue the planting process. Last week Farmers in the Pamas region had planted about 40 percent of their soybean acres.

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Ethanol production slipped this week to 1.089 million barrels per day from 1.108 million barrels per day last week. Despite the slight decline it is the second highest production on record and is roughly 4.7 percent above last year’s production during the same time period. To date, ethanol production is running ahead of last years pace by 4.1 percent. Ethanol stocks also slid last week to 940 million gallons from 947 million gallons. Despite the slight week over week decline in ethanol stocks the current levels are still up 17 percent year over year.

The Federal Reserve increased interest rates by ¼ of a percentage point on Wednesday and kept the rate outlook unchanged.

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Morning Comments – December 13

In the overnight session the grains traded higher with March corn up 1 cent, January soybeans up 3 ½ cents and March Chicago wheat up 2 ½ cents. Grains closed lower yesterday in reaction to the WASDE report, with March corn pushing through November 17th lows.

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The Supply and Demand report released by the USDA yesterday showed a revision lower in 17-18 corn ending stocks by 50 million bushels to 2.437 billion bushels as a result of stronger ethanol production in the first few months of the marketing year. The average trade guess expected 2.478 billion bushels of corn carryout. Global ending stocks increased slightly to 204.08 million metric tons, up from 203.86 MMT in November.

Soybean ending stocks were revised higher by 20 million bushels to 445 million bushels after exports were reduced by 25 million bushels and seed use was increased by 5 million bushels. Exports were reduced as a result of stronger than expected competition from Argentina and Brazil in the first quarter of the marketing season. Global ending stocks increased to 98.32 million metric tons, up from 97.90 MMT in November.

US wheat ending stocks was revised higher by 25 million bushels on account of exports being reduced. Wheat ending stocks were estimated at 960 million bushels which was above the average trade expectations of 938 million bushels going into the report. Global wheat ending stocks also creeped higher to 268.42 million metric tons, up from 267.53 in the November report.

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Morning Comments – December 12

In the overnight session the grains traded mixed with March corn up ½ of a cent, January soybeans down 1 ½ cents and Chicago March wheat up ¾ of a cent. The USDA report will be released today at 11 AM CST. March corn is currently trading near recent lows and any bearish surprise could be enough to break prices another leg lower.

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According the the Reuters poll of analyst estimates the average trade guess of 17-18 corn ending stocks 2.478 billion bushels which would be down from 2.487 estimated in November. Analysts are expecting 17-18 ending stocks for soybeans and wheat to be higher than the November forecast with wheat pegged at 938 million and soybeans at 438 million bushels, up from 425 million bushels in November.

Exporters sell 120,000 metric tons of Hard Red Winter Wheat for delivery to Algeria during the 2017/2018 marketing year. Exporters sell 152,000 metric tons of Corn for delivery to Mexico during the 2017/2018 marketing year. Exporters sell 168,300 metric tons of Soybeans for delivery to unknown destinations during the 2017/2018 marketing year. – USDA

The average trade guess for global ending stocks is to see a slight reduction in wheat, corn and soybeans from November forecast. Analysts are expecting to see wheat ending stocks at 267.07 million metric tons, corn ending stocks at 202.72 million metric tons and soybean ending stocks at 97.82 million metric tons.

Analysts are expecting to see revisions lower for corn and soybeans in both Brazil and Argentina. The average trade guess has Argentina corn production at 41.77 million metric tons and soybean production at 56.52 million metric tons. Brazil corn production is expected to be revised lower to 93.26 million metric tons while expectations are for a slight increase in soybean production 108.21 million metric tons.

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Morning Comments – December 11

In the overnight session the grains traded lower with March corn down 1 ¾ cents, January soybeans down 5 cents and Chicago wheat down 3 ¼ cents. The market will be anticipating the WASDE report which is scheduled for release on Tuesday this week at 11 AM CST.

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Weather in Brazil has been beneficial for crops with weekend rain primarily in the north. Precipitation should continue in the north until Thursday and then move south by the second half of the week. There are no signs of excessive dryness in the forecast for Brazil. Argentina saw precipitation throughout half the country this weekend as high temperatures were mostly in the 90’s. Little precipitation is expected on Monday but some rain will develop on Tuesday in the southwestern parts of the country and expand northeast. Some areas will continue to have significant crop stress, but the scattered showers this week will limit the extreme dryness to a relatively small percentage of Argentina’s overall production.

The commitment of traders report showed that total open interest dropped for both corn and Chicago wheat this week. The CFTC report showed that managed money net short position declined last week from 196,763 to 160,519 in corn and from 122,774 to 118,781 in wheat. Managed money increased their net long position in Soybeans last week from 31,662 to 53,134.

On Friday, the agricultural marketing consultancy AgRural increased their 17-18 Brazilian soybean crop production forecast from 110.2 million metric tons in November to 112.9 million metric tons. The company also increased their planted area estimate to 85.99 million acres up from 85.63 in November.

On Thursday, the White House Chief of Staff called Senator Chuck Grassley to discuss the possibility of a meeting to address potential changes to the biofuels policy. Grassley’s office said that they would meet with any senator who requests a meeting. Trump met with nine senators from oil refining states last week who have interest in overhauling the biofuels policy. The meeting between senators could happen as early as next week.

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Morning Comments – December 07

In the overnight session the grains traded lower with March corn down ¾ of a cent, January Soybeans down 7 ½ cents and March wheat down 1 cent and pushing into contract lows. The USDA WASDE report will be released on Tuesday the 12th next week.

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Ethanol production jumped to an all time high this week to 1.108 million barrels per day, up from 1.066 million barrels per day last week. This weeks production is  8.3 percent above last year during the same week and brings this year’s total ethanol production to 4.1% above 2016. Ethanol stocks also increased last week, moving to 947 million gallons from 926 million. The increase in ethanol stocks reflects a 21.7 percent increase from last year during the same period and we are entering a season when ethanol stocks typically grow.

Russia announced that it will spend roughly $34 million in transportation subsidies to help speed up the export of their record wheat crop. The Deputy Agriculture Minister said that “We are not subsidizing exporters, we are subsidizing producers” and that the measures to not violate their commitments to the World Trade Organization. The transportation subsidies will make it more appealing to move grain from Siberia, Volga and central regions of Russia to markets.

Export sales were up from last week across the board with soybeans posting the strongest sales. Soybeans sales broke the 2 million metric ton mark and doubled last week’s sales. The increase in purchases can be mostly attributed to China but Thailand, Indonesia and Germany also made notable contributions. Wheat sales were within market expectations this week and up 74 percent from last week.

Weekly Export Sales-

 

Actual

Estimated

Wheat

321

250-450

Corn  

876

800-1,200

Soybeans

2,015

1,000-1,500

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Morning Comments – December 06

In the overnight session the grains are trading higher with March corn up 1 ½ cents, January Soybeans up 3 ¼ cents and March wheat down ¾ of a penny. Yesterday, November 2018 soybeans broke through previous resistance set last month before the WASDE report and is now roughly 10 cents away from the contract high of $10.28. March corn is trading above the 20 day moving average this morning which could provide some intra-day support.

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Informa reduced their corn and soybean production estimates for Brazil for the 2017-18. Soybean production was reduced by 1 million metric tons to 110 million metric tons and corn production was revised lower by 3 million metric tons to 89 MMT. The company also reduced their estimate for Australian 2017-18 wheat production by 1.3 million metric tons to 20.3 MMT.

Statistics Canada released production numbers this morning, showing a larger than expected harvest. All wheat production was set at 29.98 million metric tons which was above expectations of 28 MMT. Canola production was set at 21.31 million metric tons which is a production record in Canada and above the highest trade guess of 21 MMT.

Australia’s Bureau of Meteorology announced yesterday that the surface temperatures in the tropical Pacific had reached La Nina levels. This weather event typically means colder winters in the Northern Hemisphere and warmer, wetter winters in the Southern Hemisphere. The Bureau also said that current models suggest the La Nina could be weak and not last long.

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Morning Comments – December 05

In the overnight session grain was mostly higher with March corn up a cent, January soybeans up 3 ¾ cents and March wheat down ¾ of a cent. Soybeans met significant selling pressure yesterday after gapping higher and trading to November 9th highs. By the close of the day session January Soybeans had given back $.09 ¾ of the rally and closed near the opening tick. This morning’s trade has brought soybeans back above the $10.00 mark. The March corn contract briefly traded at $3.60 yesterday before selling pressure took over bringing the contract down to $3.525 by the close. The 20 day moving average is again overhead at $3.54 ¾ which may offer up some resistance in today’s trade.

Exporters sell 162,000 metric tons of grain sorghum for delivery to China during the 2017/2018 marketing year.-USDA

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Grain movement down the Ohio River has ground to a halt after a large traffic jam keeps barges from making progress down the waterway. The problem area is at Locks & Dam No. 52 near Paducah which has offered trouble earlier on this fall. It is now the second shutdown in 2 months caused by worn or missing sections of the Dam.

Australian wheat has experienced significant precipitation over the last week with the weekend bringing the most intense rainfall. The moisture has surely damaged some crop and has traders concerned quality problems and the possibility head sprouting in some areas. Harvest has mostly stalled until the fields dry, but the forecast for Eastern Victoria and Southeastern New South Wales is for off-and-on rain throughout the week.

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Morning Comments – December 04

In the overnight session the grains were higher with March corn up ½ of a cent, January Soybeans up 10 cents and March Wheat up 2 ¼ cents. January soybeans is now trading above the $10.00 mark, an area of strong resistance all Fall. Soybeans is now back to price levels that we have traded at prior to the November WASDE report with a resistance level at $10.08 ¼.

Argentina precipitation over the last seven days has been strongest in the western part of the growing regions and relatively dry to the east. The soil moisture shows short to very short topsoil moisture in northern Argentina and marginally adequate to short moisture the other growing regions throughout the nation. The forecasts expects a ridge of high pressure to develop over Argentina next week which is expected to produce a number of high temperature days with little precipitation. There is concern that a net evaporation effect and deplete topsoil moisture which is critical for emergence of the newly planted crop.

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The monthly Oilseed Crushings report released at 2 PM CST on Friday from the USDA estimated that 175.9 million bushels of soybeans were crushed in the month of October, this was a strong increase from September of 145 million bushels.  The estimates were above analyst expectations which averaged at 174.7 million bushels and ranged from 171 to 175.8 million bushels. The report also showed that 2.22 billion pounds of soybean oil was produced which was a 19 percent jump from September.

The cash markets moved higher last week with corn basis up 3 cents and soybeans up 2 on average across the U.S. With harvest almost completely wrapped up, basis will have an opportunity to gain some ground going into the new year as farmers have filled and locked the bins and marketing stored grain is not necessarily high on their priority list.

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Weekly Commentary – December 01

Futures Commentary-

Corn and wheat had u-shaped patterns to this week’s action as early selling in the week going into First Notice Day became renewed buying interest later in the week.  Beans were off 7 on the week.

With harvest all but done in a few minor areas, traders are turning attention to South America, demand inputs, and next year’s US acreage battle. USDA gave traders a first glimpse of what their economist’s think with the release of USDA’s 10-year baseline.  USDA sees a modest uptick in both corn and bean acres with both pegged to be 91 million in 2018, versus 90.4 for corn and 90.2 for beans in 2017. This comes thanks to another year of declining wheat acres which are expected to be off 1 million to 45.0.

Turning internationally, Russia is expected to cut back on grain production in 2018, with wheat next year pegged to be only 77 MMT which would be off from this year’s 83 MMT number. Meanwhile in Australia, heavy rains are expected to damage the soon-to-be-harvested wheat crop, which already was suffering from early season dryness. The crop could see as much as a 4 MMT downgrade in production as well as quality issues.

In South America, Argentina is expected to see some favorable rain over the weekend. However, it is not expected to be enough to widely change the dry spring planting environment. The long term outlook for South America still suggests below average precipitation and net drying for eastern Argentina and southern Brazil while rain continues in center west and center south Brazil and occurs periodically in western and northern Argentina.

On the demand front, corn has found a bid on rumors that China has been in the US market for 10 to 12 cargos, although no such deals showed up in Thursday’s export report. The holiday-shortened week did no favors for export demand as corn and wheat sales were well below expectations. Soybeans did manage to hit expectations but still came in less than 1 MMT of fresh business. Overall, export business continues to be light in the face of huge stockpiles which could suggest problems for any rally attempts in the market.

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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