Morning Comments – February 21

Grains were mixed overnight with soybeans at one point up 10-cents a bushel before backing off to a 3-cent advance. Corn and wheat were in negative territory to start the week. In outside markets, the US dollar shot higher on weakness in the Euro while crude oil was up a $1 a barrel.

Exporters sell 138,650 metric tons of wheat for delivery to unknown destinations, of which 92,650 MT is for 2016/2017 delivery, 46,000 MT is for 2017/2018 delivery.

Exporters sell 111,200 metric tons of corn for delivery to unknown destinations during the 2016/2017 marketing year. Lastly, exporters sell 269,296 metric tons of corn for delivery to Japan; of which 104,704 MT is for 2016/2017 delivery, 164,592 MT is for 2017/2018 delivery–USDA

Rains in Argentina over the weekend were mostly beneficial to some areas in the south of the country’s main grains belt that had been dry, while more central regions received lighter rains that were also helpful. Rains will continue to be above normal levels throughout this week. In Brazil, soy harvest continue to speed along at 24.8% harvested, above the five-year average of 17.1% for this time of the year. Weather maps show conditions will remain mostly dry over the next days, allowing farmers in Mato Grosso do Sul, Goiás and Paraná to continue strong.

The Korea Feed Association (KFA) purchased about 62,000 tonnes of corn in a tender Tuesday which can be sourced from optional origins including east Europe. Mills in the Philippines bought two cargoes or about 54,000 tonnes of Australian wheat in recent deals for shipment in June and July while Indonesian buyers are in the market to book cargoes of May delivery.
Australian Standard Wheat (ASW) was traded into the Philippines at $205-$210 a tonne, including cost and freight.

Malaysian palm oil futures slid for a fourth consecutive session on Tuesday, hitting their lowest in 15 weeks as expectations of higher production and ample supplies of rival soybean oil weighed on the market. Benchmark palm oil futures for May delivery closed down 1.7%, the weakest since Nov. 8

Crude oil hit its highest mark since February 2nd as funds continue to plow into record-long positions. OPEC continues told firm to its November deal to reduce output by 1,8 million barrels per day, but crude stocks continue to balloon. U.S. crude oil and gasoline inventories soared to record highs last week as refineries cut output and gasoline demand softened.

 

Weekly Cash Comments

Cash Commentary-

Grain basis was mixed this week as corn basis came under some modest pressure giving up 0.5 a cent a bushel on average across the U.S. Soybeans posted a nearly 1-cent gain on the week.

This week, there was clear dichotomy between end users and river terminals. End corn users were clearly lower this week especially in the Western Cornbelt. Corn basis at ethanol plants across the US averaged a 2 cent slide. Losses of 4 to 6 cents were typical in the Western Cornbelt. Meanwhile, river terminals firmed as strong export demand and approaching First Notice Day for March futures pushes basis levels to converge at river markets. For the week, corn river terminals gained 3 cents a bushel.

For soybeans, similar forces were at play with river terminals up nearly 5 cents on average for the week, while crush plants as a group were unchanged. The Northern Plains and Upper Midwest continues to be plagued by weak basis levels as rail delays in the PNW regions put load-outs behind schedule and keep basis levels on the defensive.

Futures Commentary-

Grains were mixed this week as competing forces of strong demand and potential big supplies from South America continue to see-saw prices. For the week, corn and wheat were in positive territory posting 4-cent gains while soybeans gave up 6 cents.

In South America, Brazil continues to move quickly through soybean harvest in Mato Grasso although Parana has been behind pace. Farmer selling has been mostly light in the early stages of harvest but port supplies have been sufficient to meet ship loading schedules. Harvest is expected to increase in Brazil in the coming weeks with second season Safrina corn planting expected to improve. Trade expectations continue to point to a bigger soybean crop in Brazil of 105 to 106 MMT vs USDA at 104 MMT.

In wheat, world wheat growing conditions look mostly favorable with the only lingering issues being India where dryness is leading to some crop losses and is not expected to see much rain in the near term. In Europe and in the US Southern Plains, it has been dry but moisture is expected in both areas in the 6 to 10 day outlook.

On the demand side, ethanol production was off 15,000 barrels per day this past week, but still maintains a strong pace above last year. But, ethanol stocks continue to balloon as inventories approach all-time highs set last year. On the export front, corn exports have been seasonally strong and so far remain well above the pace needed to reach USDA’s annual forecast. But rumblings with Mexico are causing some potential concerns. Mexico’s ag minister will take a delegation to Brazil and Argentina to explore options for increasing corn exports as a way to mitigate potential political risk with the US. Right now, Mexico continues to be the number 1 buyer of US corn thanks to simple price economics, but policy makers could change that equation if tariffs or quotas become enacted to favor SA over the US.

Next week, USDA will hold its annual ag outlook forum where it will release its new crop supply and demand forecasts. These are not based on formal surveys, but so far analysts are looking for soybean acres to increase 4 to 6 million acres and corn acres to fall by 3 to 5. Formal surveys by USDA conducted on March 1 will be released at the end of March.

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

Morning Comments – February 17

Grains continued to slide heading into the last day of trade before the weekend.

USDA reported this morning exporters sell 119,112 metric tons of corn for delivery to Japan, of which 60,000 MT is for 2016/2017 delivery; 134,112 MT is for 2017/2018 delivery.

Palm Oil continues to sink hitting a fresh 3-month low overnight. Production levels continue to move higher as exports remain unclear with increased veg oil supplies from South America.

On Thursday, USDA released their baseline 10-year projections ahead of their outlook conference next week. USDA shows a 2.2 billion carry-out for next year’s crop, not hugely different from 2.3 billion for the current year. This is assumed from a 90 million acre crop next year with a 170 bu yield. For soybeans, they look for carry-out to shrink to under 400 MB but that is based on assumed 1.8 million acre increase in soybean plantings this spring to 85.5 million. Most analysts are looking for a soy acreage in the 87 to 89 range.

In export news, Egypt’s GASC is in the market for wheat again overnight. The lowest offer was from Russia at $195 a ton. US wheat was also offered up at $208 per ton. The results of the tender will be announced later today.

Morning Comments – February 16

Grains faltered in early trade after solid advances posted on Wednesday, although export sales ahead of the morning break added some buying strength to wheat and soybeans. Outside markets showed the US dollar correcting lower on steady gains in the last week while crude oil was in positive territory.

Corn has rallied to fresh highs on this move with March hitting $3.79 in yesterday’s trade, the highest market since July. Funds were buyers of 13,000 contracts on Wednesday and seemed to be the main culprit behind the bullish momentum with an estimated net long of 43,000 contracts.

Heavy rains are expected in Southern Argentina over the next 7-10 days with Buenos Aires, Entre Rios, Southern Santa Fe and Northern La Pampa getting the most moisture. In Brazil, weather looks to improve harvest targets as expected rainfall totals decrease from Parana to Bahia. In Mato Grosso however, the conditions are wet and looks to stay wet over the next few days, however rains should back off and give the area time to dry next week.

Consultancy Strategie Grains on Thursday raised its forecast for this year’s corn crop in the European Union but left its soft wheat crop forecast unchanged as it estimated that cold weather had caused no additional damage from last month. Strategie Grains pegged the 2017 soft wheat crop at 143.8 million tonnes, a forecast that would be 6 percent above estimated production of 135.7 million tonnes last year when output was curbed by a very poor harvest in top EU wheat grower France.

Weekly Export Sales-

Actual

Expected

Wheat – OC

569

300-500

Wheat – NC

20

0-50

Corn – OC

784

900-1,100

Corn – NC

285

0-150

Soybeans-OC

890

500-750

Soybeans-NC

207

50-150

Morning Comments – February 15

Grains were lower to start the day as the bullish enthusiasm from last week appears to be waning. Meanwhile, the US Dollar continued to exert its strength to the upside while crude oil drifted lower.

The NOPA crush report to be released today at 11:00 AM is expected to show 159.1 million bushels of soybeans in January (ranging from 156.9 million to 162.0 million bushels). The past two months have seen actual NOPA estimates come in below the average trade guess by 2 MB.

Argentina hopes to increase its corn exports to Mexico, where it sent less than 100,000 MT last year, as part of its effort to gain market share for its growing corn output, an Agriculture Ministry official said Tuesday. The presidents of Argentina and Brazil, South America’s largest economies, said they would seek closer relations with Mexico and other Latin American countries that could be threatened by a more isolated United States.

The Taiwan Flour Millers’ Association has issued an international tender to purchase 102,850 MT of grade 1 milling wheat to be sourced from the United States.

Crude oil will look to EIA for data on inventories. Traders look for a 3.5 million barrel build in crude stocks on the week. Last week, inventories ballooned by over 13 million barrels and for 5 weeks running stocks data have come in higher than expectations.

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

 

Morning Comments – February 14

Grains were weaker to kick off the day with wheat and soybeans feeling the most selling pressure in the night session.

USDA announced a sale of 229,000 MT of corn to Japan and a 142,500 MT sale of soybeans to Mexico.

The NOPA crush report to be released Wednesday is expected to show 159.1 million bushels of soybeans in January (ranging from 156.9 million to 162.0 million bushels); NOPA reported a December crush of 160.176 million bushels; in January 2016, processors crushed 150.453 million bushels. Marketing year-to-date NOPA crush figures are up 2.5% over the same period last year, on par with USDA’s expected increase in annual soy crushings of 2.3%.

Yesterday, a Mexican Senator who leads a congressional committee on foreign relations, says he will introduce a bill this week where Mexico will buy corn from Brazil and Argentina instead of the United States.

In wheat, prices broke above its 200-day moving average for the first time since June. However, there is no shortage of wheat in the world and competition will be strong. In Australia farmers produced a record amount of wheat during the 2016/17 season, the country’s chief commodity forecaster said on Tuesday, as ideal weather pushed the world’s fourth largest exporter to production levels of more than 35 million tonnes. That’s up from 24.5 MMT last year and above USDA’s forecast of 33.0 MMT.

As wheat has rallied, the US competitive position has started to erode. This week relative to French White Wheat, US prices have gained nearly $5 a MT vs French prices. For corn, US price strength has caused US prices to gain about a $1 a MT vs Brazil and Europe. In beans South America prices have strengthened relative to the US. Farmer selling in Brazil during harvest is reported to be relatively slow.

WORLD EXPORT PRICE SPREADS RELATIVE TO US

Crop

Country

Today

Last Week

Last Year

CRN

BRZ

-$21.2

-$20.7

-$23.2

CRN

EUR

-$1.4

+$0.0

-$19.4

SBN

ARG

+$4.4

-$6.5

-$18.5

SBN

BRZ

+$2.6

+$1.7

-$11.4

WHT

EUR

-$23.7

-$18.6

-$45.8

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.

 

 

Morning Comments – February 13

Grains started the week with a negative tone following last week’s strong performance. In outside markets, crude oil was falling lower while the US Dollar was holding around the unchanged mark.

Brazil got spotty rains over the weekend which will take some of the steam out of early Brazil harvest. Any slowdown in Brazil’s soy harvest may lead to less second-season Safrina corn acres. The cut-off for planting of that crop is expected to be in the next 10 days. However, the next 10 days are expected to see widespread dryness. In Argentina, no emerging threats for weather seem to be in the cards.

In the US Southern Plains temperatures over the weekend hit the high 90s adding some stress to already parched soils. Rains are expected later this week in S Oklahoma and N Texas but not enough to favorably change the drought situation.

In India, there continues to be little rain to stem the drought concerns. Only a half inch of rain is expected this week in the most Northern part of the the country leaving the key central region dry. Some yield loss has already occurred in parts of India this year because of restricted rain in recent weeks. The biggest decline has been in central parts of the nation. Warmer temperatures later this week and next week will be a concern.

 

Weekly Cash Comments

Cash Commentary-

Grain basis reversed course from recent trends with corn basis moving lower while soybean basis moved higher. For the week, soybean spot basis was up 1.4 cents a bushel while US average corn basis dipped 0.7 cents a bushel.

In corn, the big drag on basis was a move lower at river terminals which fell nearly 3 cents a bushel. Basis levels are now running about where they were in mid-December before peaking at the first of the year. With ethanol plants, they continue to run mostly full of corn with no major need to bid up basis to cover needs.  This is especially true in the Western Cornbelt where corn stockpiles are still burdensome.

For soybeans, crush facilities eked out a 1-cent advance this week but continue to trade well below historical norms.  Basis levels for soy plants are running about 35 cents below normal for this time of year. Meanwhile, river terminals are also weaker than normal are about 20 cents off basis expected at this time of year but will need to converge close to zero as first notice day approaches for March soy futures at the end of this month.

Futures Commentary-

Grains found strength this week with soybeans and wheat leading the complex higher on 13 and 9-cent gains by the end of the week. Corn posted a more modest 2-cent advance.

This week brought fresh data from USDA’s supply and demand report.  Wheat found the greatest revision as USDA trimmed global and US carry-out more than had been expected by the trade. India’s production was slashed by 3 MMT and a few minor adjustments in other countries resulted in a 5 MMT drop in wheat carry to 248.6 MMT.

In soybeans, USDA held firm on their projections to South America crop production and China’s soy imports. USDA at 104 MMT for Brazil seems to be below recent estimates from private consultants and SA government agencies at 105 to 106. USDA also kept US exports of soy unchanged and left China’s soy imports the same although both are running better than pace at the mid-mark of the marketing year.

USDA lowered US corn carry-out by 35 MB thanks to better ethanol and industrial use of corn but they kept corn exports unchanged. YTD corn sales are up about 12% over the 10-year pace of sales needed to reach USDA’s annual forecast of 2,225 MB. If the current pace of exports were to persist it would imply an annual export number of around 2,500 MB.

While the report did little to alleviate large supplies, it did seem to show demand base building for corn and wheat. Traders will continue to watch for signs of higher SA production than expected as well as indications that China will slow its rampage in bean buying.

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

Morning Comments – February 10

Soybeans posted modest gains overnight trying to recover some of yesterday’s losses while wheat and corn were mostly stable. In outside markets the US dollar and crude oil were extending their gains from yesterday.

USDA’s supply and demand report showed the most bullish news for wheat where USDA trimmed global and US carry-out more than had been expected by the trade. India’s production was slashed by 3 MMT and a few minor adjustments in other countries resulted in a 5 MMT drop in wheat carry to 248.6 MMT.

In soybeans, USDA held firm on their projections to South America crop production and China’s soy imports. USDA at 104 MMT for Brazil seems to be below recent estimates from private consultants and SA gov agencies at 105 to 106. USDA also kept US exports of soy unchanged and left China’s soy imports the same although both are running better than pace at the mid-mark of the marketing year.

USDA lowered US corn carry-out by 35 MB thanks to better ethanol and industrial use of corn but they kept corn exports unchanged. YTD corn sales are up about 12% over the 10-year pace of sales needed to reach USDA’s annual forecast of 2,225 MB. If the current pace of exports were to persist it would imply an annual export number of around 2,500 MB. In overnight news, South Korea’s largest feed-maker, Nonghyup Feed Inc. (NOFI), purchased 210,000 tonnes of corn and 67,000 tonnes of feed wheat in an international tender which closed on Friday. The grains can be sourced from optional origins for May/June arrival in South Korea, they said.

 

Morning Comments – February 09

Grains slipped overnight ahead of USDA’s crop report at 11 am CDT today. In outside markets, crude oil was pushing higher back into the mid $52 range while the US dollar was mostly steady.

USDA reports the sale of 107,000 MT of soybeans to unknown destinations.

Traders expect only minor changes to USDA’s supply and demand data, with the biggest consensus for a modest drop in US corn carry-out and potentially a cut in US soy carry-out. International factors like SA production and China soy imports will likely play a bigger role. USDA could bump China soy imports from current estimates of 86 MMT as the country has been aggressively buying. Supply estimates are expected to show Brazil beans at 104 and Argentina at 54. But, many analysts continue to peg a higher Brazil number in the 105-106 range; forecaster Conab this morning pegged it at 105.6 MMT.

China curbed its corn surplus for 2016/17 due to better-than-expected domestic demand and lower imports, as it embarks on a strategy to erode its vast stockpile, curb acreage and boost consumption. In its monthly crop report, the Ministry of Agriculture said it expected surplus supply for the 2016/17 season that ends in September to total 4.41 million tonnes, down from last month’s prediction of 5.11 million tonnes. That would be way below 33.73 million tonnes in 2015/16. The data does not include state reserves, which are estimated to be around 200 million tonnes, equivalent to one year’s worth of demand.

Weekly Export Sales-

Actual

Expected

Wheat – OC

527

300-500

Wheat – NC

16

25-100

Corn – OC

971

800-1,100

Corn – NC

34

0-150

Soybeans – OC

536

500-800

Soybeans – NC

129

100-250