Morning Comments- November 25

Grains were modestly higher overnight trying to rebound from Tuesday losses. In outside markets, crude oil gave up most of its gains from Tuesday to move lower in Wednesday, while S&P futures were up in overnight trade,

In overnight news, Egypt’s GASC was tendering for wheat, with the lowest offer coming in at $195.54 per MT from France origin. Russia and Romania also offered wheat in the latest deal, with the US not offered in the deal.

The EPA is widely expected to increase requirements for biofuels use through 2016 due to higher total fuel. The EPA in late May proposed requiring 17.4 billion gallons of renewable fuels to be blended into motor fuels next year, up from 16.3 billion gallons this year.

The head of the company that led the breakneck expansion of Argentine soy cultivation over the last two decades said on Tuesday the country’s grains output could climb by 50 percent over the next three years thanks to a change of government. Opposition leader Mauricio Macri beat ruling party candidate Daniel Scioli in Sunday’s election, effectively ending an eight-year, production-sapping feud between farmers and outgoing President Cristina Fernandez, who clamped down on wheat and corn exports in a bid to curb double-digit inflation.

S&P futures (ESZ5) rose Wednesday as investors shrugged off concerns over an escalation in geopolitical tensions. Investors are likely to bet there won’t be a further flare up in geopolitical tensions as long as NATO stands with Turkey. Instead, markets are more focused on the prospect of further monetary stimulus–also known as quantitative easing, or QE–at the European Central Bank’s meeting next week and whether the Federal Reserve will raise interest rates in December.

Crude oil (GCLF6 / QMF6) was lower on a de-escalation of fears about the Turkey-Russia incident on Tuesday.  Also, data from industry group the American Petroleum Institute on Tuesday showed that U.S. crude inventories rose by 2.6 million barrels in the week to Nov. 20 to 488.3 million, compared with analyst expectations for an increase of 1.2 million barrels.

Morning Comments – November 24

Grains were modestly lower overnight following Monday’s strong turnaround in prices. S&P futures were lower while crude oil was higher after Turkey shot down a Russian warplane overnight, increasing global tensions.

Wheat had the biggest losses overnight as USDA reported another uptick in US winter wheat conditions on Monday. Winter wheat is rated at 53% good-to-excellent versus 52% last week, but still off from last year’s reading of 58%. India’s wheat planting has been delayed by at least a week due to high temperatures, threatening its output of the grain yet again after hailstorms during harvest earlier this year dragged down annual production levels for the first time since 2007.  Lower wheat acreage, down around 26% so far this season, in the world’s No. 2 wheat producer.

In Brazil, the northern region has seen less rainfall than normal as the region is running 30% below normal. While there was a spurt of rain in the past week that helped seeding activities, rainfall of late has been irregular and the forecast for rain is somewhat limited. Predicted totals range between 70-110mm, below the norm of 133mm for this time of year.

Ukraine’s corn harvest is likely to increase by 12% to 25.76 MMT next year due to a larger sowing area, analyst UkrAgroConsult said on Tuesday. Ukrainian farmers are likely to increase the area sown for the 2016 spring crops, including corn and oilseeds, after a severe drought forced them to cut the area sown for winter grains, UkrAgroConsult said in a statement.

Overnight, a Russian warplane was shot down by Turkey, which claimed the plane ignored the country’s airspace and repeated warnings. S&P futures (ESZ5) were lower on the news, while crude oil (GCLF6 / QMF6) was sharply higher on increased tensions.

Morning Comments – November 23

Grains started the week on a down note, with soybeans leading the sell-off to the downside while wheat and corn were slightly lower in quiet trade. In outside markets, S&P futures and crude oil were off slightly from Friday’s close.

Soybeans came under pressure as Argentina’s presidential election results. Conservative challenger Mauricio Macri turned Argentine politics on its head on Sunday, kicking the ruling Peronist movement out of power with a promise to liberalize the ailing economy and end a culture of divisive politics. For grains, this would mean an elimination of stiff export taxes and quotas that have restrained the country’s ability to ship to world markets.

In wheat news, France is set to export wheat to Indonesia for the first time since the 2008/09 marketing season after private animal-feed companies were attracted by unusually competitive French prices. Exporters have turned to French wheat to cover optional-origin deals after Ukrainian supply became less readily available and in view of relatively expensive prices for Australian wheat. French shipments have become cheaper due to a weaker euro and a slide in ocean freight rates, while exporters are keen to find overseas outlets for a record-large French wheat harvest after a slow start to the export season.

In crude oil (GCLF6 / QMF6), prices were off sharply on Sunday’s open, but recovered this morning as Saudi Arabia’s cabinet said on Monday it was ready to cooperate with OPEC and non-OPEC countries to achieve market stability. The council (of ministers) … stressed the kingdom’s role in (achieving) the stability of the oil market and its continuous readiness and efforts to cooperate with all OPEC and non-OPEC countries to maintain the stability of the market and prices,” the cabinet said in a statement following its weekly meeting.

S&P index futures (ESZ5) were little changed on Monday, coming off strong gains last week, with the S&P 500 posting its biggest gains in almost a year and the Dow Jones industrial average turning positive for the year.  The U.S. Federal Reserve is widely expected to raise interest rates next month as labor conditions continue to improve and inflation stabilizes. Geopolitical security issues also weighed on investors’ minds with a lockdown in Brussels continuing for a third day as police hunt for a suspected Islamist militant on the run since the Nov. 13 attacks in Paris.

Weekly Cash Comments

Cash Commentary-

Grain basis was mixed this week as soybean basis took a break from its steep incline since harvest to finish the week unchanged, while corn basis continued to press higher advancing 2 cents a bushel.

In corn, gains were largely driven by ethanol plants this week. As a group, they were up 3 cents a bushel, but in the Western Cornbelt there was fairly widespread gains of 5 to 10 cents a bushel.  At river terminals, basis levels were in line with the US average gain of 2 cents a bushel as Gulf export bids remained flat for the week.

For soybeans, the biggest driver this week was a lower Gulf basis, which gave up 6 cents a bushel. That had an impact at upstream river terminals, which lost 3 cents on the week. Soy plants were unchanged as a group for the week.

Futures Commentary-

Grains were mixed this week as wheat lost 7 cents a bushel and soybeans gave up 3 cents, while corn managed a modest 2 cent gain.

In wheat, improved weather in the US Plains and Ukraine helped ease fears about stress as the crop heads into dormancy. However, the Ukrainian agriculture ministry is said to be limiting wheat exports to 16.6 MMT in the 2015/16 season. The figure could be reviewed depending on the outlook for next year’s winter wheat harvest. The 16.6 MMT figure is still above USDA’s export projection for Ukraine of 15 MMT.  Farmers in the European Union have sown 23.9 million hectares with soft wheat ahead of the 2016 harvest, an estimate reduced by 100,000 hectares from last month, and now down 1 percent on 2015/16, consultancy Strategie Grains said on Thursday. In weekly export sales, wheat came in strong at 722,000 MT as compared to expectations ranging from 200-400,000 MT.

For soybeans, weather in South America continues to be in good shape during the spring season there.  In Brazil, expansive rain coverage in the next two weeks remains likely to further limit any near-term dryness concern and will recharge topsoil moisture, although rains may be very heavy (6 to 10″ or more) in parts of Parana over the next ten days. This will threaten some pockets of excess moisture for corn/soy and will slow port loading, but the pattern otherwise aids corn and soybean development elsewhere. The Center-West soy will see showers peak Friday/Saturday, with additional chances at the middle of next week and in the 11 to 15 day. US exports of soybeans were strong as well this week coming in at 1,797,000 MT, well above expectations which were 700-1,100,000 MT.

In corn, Early in the week Mexico made a large purchase of US corn, totaling 1.4 MMT. However, there was little fresh news to drive prices higher. Ethanol production for the week was lower, while inventories of ethanol reached their highest point since summer, signaling an imbalance between demand and supply. In export sales, weekly sales were 779,000 MT versus trade expectations of 500-700,000 MT.

Morning Comments – November 20

Grains were mostly lower overnight with soybeans leading the losses to the downside.  In outside markets, S&P futures were higher while crude oil was under pressure.

Thursday brought a round of unexpectedly good news for grain with USDA reporting that corn, soybeans and wheat posting better than expected export sales for the week.  Corn sales were 779,000 MT versus trade expectations of 500-700,000 MT while wheat was 722,000 MT as compared to expectations ranging from 200-400,000 MT. Soybeans were also well above expectations which were 700-1,100,000 MT, coming in at 1,797,000 MT.

In overnight news, the International Grains Council (IGC) trimmed its forecast for world corn production in 2015/16 by 3 MMT to 967 MMT, reflecting drought-related cuts to production in China, Ethiopia and South Africa. In world wheat production, IGC pegged 2015/16 at 726 MMT, unchanged from last month’s forecast, with an upward revision from Ukraine (to 27.5 million from 26.0 million) offset by cuts for Egypt (to 8.5 million from 9.2 million) and Brazil (to 6.2 million from 6.6 million). The IGC also said that wheat’s global harvested area for the 2016/17 season was forecast to fall by almost 1 percent to 221.8 million hectares. World soybean production in 2015/16 was projected to equal the previous season’s record high of 321 MMT.

S&P futures (ESZ5) are heading for its biggest weekly gain since October. Traders will be watching  Federal Reserve Bank of St. Louis President James Bullard and Fed Bank of New York President William C. Dudley comments today for insight into the state of the US  economy.  Recent data has bolstered the case for raising borrowing costs for the first time since 2006, with the latest payroll report — released after the Fed’s October meeting — showing the biggest increase in hiring this year.

Crude oil (GCLF6 / QMF6) continued to drift lower overnight as oversupply continues to be the driving theme of the market. Market data suggests oil traders are preparing for another downturn in prices by March 2016, as forecasts for an unusually warm winter dent demand and Iran prepares for post-sanctions crude oil exports.

Morning Comments – November 19

Grains were mixed overnight with soybeans drifting lower while wheat and corn tried to hold on to modest gains. In outside markets, S&P futures were trying to take another run at the 2,100 mark while crude oil was trading lower.

In wheat, prices have been battered down in the past 4 trade sessions on improved weather in key wheat growing regions around the globe. Overnight, the Ukrainian agriculture ministry and traders’ unions have agreed to limit wheat exports from Ukraine to 16.6 MMT in the 2015/16 season. The figure could be reviewed depending on the outlook for next year’s winter wheat harvest, which may fall sharply due to unfavorable weather this fall. The 16.6 MMT figure is still above USDA’s export projection for Ukraine of 15 MMT.  Farmers in the European Union have sown 23.9 million hectares with soft wheat ahead of the 2016 harvest, an estimate reduced by 100,000 hectares from last month, and now down 1 percent on 2015/16, consultancy Strategie Grains said on Thursday.

Japan’s Ministry of Agriculture bought a total of 114,941 MT of food quality wheat from the United States and Canada in a regular tender that closed late on Thursday. Of the total, 80,000 MT was sold by the US.

In Brazil, expansive coverage in the next two weeks remains likely to further limit any near-term dryness concern and will recharge topsoil moisture, although rains may be very heavy (6 to 10” or more) in parts of Parana over the next ten days. This will threaten some pockets of excess moisture for corn/soy and will slow port loading, but the pattern otherwise aids corn and soybean development elsewhere. The Center-West soy will see showers peak Friday/Saturday, with additional chances at the middle of next week and in the 11 to 15 day.

S&P futures (ESZ5) were higher on Thursday, a day after minutes from the Federal Reserve’s October meeting flagged a December interest rate hike and pointed to a cautious approach after that. The minutes showed that central bankers are grappling with longer-term issues that may be relevant to the pace of subsequent rate hikes. U.S. interest rates futures implied a 72 percent chance of a liftoff next month, up from 64 percent on Tuesday.

On Wednesday, crude oil (GCLZ5 / QMZ5) fell below $40 a barrel for the first time since August as an EIA report showed higher crude stocks. Crude inventories rose by 252,000 barrels to 487.3 million barrels in the last week, compared with analysts’ expectations for an increase of 1.9 million barrels. Eight straight weekly increases have boosted stockpiles to close to their modern-day record 490.9 million barrels in April.


Actual Expected
Corn 779.8 500-700
Soybeans 1,797.6 700-1,100
Wheat 721.9 200-400


Morning Comments – November 18

Grains were modestly higher overnight with soybeans trying to lead a feeble recovery on a 2 cent advance. In outside markets, S&P futures and crude oil put up slight advances in the night session.

In grain markets, there was little fresh news on Tuesday to change the course of trading. Grain prices continued to be weighed down by ample supplies not only in the US, but in global warehouses as well. Also, the US dollar continues to show signs of moving higher after a month of nearly vertical increases. The US dollar index is up 6% in the past month, which weighs heavily on US grain prices which depend on export business to foreign countries.

In weather, areas of the world where weather was of concern have since given way to an improved growing condition. The Former Soviet Union is expected to see warm and wet weather in the next week should aid the winter wheat crop there, while precipitation expected across the US Plains this week should also be beneficial for US wheat development.  Likewise, in Brazil an increasingly wet pattern should continue to bolster the summer crop prospects of our biggest competitor in the global soybean market.

S&P futures (ESZ5) were little changed on Wednesday as investors remained cautious after a shootout between French police and militants in Paris and a bomb scare at a German soccer match. Investors are also awaiting the minutes of the Federal Reserve’s policy meeting last month. The minutes will be analyzed for clues on the central bank’s reading of the economy. The Fed is widely expected to raise interest rates at its December meeting. U.S. stocks forfeited gains on Tuesday after a soccer match between Germany and the Netherlands, which German Chancellor Angela Merkel was due to attend, was called off over fears of a bombing.

Crude oil futures (GCLZ5 / QMZ5) rose on Wednesday on reports of falling stockpiles and rising refinery activity in the United States. The American Petroleum Institute (API), an industry group, said on Tuesday that U.S. crude stockpiles fell last week by 482,000 barrels due partly to higher refinery runs. Official inventory data is due from the U.S. government’s Energy Information Administration (EIA) today, with a poll of eight analysts predicting a crude stock build of 1.9 million barrels on average in the week ended Nov. 13.

Morning Comments – November 17

Corn and soybeans posted small gains in the overnight session while wheat continued to dip for a third consecutive day. In outside markets, S&P futures extended Monday’s gains while crude oil was lower.

Corn found some support on Monday as a large export deal was announced by USDA that saw Mexico buying over 900,000 MT of US corn for 2015/16 and 487,000 MT of corn for 2016/17 delivery.  This helped offset the poor export inspections data also released on Monday that showed only 373,000 MT of corn for the week, versus trade expectations of 650- to 850,000.

Soybeans also were helped by another deal by China which saw the number one soybean buyer purchasing 180,000 MT of US soybeans. The deal was announced on Monday from the USDA’s export sales program. Weekly export inspections for soybeans of 2,169,000 MT also topped analyst expectations which ranged from 1,900,000 to 2,100,000 MT. Also on Monday, NOPA’s October crush estimate was released showing 158.9 MB of soybeans crushed for October. This compared to a 161 MB expectation by the trade, with the range of analyst estimates varying from 58.5 to 164.8 MB.

In wheat, USDA reported a slight bump in the condition of the US winter wheat crop as it went from 51% good-to-excellent last week to 52% this week. This still remains off from last year’s reading of 60%. Export inspections for the week were also disappointing coming in at 279,000 MT versus a trade expectation ranging from 300- to 450,000 MT.

S&P futures (ESZ5) were higher Tuesday as investors anticipated data on consumer inflation, earnings from retailers, and a number of speeches from Federal Reserve officials. The Consumer Price Index, after declining for two months because of lower energy and import costs, is forecast to increase by 0.2% in October. CPI will be released at 8:30 a.m. EST. Industrial production for October will be released at 9:15 a.m. and is expected to show a slight gain of 0.1% after two months of declines.

Morning Comments – November 16

Grains started the week drifting lower, with all three grain markets posting losses in Sunday’s overnight session. In outside markets, S&P futures were higher while crude oil found positive gains as well.

In Ukraine, independent analyst UkraConsult cut the 2016 wheat crop forecast to 17.5 MMT from 19 MMT due to poor crop conditions.  If realized this would be a substantial shortfall from Ukraine’s 2015 production of 27 MMT.  Domestically, rains in the U.S. Midwest and the Plains are expected next week that should help winter wheat ahead of dormancy.

Meanwhile, in Brazil, a negative came late on Friday from Mato Grosso, the top soybean-producing date, where farmers have now nearly caught up with last year on plantings, getting 83.7% in the ground compared with 84.1% a year ago, according to research institute Imea. A week before, farmers had planted just 61.0%, compared with 66.9% a year before.

On Friday, Informa released their latest 2016 acreage forecasts, with the private firm forecasting 90.1 million acres of corn, off from their previous estimate of 90.8 while they pegged soybeans at 85.3 million acres, up from 83.9 previously.

In outside markets, the events in France over the weekend had little impact on global stocks. S&P futures posted modest gains overnight, trying to recover from last week’s losses.  In crude oil, prices were higher in response to the geopolitical tension that surfaced over the weekend, putting a slight risk premium back into crude, which had been on its way down to $40 a barrel.

Weekly Cash Comments

Cash Commentary-

Grain basis continued to push higher this week although gains were more limited than last week. US average soybean basis added 3-cents a bushel while corn posted a 2-cent advance on the week.

Barge rates seemed to bottom out early in the week after a nearly 6 week slide as barge costs added about 4 cents a bushel along the IL River this week. Gulf basis for corn was off 2 cents a bushel, while soybean basis at the Gulf was unchanged. At upstream river terminals, basis levels for corn were relatively flat only advancing 1-cent on average, while soybean basis was up sharply gaining 6 cents.

For end users, there continues to be relatively steady advances in basis as both corn and soybean plants try to entice farmers to move grain in the face of slumping futures prices.  At corn plants, basis levels gained 3 cents on average, with gains of 5 to 10 cents fairly typical at plants in the Western Cornbelt. At soybean crushing plants, there were also better than average, adding a nearly 4-cent advance on the week.

Futures Commentary-

Grains came under pressure this week as higher than expected production and stocks pushed prices lower. For the week, wheat gave up 28 cents, corn was off 12 cents and soybeans were down 1 cents.

Tuesday’s USDA report gave traders more bearish news to digest as US production and ending stocks came in higher than expected. Corn saw the biggest jump in stocks as carryout went to 1,760 MB versus trade expectations of 1,597 MB. Soybeans and wheat were also above expectations with soybeans at 465 MB carryout versus 436 expected and wheat at 911 MB versus 877 expected.

In international news, rains in Brazil continue to be optimal for crop development there as traders look for a bumper soybean crop to be in cards. Brazil’s government crop supply agency Conab raised its forecast for a record national 2015/16 soybean crop to between 101.2 million and 102.8 million tonnes on Tuesday, up from 100.1-101.9 million seen last month.   Conab’s overall corn forecast, however, fell to between 81.1 million and 82.7 million tonnes, down from 82.6-83.6 million in October, the agency said in its second report of the crop year.

For wheat, traders are closely monitoring conditions in Russia and Ukraine where dry conditions have hampered development although recent rains have helped alleviate fears of crop losses.  In Ukraine analysts there are still pointing to significant shortfalls in the winter wheat crop. Just on planted area alone, acres are expected to be lower and as of Nov 9 only 59% of the crop has been planted versus 88% this time last year. UkrAgroConsult pegs the 2016 wheat harvest at 19 MMT while Thomson Reuters’ Lanworth group predicts 24.3 MMT. Ukraine’s state weather agency implies a harvest around 21 to 22 MMT. This compares to a 27 MMT crop in 2015.

In China, USDA’s attaché says lower corn usage there is the culprit for higher stocks in China. China has had a massive surge of imported sorghum, barley, and DDGS. Combined imports of these three commodities reached 25.6 million tons in MY2014/15 as feed mills searched for alternatives to high priced domestic corn. The attaché raised the MY2015/16 forecast for ending stocks by over 26 MMT to 117 MMT.

Overall, the outlook for grain prices continues to be bearish or at best flat for the near-term. For farmers, the best marketing option between now and the end of 2015 could be basis, which has shown strength in the Midwest following harvest thanks to slow farmer selling.