Morning Comments – June 20

Grains sunk lower overnight with soybeans and wheat leading the complex lower.

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On Monday after the close USDA released their crop condition report showing corn ratings unchanged on the week at 67% good-to-excellent. Traders had expected the ratings to improve to 68%. For soybeans, the ratings improved slightly to 67% from last week’s ratings of 66%. For spring wheat, another surprising drop as ratings hit 41% off from 45% last week and expectations going into the report which looked for an improvement to 47%.

Egypt announced the close of its local wheat harvest on Tuesday, having bought 3.4 MMT of wheat from farmers, Supply Minister Ali Moselhy said, just short of the government’s target of 3.5-4 million. Egypt this year scrapped the subsidy it traditionally pays farmers and instead pegged the local buying price to world market prices for the grain, a measure that traders have said removed the incentive for smuggling but left the country with a lower procurement figure.

Grain cargo ships in Argentina’s main shipping hub of Rosario were halted late on Monday when replacement workers filling in for striking unions walked off the job after receiving threats, the country’s export chamber said. Regular port workers were on the fifth day of a wage strike on Monday when replacement workers were brought in early in the day, allowing for the resumption of some loading of freshly harvested corn and soy.

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Morning Commentary – June 19

Grains were mixed to start the week with corn trading lower, soybeans trading higher and wheat showing only modest gains going into the break.

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Private forecaster Planalytics sees US corn yield at 166.9, off from their last forecast of 167.4 two weeks ago and well below USDA trend yield of 170.7. Most areas of the country are doing on par with normal, except for the Northern Plains of SD & ND where hot and dry conditions are taking a toll. Yields there are expected to be 10 or more bushels below trend based on current conditions.

For soybeans, Planalytics sees a 46.8 bushel yield for the US average. This is off 0.2 bushels from their previous forecast and below USDA’s yield of 48 bushels per acre. As in the case of corn, the Dakota’s are seeing the most downside in soybean yield based on current conditions.

Weather in Western Europe is expected to get turned up this week with intense heat stress expected. Areas of France, England and Germany are expected to see highs in the mid 90s to near 100s for much of this week. Next week should see a return to Normal. In the US, two storm systems will track thru the Midwest this week bringing rain to the Ohio River Valley and Southeast. The second system will bring rains of 0.5 inches to 2 inches from Iowa and Minnesota and up thru Michigan. The Northern Plains will continue to see limited rain potential.

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Weekly Commentary

Cash Commentary-

Grain basis was mostly stable this week for corn and soybeans with neither commodity showing any strong trends on the week. On average, US corn basis was up 0.9 cents a bushel while soy basis was up 0.7 cents.

In corn, basis levels were firmer across the Southern Plains and river terminals this week. The Gulf market inched higher by 1 cent a bushel but river terminals as a group were consistently 2 to 4 higher on the week. Meanwhile, ethanol plants as a group were mostly flat, but there was some higher bids at some plants in the WCB that ranged from 3 to 5 above last week.

For soybeans, basis levels at river terminals were a drag on the broader market as river terminals as a group sinking 3.5 cents on the week while the Gulf basis actually was bolstered by 2 cents on the week. For soy crush facilities, the basis was up 2.7 cents a bushel with 5 to 8 cent gains fairly typical across the plants in the WCB.

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Futures Commentary-

Grains saw renewed volatility this week with spring wheat futures hitting two-year highs. On the week, however, it was more mixed for the broader complex with corn down 6, soybeans down 3 and Chicago wheat up 5.

Weather in the Northern Plains continues to be a region of concern as persistent drought and heat start to weigh on spring wheat production. USDA’s crop progress report on Monday showed a deep slide in spring wheat conditions to 45% good-to-excellent off from 55% last week and 65% the previous week. For corn, the conditions did slip to 67% as compared to 68% last week. For soybeans the first reading of the year came in at 66%, off of the 70% expected.

Heading into the weekend, the latest US model runs continue to show good precipitation coverage from IL to the East for the next two week period while the Central Plains, Northern Plains and WCB will see limited rainfall. Temperature patterns should follow the rain development with the same areas expected to be dry should see above normal temp readings in this two-week period.

Export business continues to be mostly light especially for new-crop corn and soybeans. Year-to-date totals for new-crop soybean sales are running nearly 40% off the pace last year, but USDA has penciled in a 5% growth factor in exports for the new-crop 2017 marketing year.  Likewise, corn forward sales are off 31% from last year but for new-crop corn USDA is already factoring in a shortfall of 16%.

In international markets, France and much of Western Europe continue to face drought-like conditions. This week private consultant Strategie Grains cut its forecast for the EU wheat crop to 141.6 MMT, down 1.1 MMT from last month, but still 4% above the 136.1 MMT in 2016, when output was curbed by a poor French crop. For corn, they noted a slight cutback of 0.1 MMT to 60 MMT which would be unchanged from last year. But they noted the weather is set to remain dry in most of the primary corn growing countries and the condition of the crop could deteriorate rapidly.

Morning Comments – June 16

Grains continued to advance overnight led by the wheat complex which saw July wheat reach its highest mark in 6 weeks.

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The corn market took a wild ride yesterday with Dec corn trading down to $3.88 in the morning opening bell where underlying support is just below at $3.85 but posted a 12-cent rally back to $4. Yield forecasts from private analysts continue to suggest below-trend yield potential and yesterday’s mid-afternoon weather model run produced more warmth and drier weather than previous models.

The condition of French soft wheat declined slightly in the week to June 12, with 74% of crops rated good or excellent compared with 75% the previous week, farm office FranceAgriMer said on Friday. The corn crop was rated 86% good-to-excellent down 1% from last week.

The latest US model runs continue to show good precip coverage from IL to the East for the next two week period while the Central Plains, Northern Plains and WCB will see limited rainfall. Temperature patterns should follow the rain development with the same areas expected to be dry should see above normal temp readings in this two-week period.

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Morning Comments – June 15

Grains were lower heading into the morning break with spring wheat continuing its leader role with nearly double-digit losses. Crude oil was also down following yesterday’s sharp sell-off.

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Private consultant Strategie Grains cut its forecast for the EU wheat crop to 141.6 MMT, down 1.1 MMT from last month, but still 4% above the 136.1 MMT in 2016, when output was curbed by a poor French crop. For corn, they noted a slight cutback of 0.1 MMT to 60 MMT which would be unchanged from last year. But they noted the weather is set to remain dry in most of the primary corn growing countries and the condition of the crop could deteriorate rapidly.

In international deals, the Korea Feed Association (KFA) purchased about 65,000 MT of corn to be sourced from optional origins in a tender that closed on Thursday. South Korea’s Korea Corn Processing Industry Association (KOCOPIA) also purchased about 60,000 MT of corn to be sourced from optional origins in a tender that closed on Thursday. Meanwhile, Japan bought 162,000 MT of wheat, of which 98,500 MT was from the US.

Weekly Export Sales-

Actual

Estimated

Wheat – NC

373

350-550

Corn – OC

600

500-700

Corn – NC

13

100-300

Soybeans-OC

340

250-450

Soybeans-NC

314

100-300

Crude futures edged lower again Thursday, following sharp declines in the prior session, but investor sentiment continued to be battered by data showing that the market remains awash in surplus oil. On Thursday, oil prices tanked by nearly 4% to their lowest level since November, following U.S. Energy Information Administration data that showed the decrease in crude stockpiles last week was smaller than anticipated. Compounding the woes was the unexpected increase in gasoline stocks, surprising many traders and analysts who expected much of the excess gasoline to be mopped up during the U.S. summer driving season. Data show gasoline demand has fallen for three weeks straight.

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Morning Comments – June 14

Grains continued to move higher overnight with Minneapolis wheat adding 12 cents to yesterday’s 25-cent advance.

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Spring wheat prices hit a 2 year high as the market braces for cutbacks from key growing areas in the High Plains. Weather forecasts for ND show no real relief in the 14-day period. Minor storms bringing limited rain are expected this coming weekend and again in another 10 days.

For the US, weather looks to be hot for the Central Plains and Midwest with temps 3 to 5C above normal for the next several days. Rainfall is expected in most key growing areas but the WCB rains are expected to be somewhat limited.

In China, the government there approved two new GMO varieties – Dow’s Enlist Corn and Monsanto’s Vistive Gold soybeans. China has dragged its feet on permitting new GMO varieties, generally taking 6 years to approve while other countries are more on par with 3 years. In May, Beijing promised to speed up the evaluations of eight US varieties of GMO crops by the end of the month under a trade deal with the US.

The Fed will make an announcement today on interest rates, with a widely expected quarter-point interest rate hike. This would push the Fed funds target rate above 1% for the first time since 2008. Market participants’ focus will be on signals on the frequency of further hikes and how the Fed plans to unwind its huge Treasury bond stockpile over the years ahead.

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Morning Comments – June 13

Grains were bolstered overnight led by spring wheat which catapulted higher following USDA’s crop condition scores on Monday showed further deterioration.

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USDA’s crop progress report showed spring wheat conditions plunged to only 45% good-to-excellent, well below market expectations of 53% going into the report and a 55% reading last week.  For corn, the conditions did slip to 67% as compared to 68% last week. For soybeans the first reading of the year came in at 66%, off of the 70% expected.

In export news, the Taiwan Flour Millers association bought 92,400 MT of US milling wheat overnight. In France, the Ag Ministry there pegged corn sowing at 1.37 million hectares, down 3.3% from last year and 15% below the 5-year average. It also trimmed its estimate of wheat acres to 5.15 million hectares off 0.5% from last year.

Egypt received offers on Monday’s tender for wheat with the lowest offer on an FOB basis being Ukraine with Russia, Romania and French wheat also being offered up. No US offers were presented in the tender.

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Morning Comments – June 12

Rains over the weekend combined with a forecast for cooler temps and more precip helped push the grain complex lower to start the week.

USDA reported the sale of 130,000 MT (old crop) of soybeans to unknown destinations this morning. 

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Over the weekend the Northern Plains saw modest rains of mostly 0.25” but not a drought buster. Highs on Friday in the Plains were 90s to low 100s. The outlook for this week is warm for much of the Midwest but showers will develop later in the week bringing cooler temps. Overall, there is little in the two-week forecast to cause concern about crop losses with most areas seeing some moisture and temperatures oscillating between hot and cool as storms track across the grain belt.

Export activity has perked up a bit to start the week. Late on Friday Egypt announced a tender to buy wheat, the results of which should be announced soon. Saudi Arabia bought 805,000 MT of hard wheat to be optional origin from the EU, North America or South America. And, a group of Israeli private buyers issued a tender for 850,000 MT of corn and 30,000 MT of feed wheat.

China’s soybean futures hit three-month highs on Monday, as talk that the the government has ramped up checks on imports of GMO beans. China allows imported beans to be used by crushers to make soymeal for animal feed but none of the beans, are permitted for use in food products.

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Morning Comments – June 06

Grains were higher overnight led by Minneapolis wheat which had double digits gains going into the morning break.

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Yesterday after the close USDA’s crop progress report showed spring wheat conditions dropped sharply to 55% good-to-excellent, down from 62% last week. Winter wheat conditions also turned lower, slipping to 49% good-to-excellent vs 50% last week. Corn, on the other hand, managed to improve 3% to 68% good-to-excellent.

In international news, Iraq was tendering for wheat and the lowest offer was from the US. But the final results of the tender have not been announced yet. Algeria was also tendering for wheat. Overnight, Palm Oil futures in Malaysia fell about 1% on strength in tandem with rival oils.

The US Dollar sank to its weakest since mid-April against the yen on Tuesday, as economic data drove U.S. government bond yields to lows not seen since Donald Trump’s election last year and investors sought refuge before big events on Thursday.

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Morning Comments – June 05

Grains were holding on to modest gains heading into the morning break after a night of fairly limited two-sided trade.

USDA reported a 120,000 MT sale of soybeans to unknown destinations. Half of it is for OC delivery and the remaining half for NC 2017 delivery.

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Wheat harvest was slowed last week in TX/OK as rains kept farmers from making much progress. According to US Wheat Associates, the TX crop was 27% cut while the OK crop was 16% cut. A high percentage of wheat acres in SW OK extending southward into C TX Texas have been swathed for hay, or otherwise abandoned, in favor of planting cotton.

In Argentina, rains have slowed the corn harvest there as farmers have cut only 40% of the crop versus a normal pace of 60% at this time of year. This could lead to a glut of corn on the market later this summer. Argentina is expecting a record overall 2016/17 corn crop of at least 39 million tonnes, with about 60 percent, a bigger proportion than ever, planted late in the season. Brazil is usually the dominant exporter in August and US supplies are generally just coming to market in September, so Argentina’s crop getting such a late start and slow harvest could add to the price pressure.

In the US Northern Plains, the weather continues to point to mostly dry conditions thru mid-June. A small amount of moisture is expected in the next day for SD/ND but after that it will be another before week before any noticeable precip shows up.

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