Apr 24 – Morning Comments

Grains were fairly subdued overnight. Wheat was the leader to the upside gaining 3 cents while corn was 1 cent higher. Soybeans slipped 2 cents in the night trade.

Soybeans continue to trade well below $15 for front month May futures as traders expect more cancellations of soybean exports and talks of Brazil bean cargoes coming to the US markets. Basis levels continue to hold up relatively well, but deferred delivery beyond June is starting to fade pretty quickly. Export sales were disappointing this week with only 800 MT of old-crop sales, but even more bearish was the lack of significant business for new-crop with only 118,000 MT of sales versus trade expectations of 350,000 to 550,000 MT.

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In corn, EIA weekly ethanol production showed a drop from the previous week with output off 29,000 barrels per day for a weekly average of 910,000 barrels per day. The weather is expected to be wet over much of Iowa and Illinois today and tomorrow which could hamper corn plantings. However, the longer term outlook is for dry weather to return to the Midwest and with it still being April, it is probably too early to be overly concerned about planting delays. On Wednesday, USDA reported China bought 120,000 MT of US sorghum for old-crop delivery, signifying they are still in the market for feed grain even if they aren’t buying US corn.

For wheat, markets have remained downwardly biased after rain helped give some modest relief to the Southern Plains. Over the past week, 1 to 2 inches of rain were observed in Southern Oklahoma and Western Kansas. However, dry conditions are expected over the next 10-day forecast period for much of the Southern Plains, so it seems drought conditions will likely persist. In international deals, Morocco bought 30,000 MT of wheat overnight from Poland. This morning Stats Canada released their wheat plantings estimate for 2014, which they pegged at 24.766 million acres, just a bit more than 24.4 million acres expected, but off from 2013 plantings of 26.1 million.

WEEKLY EXPORT SALES (in thousand metric tons)

  OC Actual OC Expected NC Actual NC Expected
Corn 618.9 500-800 382.9 150-250
Soybeans 0.8 -200 – +100 118.2 350-550
Wheat 339.1 200-400 271.7 250-500

 

 

Ar 23 – Morning Comments

Soybeans continued to move lower in the overnight session giving up 10 cents a bushel. Wheat and corn were mostly quiet in the night trade with fractional changes.

Front month May beans have tumbled 60 cents in the past 4 trading sessions as reports circulate of South American beans heading to the US. A pair of Brazilian soybean vessels initially sold to China by Marubeni are now US-bound. One is headed for Wilmington, NC, and the other to Mobile, AL. In production news, the Rosario Grains Exchange estimated Argentina’s 2013/14 soybean crop at 54.9 MMT versus a previous estimate of 54.7 MMT. USDA has Argentina’s crop at 54.0 MMT in its latest April WASDE report.

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In corn, weather models are beginning to hint at more rain in the Midwest in the coming week which could slow the pace of planting. Rain is expected to be about 1 inch over much of Iowa, Wisconsin and Minnesota in the coming 48 hours, with more rain expected early next week. On Tuesday, private exporters reported the sale of 240,000 MT of U.S. corn to Mexico for delivery in the 2014/15 marketing year.

For wheat, Oklahoma State Agronomist Jeff Edwards found damage from last week’s freeze in field trial plots, although damage was quite variable ranging from 5% to 80% depending on the location. Edwards goes onto to state “The drought has severely limited resilience in our crop and we are entering late April, so I do not anticipate there will be much of a recovery or rebound in fields that were severely damaged. It is important to note that 50% injury does not necessarily mean 50% yield loss. In most cases the actual yield loss will be less than the % injury. So, it is reasonable to expect that 50% injury might only result in a 35 or 40% yield loss.” In overnight deals, Japan’s Ministry of Agriculture bought a total of 108,789 MT of food quality wheat from the United States, Canada and Australia in a regular tender. In Australia, timely rains will boost wheat plantings by farmers when the seeding window opens later this week, analysts said, but the threat of an El Nino dry weather system may see production fail to capitalize on the good start to the season.

 

Apr 22 – Morning Comments

Grains found modest support overnight following Monday’s sharp selloff. Soybeans and wheat were up 5 cents in the night session while corn climbed 3 cents.

Beneficial weather was a key driver in Monday’s selloff as wet weather was in the forecast for the Southern Plains, which has been engulfed in a massive drought. By the weekend, a low pressure system will be approaching the Plains another opportunity for thunderstorms in the Central-Southern Plains for the weekend. Monday’s crop progress report showed no change in the overall condition of the winter wheat crop, which held steady at 34% good to excellent. In overnight deals, Iraq’s state grain board has rejected all offers and made no purchase in a tender for at least 50,000 MT as prices were said to be too high. Meanwhile, Japan’s Ministry of Agriculture is seeking to buy a total of 108,789 MT of food quality wheat from the United States, Canada and Australia in a tender that will close late on Wednesday.

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In corn, a dramatic warm-up in the Midwest is helping give farmers a chance to catchup on planting. All though this week’s planting pace was at 6%, below expectations of 9% by analysts, the weather outlook for the remainder of the week looks very favorable for farmer planting. Monday’s export inspections report showed another strong week with total exports hitting 1.6 MMT, above trade expectations which ranged from 1.05 to 1.55 MMT. Overnight a South Korea feed group bought 60,000 MT of corn with optional origin from the US or South America.

For soybeans, Chinese customs data released on Monday showed the country has kept up its strong appetite for beans, with total imports up 33% year to date, and most of the volume coming from the US so far. Weekly US export inspections were slim with 138,777 MT of shipments for the week, at the low end of expectations which ranged from 135,000 to 350,000 MT. In the cash market, slow farmer selling is being largely offset by limited exporter and processor demand. Bids for soybeans were weaker in Davenport along mid-Mississippi River after dealers there felt there were a touch too aggressive in hiking their bids last week. A firmer tone in barge freight costs amid lock delays on that stretch of the river also weighed on basis.

 

Favorable Weather on the Horizon

The grains are trading lower this morning on improving weather outlook for the next 10 days. This morning May corn is down 3 3/4, May soybeans is down 8 ½ and May wheat is down 12 ½ cents.

The central plains saw temperatures in the 70’s over the weekend, with Chicago recording temperatures at 79F degrees on Easter Sunday. The weather outlook favors a dramatic warm-up throughout the U.S and parts of Canada over the next 10 days which will have speeding effect on planting. Planalytics is expecting temperatures average 3 to 6 degrees F above normal in the major corn producing areas which will improve soil temperature throughout the grain belt. Two low pressure systems are expected over the Central Plains this week which are expected to move eastward. This first low pressure system is expected on the 23rd and the second is expected on the 24th and 25th. These events will interrupt planting slightly but not impact progress for more than a day.

The crop progress report will be released later today at 3 PM CST. Analysts are expecting corn plantings to be 15 percent complete which would be only 3 percent behind the average by late April.

China’s customs data was released overnight which showed that soybean imports through March were up 33.5 percent year over year with the U.S supplying the vast majority. Corn imports were up 14.7 percent year over year with the imports largely sourced from Argentina, while U.S corn imports to China fell 16.1 percent.

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