Morning Comments – May 02

Grain markets were subdued overnight with grains showing modest losses in fairly limited trade. In outside markets, the US dollar hit fresh lows late in the morning session while crude oil was weaker on the night but was coming back closer to unchanged.

On Friday a number of analysts trimmed the Brazil corn crop estimate as heat stress has taken its toll on the 2nd crop there. Analyst AGR BRASIL reduced its Brazil 2015/16 corn forecast to 79.6 MMT from 85.1 MMT in March. Meanwhile analyst Franca pegged it at 79.5 MMT versus 87.1 MMT in March.

Most of this week will be dry in Brazil’s main agricultural areas. Some random showers will occur near the coast from Minas Gerais and Rio de Janeiro to eastern Bahia and a few may occur infrequently from northern Mato Grosso to Tocantins. The impact will be one of net drying for most of the nation and immature second season corn production areas will slowly dry out once again, but many crops will be in favorable condition because of rain that fell last week.

In Argentina, A favorable weather pattern is expected through the next ten days with restricted rainfall and mild to warm temperatures. The environment will favor better harvest conditions as time moves along. No meaningful rain is expected through Thursday morning. Some showers will evolve Thursday afternoon and Friday in portions of the nation. Some of the shower activity will linger into early next week.

Oil prices edged back from 2016 highs on Monday as rising production in the Middle East outweighed a decline in U.S. output and a sliding dollar. Crude production by the Organization of the Petroleum Exporting Countries rose in April to 32.64 million barrels per day (bpd), close to the highest level in recent history. Iraq’s April exports from southern fields increased, as did seaborne exports from Russia, the biggest exporter outside OPEC.

 

Weekly Commentary

Grain basis was flat this week with both corn and soybean basis holding steady at week ago levels.

However, the river markets continue to push basis levels higher as export demand continues to be robust, especially for this time of year. Corn basis at river terminals averaged a 2-cent advance on the week while soybean basis was up only modestly.

End users as a group were relatively flat this week with no significant change in corn or soybean plant basis on the week.

Futures Commentary-

Market volatility increased in grains this week with front-month soybean futures hitting fresh highs on the bull run but finished the week unchanged. Wheat was off 18 cents while corn was up 1.5 cents.

USDA’s crop progress report showed a big jump in corn plantings this week with 30% of the US crop planted, up from 13% last week and a 16% 5-yr average. The first reading for soybeans was 3% planted, slightly better than the 2% planted rate which is normal for this time of year. Winter wheat conditions improved 2% to reach 59% in good-to-excellent condition. Most of the improvement was in HRW states from TX to SD which saw ratings jump 3 to 4% on the week.

Corn continues to find strength from yesterday’s big export sales report showing 2.6 MMT combined for old- and new-crop deliveries, the highest weekly total in 4 years. The weakness in the US dollar continues to make US grains more attractive. Argentina’s port price is running at $6 a MT higher than the US price versus in December when Argentina’s price was $7 a MT cheaper than the US.

In weather, rains will favor much of the Plains hard red winter wheat belt, with weekend showers reaching much of the central/southern Midwest and Delta. The Midwest/Delta then will see favorably dry weather for seeding in nearly all areas for most of next week, with a return of 11 to 15 day rain posing the next interruption to fieldwork. Overall, planting should remain at a favorable pace, and any concerns with excess moisture will remain localized.

In South America, Argentina was dry on Thursday, with lows in the mid-30s to low 40s. Unseasonably cold air lingers this weekend, but frost threats remain minimal for double-crop soy. Mostly dry weather now looks likely to persist through much of the next two weeks, allowing corn/soy harvest to recover. Second season corn in Brazil from Mato Grosso through southern Goias to Sao Paulo and Parana will not receive much precipitation over the next week. Brazil showers this weekend will produce 0.10 to 0.75 inch of rain from far northeastern Sao Paulo, Rio de Janeiro and Minas Gerais to northern Goias and parts of Tocantins.

Morning Comments – April 29

Corn found more strength overnight while soybeans was off slightly but improved from its lows on the nights. Wheat was higher as well. In outside markets, crude oil continued to climb getting above $46 a barrel while the US dollar came under pressure.

Corn continues to find strength from yesterday’s big export sales report showing 2.6 MMT combined for old- and new-crop deliveries, the highest weekly total in 4 years. The weakness in the US dollar continues to make US grains more attractive. Argentina’s port price is running at $6 a MT higher than the US price versus in December when Argentina’s price was $7 a MT cheaper than the US.

In weather, rains will favor much of the Plains hard red winter wheat belt, with weekend showers reaching much of the central/southern Midwest and Delta. The Midwest/Delta then will see favorably dry weather for seeding in nearly all areas for most of next week, with a return of 11 to 15 day rain posing the next interruption to fieldwork. Overall, planting should remain at a favorable pace, and any concerns with excess moisture will remain localized.

In South America, Argentina was dry yesterday, with lows in the mid-30s to low 40s. Unseasonably cold air lingers this weekend, but frost threats remain minimal for double-crop soy. Mostly dry weather now looks likely to persist through much of the next two weeks, allowing corn/soy harvest to recover. Second season corn in Brazil from Mato Grosso through southern Goias to Sao Paulo and Parana will not receive much precipitation over the next week. Brazil showers this weekend will produce 0.10 to 0.75 inch of rain from far northeastern Sao Paulo, Rio de Janeiro and Minas Gerais to northern Goias and parts of Tocantins.

 

Morning Comments – April 28

Grains were mixed overnight with corn and soybeans posting small losses while wheat posted a modest gain. In outside markets, the US dollar continued to sink while crude oil had a modest drop after hitting fresh highs in the previous session.

On Wednesday, Argentina’s grain exchange said one third of soybean farms remain swamped after early April storms, with crop loss estimates at 5 MMT as harvesting starts in areas dry enough to support field work. The exchange estimates this year’s crop at 59 MMT, a forecast that is likely to fall in the weeks ahead as the sun comes out and farmers measure flood-related losses. Last week the Buenos Aires Grains Exchange chopped its harvest forecast to 56 MMT from 60. The first cold front of the Southern Hemisphere autumn hit Argentina on Sunday, ending the rains. Mostly fair weather is expected in May, which should allow harvesting machines to get to farms left isolated when floods washed out the poorly maintained roads that crisscross the Pampas.

In the US, the Midwest is slightly drier Sunday. Abundant rains in central and southern areas through the weekend will slow corn and soybean planting, but will improve soil moisture, especially in western areas. The 6-10 day outlook is warmer in northwestern areas. The Plains are wetter in northwestern areas in the 6-10 day period. Additional widespread showers through the weekend will continue to build moisture and winter wheat conditions. The rains will be most beneficial in southwestern areas.

Saudi Arabia’s main state grain agency, the Saudi Grains Organization (SAGO), said on Thursday it was seeking 550,000 MT of hard wheat in a tender.   The wheat should contain 12.5 percent protein and will be for shipment from July to August, SAGO said in a statement.   The deadline for offers is Friday, it said.

The Federal Reserve kept interest rates unchanged on Wednesday but signaled confidence in the U.S. economic outlook, leaving the door open to a hike in June.   The U.S. central bank’s policy-setting committee said the labor market had improved further despite a recent economic slowdown and that it was keeping a close eye on inflation.   It added that global economic headwinds remained on its radar, but removed a specific reference from its last policy statement to the risks they posed. The US dollar initially reversed its recent slide on this news but continued lower in the night session, giving up 0.5%. The US dollar index has lost 5% of its value since March 1.

WEEKLY EXPORT SALES

OC-Act OC-Exp NC-Act NC-Exp
Corn 2,160 1,000-1,300 440 200-400
Soybeans 226 400-600 720 300-500
Wheat 351.9 75-175 454.7 300-450

 

Morning Comments – April 27

Grains were weaker overnight but seemed to finding some pullback heading into the morning break. Meanwhile, crude oil continues to hit fresh highs on this rally, posting a $1 a barrel gains going into the day while equity futures were sharply lower.

On Tuesday, South Africa was said to expect a 7.054 million tonnes of maize crop in 2016, 29.1 percent less than the 9.95 million tonnes reaped last year because of a drought and late plantings.   The forecast harvest, which the Crop Estimates Committee (CEC) said would be the smallest crop since 2007, is 5.3 percent above market expectations of 6.7 million tonnes, according to a Reuters’ poll of traders.

Also on Tuesday, Brazil has given grain trading companies an initial quota of 100,000 tonnes of tariff-free corn on purchases outside of the Mercosur trade bloc, the trade ministry stated in the official gazette on Tuesday. However, Brazil food processor BRF says it has imported corn from Mercosur countries and does not expect to import from outside countries.

Rains were heavy across the Southern Midwest yesterday bringing 1 to 3 inches of rain. The Central and Southern Plains continue to see rains as well. In South America, Argentina was dry in the past 18 hours while Brazil continued to see good rain coverage helping aid dry soils there.

In crude oil, API stocks data on Tuesday showed a drop in crude stockpiles of 1.07 million barrels on the week, while traders had been expecting a 0.8 million barrel build. Official government data from EIA will be released at 9:30 am CDT today and is expected to show a 2.366 million barrel build.

 

Morning Comments – April 26

Grains were modestly higher overnight with corn and soybeans posting tepid gains, while wheat was slightly lower. The US dollar continued to fall while crude oil was trying reverse yesterday’s steep losses.

After the close Monday, USDA’s crop progress report showed a big jump in corn plantings with 30% of the US crop planted, up from 13% last week and a 16% 5-yr average. The first reading for soybeans was 3% planted, slightly better than the 2% planted rate which is normal for this time of year. Winter wheat conditions improved 2% to reach 59% in good to excellent condition. Most of the improvement was in HRW states from TX to SD which saw ratings jump 3 to 4% on the week.

US Planting weather continues to show mostly favorable conditions. Most areas remained favorably dry for fieldwork, but the seeding slows in the central/southern Midwest and Delta through early next week. The best rain chances in the western Midwest will be tonight/tomorrow and this weekend, while the eastern Midwest/Delta pick up rain Wednesday/Thursday and Sunday/Monday. Another system will also favor the Delta and near the OH River next Tuesday/Wednesday. Locally 2 to 4”+ rainfall with each event will bring isolated flooding (main risks in southern Midwest/Delta), but notable wetness concerns are unlikely.

The European Union’s crop monitoring service MARS on Tuesday raised its forecast for average winter cereals yields in this year’s harvest as favorable weather in major producing countries helped crop development. MARS pegged the average soft wheat yield for the 2016 crop at 6.11 tonnes per hectare (t/ha), up from 5.96 t/ha estimated last month. The new forecast was now 2.7 percent lower than last year but 4.9 percent above the five-year average. “In general, the current prospects for EU-28 yields are above the five-year average, and the forecast for total cereals has increased compared to our last bulletin, reflecting the generally good growth conditions.”

Morning Comments – April 25

Grains were lower overnight with soybeans taking the biggest loss. In outside markets, crude oil and equity futures were also lower in overnight trade.

After Friday’s meltdown in the soybean market, prices on front-month May futures seemed to find support at $9.80 before the regular session open. However, news that fueled the rally over the past month seems to be waning in importance. Argentina’s weather woes look to be in the rearview mirror. Bean harvest was picking up in SW Argentina and receipts at port terminals are gaining to almost normal harvest levels. Weekend rainfall was spotty in Argentina with a few areas seeing a 0.50 inch, but most key areas were dry over the last 3 days.

In the US, rains were prominent in IA, MN & ND over the weekend bring an inch or more of precip, while the Southeast also saw large rain events. Rain looks to be prominent in the 7-day forecast with accumulations heaviest from IA to TX, and potentially excessive at times.

USDA will release planting progress today after the market closes. Average corn plantings on this date are around 25% and good weather last week may lead to a big jump in plantings to over 30%. Also, look for winter wheat conditions to improve on improved moisture in the Plains. Some producers in HRW country are talking yields 10% above last year.

Crude prices fell overnight following a report saying Saudi Arabia could maintain its total production capacity with the expansion of an oilfield, fueling fresh concerns about the global supply glut. Saudi Arabian Oil Co will complete an expansion of its Shaybah oilfield by the end of May, allowing the world’s largest exporter to maintain total capacity at 12 million barrels a day, Bloomberg News reported. The expansion will see Shaybah’s capacity rise from 750,000 barrels to 1 million barrels a day, the report said.

Morning Comments – April 22

Grains head lower overnight with soybeans taking the biggest hit giving up 20 cents. In outside markets, crude oil recovered from yesterday’s losses while equity futures had a slightly weaker tone in the night session.

Markets seemed poised to turn to the reality of the fundamentals. Overnight, Goldman Sachs stated to clients “While this recent rally has the potential to run further to the upside … we believe that it is not yet driven by a sustainable shift in fundamentals.” Yesterday, the Buenos Aires Grains Exchange dropped its 2015-16 soybean crop estimate to 56 million tonnes from its previous 60-million-tonne forecast. Minutes later the agriculture ministry marked its estimate down to 57.6 million tonnes from 60.9 million tonnes. Some analysts have been talking about a 15 MMT loss in Argentina but the reality could be something substantially smaller like 5 MMT.

Corn and wheat made bearish key reversals on the charts yesterday which could cause selling pressure to intensify. Brazil corn sees showers expand into the southwest 2/3 of the belt early next week to ease stress. Showers remain limited in the northeast 1/3, leading to ongoing stress into early May. Rains in the far south stall soy harvest, but the 6 to 10 day turns drier. In Argentina, rains (.25 to 1”, locally 2”) were confined to northeast fringes of the corn/soy yesterday. Light weekend showers (.25 to .75”, locally 1.5”) cross the belt. Drier conditions then settle in for much of the next 10 days. Harvest should improve in the southwest 2/3 of the belt, while recovery in the northeast 1/3 will still be very slow.

NOTE: CME Margin Rates for soybeans have increased from $1,500 to $1,750 per contract on hedge accounts

In outside markets, crude oil was moving higher and seemed poised to make a run at the near-term high of $44.45 a barrel. Later today the Baker Hughes rig count will be out and will likely show a continued decline in active US rigs.

Morning Comments – April 21

The wet conditions continue to hamper operations in NE Arg but dries in the
SW part of the country with some harvest resuming next week. As the storm system moves north, it is expected to give some relief to the drier areas of the southern Brazil safrina crop.

 WEEKLY EXPORT SALES

OC-Act OC-Exp NC-Act NC-Exp
Corn 1202.8 900-1,200 123.1 100-200
Soybeans 407.7 100-200 339.7 200-500
Wheat 295.1 0-300 325.6 100-250

Short covering in wheat hit day 3 hard yesterday with total gains approaching 50-cents over that 3-day period. With wheat, you have to ask whether we really need this big a rally in the face of burdensome supplies, lackluster export demand and better than normal crop conditions in US winter wheat. It’s difficult to pick a top, but in the case of wheat we have blown thru some key levels and made our export deals even less competitive in the world’s eyes.

 

 

Morning Comments – April 20

Soybeans were weaker overnight following yesterday’s 30-cent advance while wheat and corn held onto modest gains.

Overnight, new-crop November soybeans took a run at the milestone $10 mark, but fell short hitting an intra-day high of $9.99 before returning to the low $9.90 mark. Funds were heavy buyers on Tuesday, buying 25,000 contracts.

This morning’s weather forecast suggests Argentina’s corn and soybean harvest could resume in much of the country next week after being plagued by flooding which put harvest at a standstill and potentially damaged crops there. In Brazil, stress to the 2nd season corn crop in the South may be eased as wet weather and cooler temps are expected early next week.

In crude oil, prices were off about $0.80 a barrel overnight after yesterdays API crude stocks number came in higher than expected. Average expectations were for a 1.6 million barrel build, but came in at a 3.1 million barrel build. Also pressuring crude, Kuwait oil workers called off a three-day strike, a key support that kept oil prices afloat after major global producers failed to agree to a production freeze last weekend.