Weekly Cash Comments

Cash Commentary-

Grain markets found heightened volatility this week with corn futures posting gains while soybeans traded lower. In the cash market, basis for both corn and soybeans were unchanged on average across the country this week, but that masks a fair amount of movement by end users and exporters.

For corn, ethanol users backed off on bids by a penny a bushel this week, but there are signs that more weakness could be in store for the ethanol sector. In Iowa, spot ethanol prices tumbled 32 cents a gallon to reach $1.68 a gallon. At the start of December, ethanol prices were as high as $2.42 a gallon. So far, ethanol production continues to exceed last year’s tally at this time of year but that should change as current margin are now a $1 a bushel lower than the same time last year. On the export front, sales have been pace to reach USDA’s export target for their year but recent approval by China to accept Syngenta’s MIR 162 variety may give a slight boost there for corn & DDG exports. Basis levels at river terminals were up 2 cents on average thanks to some weakness in barge rates.

In soybeans, the Gulf export market was off 9 cents on basis for the week which triggered some weakness at river terminals even with falling barge rates. On average, river terminals were off 4 cents a bushel. At soybean plants, basis levels were off 2 cents a bushel.

Futures Commentary-

Corn and wheat led the market higher for the week ending December 18th, 2014. Corn added 12 ½ cents, wheat improved 57 ¾ cents and soybeans declined 7 ¼ cents on the week. The wheat market continued to focus on the developments in Russia as another announcement from the Veterinary and Phytosanitary Surveillance Service restricted grain export certificates for some countries.

Coming into this week there were two major soybean demand announcements that analysts were watching closely. The first was NOPA crush numbers which analysts were expecting to set a record high for November and the second was a publicized purchase event where six major soybean buyers from China were expected to buy large amounts of soybeans on the 16th.

NOPA crush numbers were released on Monday at 11 AM CST and came in on the low side of analyst expectation with 161.211 million bushels crushed in November. The average expectation for this report was 165.404 million bushels compared to last year’s November total of 160.145. Analysts ranged from 161 to 176 million bushels.

Tuesday the 16th the Chinese soybean buyers signed agreements to purchase of 1.5 million metric tons of soybeans which seemed to do little for the market. Analysts viewed this sale as “routine” compared to a similar signing event back in September which produced 4.5 million metric tons of sales.

With both soybean demand announcements producing little excitement by the market, there is a reason to be concerned that prices could start to come under pressure in the near future. Bull markets need to be fed positive news, and with Brazil soybeans 100% planted and Conab expecting a 4.9% increase in soybean acres year over year there is little in the way of Bullish news coming from South America. Brazil’s soybean crop is currently rated 75% good and 25% average with rain expected to improve crop development in the 15 day forecast. In Argentina they are still planting due to excessive rainfall in the northern regions early on in the season. There has been some dryness in parts of the growing region which could hurt final yield numbers but the longer term outlook is for increased shower activity.  No major concerns have developed in Argentina yet.

This week China has approved a genetically modified strain of corn developed by Syngenta which was the reason behind many rejected cargoes of DDG’s and corn late last year. The strain being approved could foreshadow stronger demand for corn or corn based products out of the U.S.  Last week Chinese firms bought 900,000 metric tons of DDG’s from the U.S. for delivery between December and March.

On Wednesday the EIA report showed another increase in weekly ethanol production. Production jumped 2,000 barrels per day, setting another marketing year high at 990,000 barrels per day.  Despite the strong weekly numbers there seems to be a slowdown on the horizon. The average ethanol prices in Iowa have been declining over the last couple weeks with late November ethanol prices going from $2.31-$2.52 dollars per gallon to around $1.88-2.15 per gallon. Crush margins have fallen accordingly from $3.42 per bushel to around $2.90.

December 19 – Morning Comments

Grains fell sharply in the overnight session with wheat leading the slide lower on a 19-cent decline. This follows yesterday’s 24-cent fall from its high on the March contract of 6.77. For corn, prices were off 6 cents in the night trade while beans fell 7 cents.

In wheat, Russia’s Association of Grain Exporters said overnight it had stopped buying grain on the domestic market for export due to what it described as state pressure.  Russia has started to restrict exports by toughening quality controls and reducing railway loading of grain to cool local prices as the country tackles a currency crisis linked to plunging oil prices and Western sanctions.  Although bullish on its face, the fact that Russia would pull out of the export market has been the driving force behind the price rally in recent weeks, and as such the “buy the rumor sell the fact” mentality might be kicking in.  In Germany, the winter wheat sown area for the 2015 harvest has been expanded by 2.8%, the national statistics office said on Friday.

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In corn, South Korea’s Feed Association bought 60,000 MT of corn overnight to be sourced from the US or South America, while MFG out of South Korea bought 120,000 MT also optional origin with the US as a potential originator.

In Argentina, port workers went on strike Thursday demanding a year-end bonus as high inflation has cut into wage earning power there. Some private economists put the inflation rate at Argentina at 40%, far higher than official government estimates.  For growing conditions, Argentina is expected to see rains easing in the near-term which should help wrap up planting which has been behind pace.  Meanwhile, Southern and Central Brazil are expected to benefit from widespread rains over the next 1 to 5 day period.

December 18 – Morning Comments

In the overnight session the grains are trading sharply higher with corn up 5 ¼ cents, soybeans up 7 ¼ cents and wheat up 15 ½ cents this morning. This morning we saw large single day reportable sales of 126,000 metric tons of corn to unknown destinations, 1.5 million metric tons of soybeans to China for 15/16 and an 89,264 metric tons sale of spring wheat to Mexico for 2014/15.

Weekly exports sales were released at 7:30 CST this morning showing wheat sales improved 8% on the week, booking 476,300 metric tons of sales which was on the high side of analyst expectations. Corn sales met expectations with 693,500 metric tons, but declined 28% from the previous week. Soybean export sales fell 14% this week booking 696,000 metric tons. Soybean sales met expectations and is still running well ahead of pace to meet this year’s USDA expectations. Cumulative sales for soybeans are now at 41 million metric tons which is well ahead of expectations for this time of year which are around 34 million metric tons.

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Yesterday ethanol production was released showing another increase in weekly production. Production jumped 2,000 barrels per day, setting another marketing year high at 990,000 barrels per day.  Despite the strong production numbers this week there seems to be a slowdown on the horizon. The average ethanol prices in Iowa have been declining over the last couple weeks with late November ethanol prices going from $2.31-$2.52 dollars per gallon to around $1.88-2.15 per gallon. Crush margins have fallen accordingly from $3.42 per bushel to around $2.90.

December 17 – Morning Comments

Wheat prices continue to climb as the market monitors the effect of certain restrictions that have been imposed by the VPSS.

In the overnight session corn, soybean and wheat are all trading higher. Corn improved 3 ¼ cents, soybeans is up 3 ½ cents and wheat is trading 13 ½ cents higher this morning. The wheat market is continuing focus on the developments in Russia as yesterday’s announcement that the Veterinary and Phytosanitary Surveillance Service has restricted grain export certificates for some countries.

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Yesterday was a strong deviation within the grains with corn trading a few pennies lower, wheat showing strength and soybeans sliding 16 cents by the close of the session. Soybeans which traded lower on Monday following a disappointing NOPA crush report saw more disappointment in export sales after 6 major Chinese buyers bought just over a million metric tons of soybeans for delivery in 2015.  Traders viewed these sales as routine considering how widely publicized the sales were. In the overnight session January soybeans went as low as $10.16.

Yesterday there was talk that China has approved a genetically modified strain of corn developed by Syngenta. This has not yet been confirmed with an official announcement, but the implications of the strain being approved could foreshadow stronger demand for corn or corn based products out of the U.S.  Last week Chinese firms bought 900,000 metric tons of DDG’s from the U.S. for delivery between December and March.

Note: Friday Informa Economics will issue its 2015 acreage update.

December 16 – Morning Comments

Corn and soybeans are trading lower this morning with corn down 2 ¾ cents, soybeans down 9 ¾ cents and wheat trading 6 ¾ cents higher. Wheat continues its move higher as Russian policy aims at curbing exports.

Yesterday, NOPA crush numbers were released at 11 AM CST and came in on the low side of analyst expectation with 161.211 million bushels crushed in November. The average expectation for this report was 165.404 million bushels compared to last year’s November total of 160.145. Analysts ranged from 161 to 176 million bushels. It is important to note that near term demand has been the force lifting soybeans since the beginning of October. Today, more demand news is expected from Chicago as six major soybean buyers from China are expected to sign large purchases. With the first of two major demand stories behind us, soybeans may have a tough time maintaining strength into the end of the week.

Export inspections yesterday showed that Wheat outperformed analyst expectations with 385,974 metric tons inspected for export. Corn disappointed the market with only 546,515 metric tons inspected and soybeans met analyst expectations with 1,820,364 metric tons inspected for export.

This morning wheat prices continue to rise on news from the Russian Agriculture minister after he stated a plan to buy 3.5 million metric tons of grains for state stocks in an attempt to raise Russian grain prices. Yesterday, the slide in the ruble was the largest one-day fall since 1998 and triggered the Russian Central Bank to raise its key interest rate to 17 percent from 10.5 percent. The ruble hit a record low of 80 rubles per dollar.

 

December 15 – Morning Comments

Grains started the week in mostly positive territory with soybeans advancing 5 cents while corn was up 3. Wheat was fractionally lower in the night trade.

Corn was bolstered in the night session after Friday’s announcement by Syngenta that it was close to approval by China for its MIR 162 variety that has caused US corn trade to China to come to a standstill. The U.S. Grains Council said late Friday it hopes for confirmation of approval “in the coming days.” Although China has had limited imports of corn in recent years, if approved it would give the market a psychological lift.

In wheat, Russia’s ag minister reiterated overnight that the country has no plans to restrict its wheat exports. In Ukraine, the weather shows signs of a warming trend where cold weather has been the norm. Well-below normal temperatures have been in control across the Ukraine winter wheat region since the crop was planted back in September. Forecasts call for near to above normal temperatures through much of next week.

For soybeans, traders will be watching today’s monthly NOPA crush estimate. Industry analysts expect a large crush estimate, which is expected to show a record high of 165.4 MB for November. In South America, production prospects still look promising for a bumper crop. Although USDA left their soy crop estimate for South America unchanged in last week’s report, private analysts continue to predict higher production levels. In Brazil, rainfall across the region has been above normal over the past 30 days.

 

Geo Grain Weekly Comments – December 12

Weekly Cash Commentary-

Higher futures prices and aggressive farmer selling helped keep soybean basis unchanged for the week, while US average corn basis rose 2 cents a bushel.

For soybeans, river terminals were hard hit this week slipping 5-cents a bushel as weakness at the Gulf combined with an uptick in barge rates pushed basis levels lower. For soybean plants, basis levels were mixed as some plants in the Eastern Cornbelt raised basis levels while some in the West lowered their basis.  On average, soybean plants as a group were off 2 cents a bushel for the week.

In corn, river terminals were also hard hit by weakness at the Gulf and higher barge freight with basis levels 4 cents lower for the week. Ethanol buyers continue to bid aggressively for corn as spot ethanol prices continue to defy the steep sell off in crude prices. Crush margins for ethanol producers continue to be favorable and this week’s production figure of 988,000 barrels per day was a marketing year high and putting year-to-date production 4.6% above last year’s tally. Basis levels for ethanol buyers were up 2 cents on average, although some plants were lower on the week thanks to increased farmer selling.

Weekly Futures Commentary-

For the week ending Thursday December 11th, the grains closed higher with corn up 8 ¾ cents, wheat up 7 ¾ cents and soybeans up 31 ¾ cents. The highlight of this week was the release of the USDA Supply and Demand report on Wednesday which showed a larger revision in soybean ending stocks than analysts were expecting.

Soybean ending stocks were revised lower by 40 million bushel from the November forecast. Ending stocks were reported below the average trade guess of 427 MBU coming in at 410 million bushels this month.  All 40 million bushels came from an increase to export sales which have been running ahead of pace this year. According to our models at Grain Hedge export sales for soybeans have already booked 40.5 MMT which is well ahead of the 33.8 MMT of seasonally expected sales needed to meet USDA expectations. Despite the strong demand in export sales, ending stocks are still expected to be the highest we’ve seen since the 2006/07 marketing year.

Ending stocks for corn fell below 2 billion bushels this report with 1,998 million bushel ending stocks which surprised analysts who were expecting an increase in ending stocks by 19 million bushels. The 10 million bushel decrease in ending stocks was a sole result of Food, Seed and Industrial column. Export sales and ethanol production were both unchanged in the December report. According to our models, export sales are running ½ a million metric tons behind the pace needed to meet the existing USDA expectations. Ethanol production continues to be strong this week with the EIA reporting 988,000 BPD of production, another marketing year high. Crush margins are fat in the short term, but the longer term outlook for ethanol margins looks gloomy with oil now under $60 per barrel.

Wheat ending stocks met analyst expectations exactly with ending stocks being raised 10 million bushels to 654 MBU. The increase in supply on the balance sheet came from a revision in imports. The market was trading lower going into the report and had a negative reaction immediately following the release of the report. On Tuesday, the Deputy Prime Minister of Russia stated that they are not discussing export restrictions which pressured the market lower following the release of that statement.

Next week we will see important demand numbers in the Soybean complex with NOPA crush numbers scheduled for release on Monday. Expectations are for a record 165.404 million bushels of crush and soyoil stocks seen at 1.156 billion lbs. according to a Reuter’s poll. Export sales will be important next week with six Chinese soybean buyers expected to sign agreements with U.S. exporters to buy an unspecified amount of soybeans. During a similar signing ceremony back in September 4.8 million metric tons of U.S. soybeans were purchased.

December 12 – Morning Comments

Grains extended their gains in the overnight session with front-month March wheat futures climbing above $6 a bushel but hitting resistance at $6.10. Corn and soybeans were also up posting 5 cent advances at the end of the night trade.

On Thursday, Egypt’s GASC announced the results of their wheat tender with Russia garnering most of the business. Prices came in around $252 per MT and were $30 lower than the only US SRTW wheat offer. Nonetheless, US interior values continue to be robust. Millers in Illinois continue to bid aggressively for wheat with basis levels for spot delivery about 50 cents a bushel higher than normal for this time of year.

For soybeans, the market continues to be buoyed by strong export demand. Current export commitments for US soybeans have eclipsed 40 MMT while USDA has pegged total exports for the year to reach 47.9 MMT. Traders also look for a large crush estimate in Monday’s monthly NOPA release, which is expected to show a record high of 165.4 MB for November.

In corn, export business was on par with expectations last week, but overall commitments year-to-date are on par with the pace needed to reach USDA’s annual forecast. Ukraine is said to be having problems meeting corn contracts signed with China in. Private feed mills in China signed contracts in October to 1.1 MMT but the Ukraine supplier is unlikely to be able to ship all of the contracted volume before the February deadline.

December 11 – Morning Comments

Grains were mixed overnight with wheat once again pushing lower with 6-cent losses and trying to add to its three day losing streak.  Corn and soybeans were up modestly with one and three-cent advances, respectively following yesterday’s sharp sell-off.

Wednesday’s USDA report on supply and demand provided little shift in trader’s opinion on pushing prices lower. Even though USDA came in with lower US corn and soybean carryout than had been expected by industry analysts, prices still fell sharply on an outlook of growing world supplies.  USDA left their forecast unchanged for South American soybean production, but private analyst groups continue to point to higher production than USDA. The weather outlook shows southern and western Argentina favored for occasional showers next 10 days and the potential for rain in Brazil in the coming days. Precipitation during the growing season has been about 30% below normal.

In corn, USDA increased slightly their projection for industrial corn use in the US by 10 MB which helped trim ending stocks. But, ethanol continues to be running ahead of last year’s production thanks to favorable processing margins. Year-to-date production of ethanol is 4.6% ahead of last year’s mark for this time of the year, but the prospect of falling ethanol prices down the road might curb production.

For wheat, Egypt’s GASC issued a call for wheat tenders on Wednesday but the US will likely be shut out of the business with French & Russian wheat expected to be more competitive. Industry insiders continue to suggest that Russia will not curb its wheat export business. SovEcon has not issued an official forecast for 2015-16 wheat production, but director Andrey Sizov’s personal estimate is for 50 to 55 MMT of wheat, down from 59 MMT this year.

WEEKLY EXPORT SALES (in thousand metric tons)-

Estimates Actual
Corn 800-1,000 963
Soybeans 700-1,000 810
Wheat 250-450 442 OC / 84 NC

 

 

December 10 – Morning Comments

Grain markets were mixed overnight with wheat continuing to come under selling pressure, losing 5 cents a bushel and off 30-cents from last week’s high. Soybeans found strength in the night trade posting a 2-cent advance while corn was down 2 cents a bushel.

Traders will look for better guidance today when USDA releases their monthly Supply & Demand Report at 11 am CDT. Analysts as a group expect USDA to increase corn and wheat carryout projections in this month’s report compared to the November forecast. But, for soybeans, the average trade estimate shows analysts looking for a cut in US carryout from 450 MB in November to 427 MB this month. Strong export demand for soybeans is helping fuel expectations of slimmer stocks. On Monday, representatives of six Chinese soybean buyers said they would sign an agreement later this month with U.S. exporters to buy an unspecified amount of soybeans. China, the world’s largest soybean importer, is forecast by USDA to buy 74 MMT of the oilseed from global suppliers this year. A similar signing ceremony in Milwaukee, Wisconsin, in September yielded purchase agreements for 4.8 MMT.

PRE-REPORT US ENDING STOCK ESTIMATES (in million bushels)

Analyst Estimates USDA Nov Forecast
Corn 2,027 2,008
Soybeans 427 450
Wheat 654 644

Overnight, CONAB pegged Brazil’s soybean crop at 95.8 MMT up sharply from their previous forecast in November of 90.5 MMT. This compares to analyst estimates of 93.4 MMT going into the USDA report this morning. For corn, analysts expect USDA to cut their output projection for Brazil to 74 MMT from last month’s projection of 75 MMT. A late soybean planting season has analyst’s looking for a smaller second-crop of corn in Brazil this year.

In wheat, Russia’s assertions that it has no intention of resorting to export restrictions appear to be having a calming effect. Previously, it had been feared that Russia might attempt to increase the quantity of wheat available in the country by prohibiting exports. Domestic demand for wheat is growing in Russia because of the Russian ban on EU imports, yet drought and cold weather are posing a threat to young plants in the 2015 crop. Overnight, Farm office FranceAgriMer raised its forecast for French soft wheat stocks at the end of the current 2014/15 (July/June) season to a 10-year high of 4.55 MMT from 4.3 MMT estimated last month.