Soybean futures continued to erode this week giving up 14 cents a bushel while corn found modest strength in a 3 cent advance. In the cash market, basis movements were fairly muted this week with US average corn basis gaining 1 cent a bushel while soybeans added 2 cents to the US average spot basis.
In the corn market, ethanol plants as a group were fairly quiet this week, although more strength was apparent in the Eastern Cornbelt of Indiana and Ohio where several plants boosted their spot basis by a nickel. At the Gulf, export premiums were mostly unchanged for the week and a modest drop in barge rates did little to change the overall trend of basis levels at river terminals.
For soybeans, gains were noted at river terminal on Wednesday with some key markets up 5 to 8 cents on the day, but by Thursday those premiums were gone and basis levels ended the week only up 2 cents on average. Gulf basis was up 4 cents on the week. At soybean plants, there has been little movement in recent weeks especially at Western Cornbelt plants were most basis levels have been flat for the past 6 weeks. In Ohio, a few key plants were up 5 to 10 cents a bushel this week.
Soybeans showed relative weakness this week declining 14 ¼ cents for the week ending Thursday, January 22nd. Corn increased 3 ¾ cents and wheat finally found some traction closing out the week with a 1 cent gain. Following the WASDE and NOPA reports last week significant damage was done to the soybean chart after prices broke through $9.91 which was the bottom of the range soybeans has been trading in since late October. Prices paused briefly in the middle of the week after falling through the key level but were unable to recover through $9.91 which acted as strong resistance.
Friday’s export sales report was very supportive for corn, neutral for wheat and bearish for soybeans which missed analyst expectations by a significant margin. Adding to a list of bearish news over the last week, soybean sales reported only 14,100 metric tons booked this week which was a marketing year low and well below analyst expectations of 400,000-700,000.
Wheat sales beat analyst expectations by a small margin, booking 458,400 metric tons which is up 61 percent from last week’s export sales total. Despite beating the analyst expectations which ranged from between 200,000-400,000 metric tons, traders will need to see a much larger pick-up in sales if prices are to be supported. Corn export sales were reported at a marketing year high, booking 2,185,400 metric tons, doubling the trade expectations which ranged between 800,000-1,000,000 metric tons.
Thursday the EIA ethanol production report showed output increased by 1000 barrels per day to 979,000 barrels per day this week. This brings ethanol production to a year over year increase of 5.4% compared to the USDA’s forecast in the January WASDE report which expects corn used for ethanol to increase only .8% year over year. Ethanol stocks also inched higher by 158,000 barrels this week to a total of 20.39 million barrels in this week’s report. Compared to last month ethanol prices have fallen from $2.20 to $1.27 per gallon. Despite the marked decline in the Iowa crush margins ethanol production continues to run well ahead of expectations.
Brazil’s crop analyst Celeres increased production estimates for Brazil’s soybean crop to 94.2 million metric tons up 2.8 million metric tons from its August forecast. Growing conditions have been positive in Brazil except for the north-eastern growing region which has experienced a moisture deficit for most of the growing season. Despite the dryness in parts of the country the main growing regions have experienced adequate to surplus moisture which has more than offset the negative impacts on yield caused by dryness in parts of the country. More showers over the next two weeks should continue to aid crop development. The current USDA production estimate for Brazil is 95.5 million metric tons which increased 1.5 million metric tons from the December Supply and Demand report.
Paraguay is about 10% complete with harvest and reports so far have shown disappointing yields. Harvest so far has only really accounted for shorter duration soybean varieties which were negatively affected by dry conditions throughout October. Yields are expected to be more favorable as harvest picks up pace in February.
The Agricultural ministry in Argentina announced an increase in their wheat production estimates after harvest has wrapped up. Argentina is expected to have harvested 13.9 million metric tons of wheat in the 2014/15 season up from its previous estimate of 13.2 million metric tons. The ministry also lowered its planted acreage for corn and soybean’s by .1 million hectares and .2 million hectares respectively.
On Thursday, the International Grains Council increased its 2014/15 global corn production to 992 million metric tons up from 982 million metric tons in their previous forecast. This revision takes into account the USDA revision lower in the U.S corn crop, but that production loss is was more than offsets with larger production from Ukraine, Argentina, Brazil and Europe.