October 17 – Morning Comments

In the overnight session corn soybeans and wheat are trading slightly lower with corn down 2 cents soybeans down 5 ½ cents and wheat down 1 ¼ cents going into the market pause. Kansas city wheat is trading 3 cents higher here this morning. UkrAgroConsult said this morning that milling wheat consisted of only 58% of harvested volume compared to 75 percent last year in Ukraine. Protein content eroded during summer rains which left 12.5% protein levels accounting for only 18.7 percent of harvest while 11 percent protein wheat accounted for 38.4% of harvest.

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Export sales were released out this morning which showed that wheat met market expectations by booking 454,000 metric tons which was up 22 percent from the week before. Wheat sales estimates were between 350,000-550,000 metric tons. Corn sales were reported at a marketing year high with 1,922,800 metric tons sold for delivery in the 14/15 season. This included the large sale to Mexico reported on October 10th. Corn’s sales number was on the high side of expectations. Soybeans sold 935,000 metric tons which was also on the high side of analyst expectations, with China being the primary buyer.

Yesterday’s ethanol report showed sliding production as crush margins continue to sag across the grain belt. Lower crude oil prices have pressured ethanol prices to the downside, but positive price action for cash corn has been the greatest impact on crush margins. Crush margins now sit below $2.00 per bushel in Iowa for the first time since August 2013. Basis at ethanol plants has reflected this weak margin environment, with cash basis for spot corn delivery down an average of 2 cents just yesterday. We will detail the entire move for ethanol in this afternoon’s cash grain report.

Outside markets are finally finding bottom after several days of hard selling. This morning S&P 500 futures are up 23 points while crude oil is trading a dollar per barrel higher. The dollar index had a relatively quiet trade in the overnight.

October 16 – Morning Comments

In the overnight session corn slipped a penny, while soybeans increased 3 ¼ cents and wheat improved by ½ a penny. At 8 AM CST a reportable sale was announced showing that 12,000 metric tons of U.S corn is to be delivered to unknown destinations for 14/15 delivery. In the overnight session Tunisia issued a tender to buy 159,000 metric tons of optional origin durum wheat.

Crude oil futures continued to march lower in the overnight session, with Brent Crude futures now testing $80 per barrel. Ethanol futures have remained steady in recent sessions despite the sharp move lower in crude. Ethanol production figures will be out today and, considering margin, should show seasonally strong weekly production.

The latest Strategie Grains forecast for the 14/15 European Union corn crop was increased to 73.3 million tons up from 71.3 million tons expected in their last month’s forecast. The company’s 2015 acreage estimates showed expectations for European Union soft wheat acreage maintain 2014 levels, while winter wheat, barley and corn slip 2 percent each. Strategie grains expects Durum acreage to increase 6 percent in the European Union.

At 10 AM CST the weekly ethanol production and stocks report is scheduled for release after being delayed a day due to Columbus holiday on Monday.

October 15 – Morning Comments

In the overnight the grains moved lower a couple pennies with corn falling 2 ¾ cents, soybeans falling 2 ½ cents and wheat falling 4 cents. There was an international tender by South Korea for 24,600 tons of U.S milling wheat. Although, there was light selling in the overnight we will be watching the open closely for continuation to yesterday’s sharp move higher.

Septembers NOPA crush data will be released at 11 AM central time with the average analyst expecting 107.553 million bushels crushed. Stocks are estimated to be around 476,730 metric tons. These numbers will most likely be market moving as the expectations for soybean crush would be the largest amount of soybeans crushed since late 2009.

Crop progress and conditions were released yesterday, showing good/excellent ratings unchanged for corn and soybeans. Harvest pace continues to lag, with just 40% of soybeans and 24% of corn harvested. Typically we see 53% of soybeans and 43% of corn harvested this week in the marketing year. Weather has been very wet across the southern grain belt this week, although a drying pattern is excepted Thursday and into the weekend.

October 14 – Morning Comments

Corn and wheat are unchanged overnight while soybeans continue to surge higher, up 12 cents trading at 957 1/4. This move has now made it through heavy resistance at $9.55 and indicates a change in the trend observed during July, August, and September looking at the November 14 daily chart. Further short liquidation is certainly possible during today’s day session. Coming into this week funds were sitting on a massive short soybean position. The next area of resistance would be at $10.00 on the November contract, but we will be waiting to see how the trade reacts during the day session for confirmation of the move. This move in the overnight was made on just 21,000 contracts traded. Soybean fundamentals remain unchanged and our bias remains bearish long term.

The Ukrainian analyst UkrAgroConsult said on Tuesday that Ukraine’s corn exports are likely to fall to 18.5 million metric tons due to the smaller harvest caused by the heavy fighting in the eastern part of Ukraine and the large global supply. The decrease in production represents a fall by 7 percent year over year.

Russian wheat exports, which beat out U.S wheat in a tender issued late last week by Egypt, has been seeing sideways price movement over the last week after declining for three weeks straight. Although there was talk that Russian wheat was priced out of the global market due to strong domestic demand, it appears that prices have corrected once again bringing Russia back to strongly competitive price levels.

October 13 – Morning Comments

In the overnight session corn slipped lower by a penny, soybeans increased by ¾ of a cent and wheat fell by 3 cents. Soybeans traded 15 cents higher in the overnight session before cupping over and closing near the open. Corn had a similar pattern in the overnight session. The Columbus day holiday will likely keep the trading thin throughout the day. Export inspections and Crop Progress reports, typically released on Monday, will be out tomorrow.

Friday, GASC announced that the tender for 175,000 which was announced on Thursday will be filled by French and Russian wheat. This is not supportive of U.S wheat which struggled to meet expectations in the last export sales report announced on Thursday.

Rains throughout the Midwest will likely delay harvest for the next couple days. The storm, which works its way east by Wednesday will bring heavier rain to the eastern grain belt, but will likely clear off for some meaningful harvest progress by the end of the week.

China has announced plans to stop weekly soybean sales from state reserves as harvest nears. China has sold 2.48 million metric tons of soybeans since May in their most recent round of sales. A halt in state sales would be generally positive for prices, but since this news comes just as harvest peaks domestically it should have limited impacts on U.S. prices.

NOPA crush numbers will be released on Wednesday at 11:00 AM central time.

October 10 – Morning Comments

USDA REPORT TODAY AT 11:00 AM CENTRAL TIME

The USDA will release their most recent supply and demand numbers today, October 10th. Below are trade expectations coming into the report and our bias on the numbers.

2014/15 Ending Stocks September Reported October Expected Difference (% change)
Corn 2,002 2,130 +128 (5.4%)
Soybeans 475 472 -3 (0.6%)
Wheat 698 704 +6 (0.8%)
Million Bushels

Corn

For corn, the average analyst guess expects production to be increased to 14.506 billion, up 111 million bushels from the September WASDE report. Yield is expected to come in around 174.685 bushels per acre which would be an increase of nearly three bushels per acre from the September report. The higher yield, combined with the larger than expected Sept. 30th quarterly grain stocks numbers which showed 51 million bushels more corn than analysts were expecting should lift the 14/15 carryout by 128 million bushels from last month’s forecast of 2.002 billion bushels.

With continued expectations for increasing yield and ending stocks we believe a lot of traders have been lifting some positions going into this report which would explain the light short covering rally we have been experiencing this week. With expectations for a bearish report, if yield is revised only a bushel per acre higher we could see a bullish reaction in prices. We are currently observing record short positions in the market, and often times when everyone is on one side of the market we see it move sharply against the masses. Although, fundamentally we still have a bearish market outlook, a rally following this report would have negative implications to a lot of farmer’s crop insurance payouts.

Soybeans

U.S. soybean production is expected to increase by 60 million bushels in today’s report, with the trade looking for yield to be bumped to 47.59 bushels per acre. Production for 2014/15 is expected at just under 4 billion bushels. Increases in production are expected to more than compensate for the short September 1st stocks reported in last week’s Quarterly Grains Stocks report. Ending stocks are projected to remain relatively unchanged as a decrease in 2013/14 carryout and increased demand side numbers should chew through added production. The average analyst is looking for 2014/15 ending stocks to be down just 3 million bushels at 472 million bushels. All things told, traders are looking for a relatively neutral soybean report when looking at U.S. ending stocks.

Historically we have not seen soybean prices above $9.00 on the board during years of stocks/use similar to 2014/15. November soybean futures have rallied this week, making puts an affordable pricing option into tomorrow’s report. Our longer term bias is still negative for the soybean market, considering current stock estimates and prices on the board.

October 9 – Morning Comments

Corn and wheat futures are sliding lower in Chicago. Corn is down 2 cents while wheat is off 8. Soybeans are making a bounce back this morning – up 4 cents.

Weekly export sales were released at 7:30 AM CST and showed that weekly wheat sales were well below expectations recording 372,400 metric tons compared to expectations between 400,000-600,000 metric tons. This week’s sales were down 50 percent from the previous week. Corn sales were reported at 784,800 metric tons which beat analyst expectations which ranged from 550,000-750,000 metric tons. Soybeans also beat analyst expectations by only a few thousand metric tons but recorded a strong sales figure for the wee at 923,400.

The USDA will release the October WASDE report on Friday. Corn production is expected to be increased by 100 million bushels to 14.506 billion for the 2014/15. Corn ending stocks are expected to reflect the production revision higher at 2.130 billion bushels. Soybean production is expected to be raised 60 million bushels to 3.97 billion. Ending stocks are expected to be unchanged at 472 million bushels. Wheat ending stocks are expected to be raised slightly to 704 million bushels. We will be sending out a full breakdown of trade expectations this morning by e-mail.

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The US Dollar Index continues to slip in the overnight session, having traded down 1.5% in the last four trade days. This market has now broke technically and this represents a sharp change in direction from the strength seen since late June. A weaker dollar index should support grain prices.

October 7 – Morning Comments

In the overnight session the market was mixed with corn slipping a penny, soybeans up 2 ¼ cents and wheat up ½ a penny. Short covering over the last couple days has lifted the grains off their lows as traders look to even up positions going into the WASDE Supply and Demand report on Friday. The trade expects the WASDE report to show that production and ending stocks will be higher than forecasted in Septembers report.

Lanworth has raised its forecast of U.S production for both corn and soybeans with expectations of a yield of 175.5 bushels per acre, up from 174.9 in their last forecast. They expect soybean yield of 47.9 bushels per acre, up from 47.1 in their last report on Sept. 29th.

In the overnight session South Korea’s Daehan Flour Mill announced a tender for 122,300 metric tons of wheat for delivery in February to May. Included in the wheat tender was 25,600 metric tons of milling wheat to be sourced from the U.S.

The USDA attache in Argentina is projecting 2.47 million (5%) additional soybean acres planted than the USDA projected in the September WASDE report. Large South American production will start catching more attention as planting is now underway in Brazil and Argentina. Argentina, Brazil, and Paraguay soybean ending stocks are projected to rise 25% in the 2014/15 marketing year.

October 6 – Morning Comments

In the overnight session the grains moved higher with corn up 4 ¾ cents, soybeans up 14 ½ cents and wheat up 7 ½ cents going into the morning pause. This morning the U.S dollar is pulling back from the highs set last week, taking some pressure off the grains. A reportable grain sale was also announced at 8 AM of 210,000 metric tons of U.S corn to unknown destinations for 14/15 delivery.

Last week we saw some indications of a short term bottom for wheat as prices seemed to put in lows and start trending higher. Higher export sales than expected and the talk of Russian wheat being priced out of the global market has been helping to lift U.S wheat over the last week. Market analysts SovEcon stated that Russia’s wheat prices declined this morning, but have not yet fallen back to a competitive level globally.

The precipitation outlook remains above average for the majority of the grain belt, particularly for eastern growers. Harvest delays from rain could be observed this week from North Dakota to Indiana. Colder than normal temperatures should move into Iowa, western Illinois, and Missouri by Wednesday and remain through the weekend. Current models indicate this is the most likely time to see a frost event in Iowa that could damage late developing crops.

Frost events were localized over the weekend with some reported in Minnesota, the Dakotas and northern Iowa. This is supporting prices this morning although it is not expected that any wide spread damage was made to the corn and soybean crops.

Traders will be looking forward to the USDA Supply and Demand on Friday at 11:00 AM central time.

October 3 – Morning Comments

In the overnight session we had the grains pull back a bit from the gains made yesterday with corn down 1 penny, soybeans down 1 ¾ cents and wheat down 2 cents. The dollar moved higher this morning in response to the U.S jobs data which showed the jobless rate declining in September to a six year low. The positive economic news gives more confidence that the Federal Reserve will be proactive about taking the beginning steps toward a more normal monetary policy.

Stats Canada has projected the 2014 Canadian wheat crop at 27.48 million tonnes. This could provide support to futures as it is roughly 500,000 tonnes lower than the current USDA estimate. Large world ending stocks remain a negative factor for the wheat market and any sustained rally will have to be supported by demand side numbers. Yesterday’s export sales report got the bulls excited but the rally was short lived and futures are drifting lower again this morning.

Informa will release their updated U.S. crop forecasts today at 10:30 AM central time.