Weekly Cash Comments

Cash Commentary-

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.

Futures Commentary-

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.

January 23 – Morning Comments

In the overnight, soybeans and wheat traded lower slipping 5 ¾ and 5 ¾ cents respectively, while corn stayed mostly unchanged increasing by ¼ cent. The export sales report was very supportive for corn, neutral for wheat and bearish for soybeans which missed analyst expectations by a significant margin.

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 which was well above the 800,000-1,000,000 metric ton trader’s expected out of this week’s report. Old crop soybean sales were reported at 14,100 metric tons well below analyst expectations of 400,000-700,000. Soybean sales recorded a marketing year low this week.

Export Sales:

  Expected Actual
Corn 800,000-1,000,000 2,185,400
Soybeans 400,000-700,000 14,100
Wheat 200,000-400,000 458,400

Yesterday, 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.

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.

Yesterday 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.

January 22 – Morning Comments

In the overnight session the grains traded slightly higher with corn up 3/4 of a cent, soybeans up 3 1/4 cents and wheat up 3 ¾ cents. Soybeans are trading at $9.87 ½ just below $9.91 which is the low side of the sideways range it traded in since late October. The low side of the range which acted as support multiple times since late October will likely act as resistance since prices broke below $9.91 on January 20th.

Ethanol production and stocks will be released today due to the Martin Luther King Jr. holiday on Monday. Ethanol production increased sharply in last week’s report following two holiday shortened weeks of declining production. As of last week 14/15 ethanol production was running 5.3% ahead of last year. Ethanol production this year is significantly higher than the .8% increase the USDA has factored in. Seasonally, production begins to slow during this time of the year and with depressed crush margins throughout the Midwest there is a strong possibility this week’s ethanol production will be lower than last week. On a more positive note, Brazil’s agricultural minister stated this morning that the government will raise its ethanol blend requirement in gasoline in the first week of February.

Ukraine Farm Ministry announced that they have an agreement with traders to limit the amount of milling wheat exports to 1.2 million metric tons between January and June of this year and have a preliminary agreement that overall wheat exports will be limited to 12.8 million metric tons in the 2014/15 marketing year which is 1.8 million metric tons higher than the USDA currently forecasts. So far Ukraine has exported 8.5 million metric tons this marketing year.

The European central bank held its policy meeting on Thursday and announced it will buy up to 60 billion euros worth of sovereign bonds from March until September 2016. This is a more aggressive quantitative easing policy than the ECB has undertaken in the past. The move was widely expected by the market and has been a contributing factor to the price slide in the Euro recently.

January 21 – Morning Comments

Grains are mixed in the overnight session with corn down ¾ of a cent, soybeans up 1 ½ cents and wheat up 7 cents after a sharp sell off over the last 20 days helped U.S. wheat gain some competitiveness on the global market. Also helping wheat is the accusations out of Kiev that Ukrainian soldiers have come under attack from Russian forces in north eastern Ukraine. Russia continues to deny that it has sent soldiers to eastern Ukraine. This morning a reportable sale of 176,000 metric tons of soybeans was sold to China.

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 rains 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.

Yesterday, corn and soybean export inspections were both reported on the high side of analyst expectations with corn reporting 747,634 metric tons inspected and soybeans reporting 1,517,985 metric tons. Wheat export inspections fell within analyst expectations with 310,307 metric tons inspected for export.

January 20 – Morning Comments

In the overnight session the grains traded lower with soybeans leading to the downside by 8 ¼ cents by the morning pause. Corn slipped 3 ½ cents and wheat slid 1 ½ cents on Tuesday morning. Soybeans are now trading below key support at $9.91 as higher than expected ending stocks coupled with lower than expected December soybean crush weigh on prices. This morning another cancellation from China including 174,000 metric tons of old crop soybeans will weigh on market prices in the early morning. This is the second cancellation in five days following last week’s cancellation of 285,000 metric tons. The USDA will release export inspections today at 10 AM CST due to the Martin Luther King holiday.

This morning China announced that its economy had grown at 7.4 percent in 2014 down from 7.7 percent growth in 2013. This year’s economic growth in China has been the slowest in nearly 27 years and increases the chances the government takes steps to stimulate growth to avoid a more serious decline.

In Brazil harvest has advanced to about 4.1% of the estimated 21.9 million acres only 1% behind the pace of last year’s harvest. Despite the dry spell that occurred in October these early planted crops are showing promising yields. The north eastern part of Brazil, which has been the driest this season looks to remain dry in the 6-10 day forecast. Despite the dry weather in the north, the southern growing regions have received above average precipitation this growing season which has helped offset the dry conditions in the north.

Weekly Cash Comments

Cash Commentary-

Grain futures fell sharply this week following the release of USDA’s revised supply and demand data. As a result, corn futures were off 14 cents, while front-month Mar soybean futures plummeted 57 cents. In the cash market, basis improved on average by 2 cents for soybeans and 3 cents for corn.

In corn, the big stimulus was a sharp increase in Gulf export basis, which improved 17 cents a bushel for the week. Export business has been improving in recent weeks. This week’s export sales tally came in at 818,700 MT versus trade expectations that ranged from 550,000 to 750,000 MT. Although the Gulf was up sharply on the week, river terminals were less subdued showing only a 7-cent advance on average. Barge rates began to creep up after recent lows which limited basis strength along the Mississippi & Illinois River systems. For ethanol, basis levels were up 2 cents a bushel this week, but many plants in the Western Cornbelt saw more impressive gains of 5 to 10 cents a bushel.

For soybeans, basis at the Gulf by a slimmer margin than corn posting a 6 cent advance on the week, while river terminals as a group were up 3 cents.  Even so, export sales for soybeans continue to be impressive with this week’s total eclipsing 1,100,000 MT versus trade expectations of only 700,000 to 900,000 MT. For soybean plants, basis levels improved more than the US average posting a 3 cent average for the week. Gains were most prominent in the Eastern Cornbelt with advances of 5 to 10 cents a bushel fairly typical in Indiana and Ohio markets.

Futures Commentary-

Grains tumbled this week with soybeans leading the fall lower by over 57 cents. Wheat fell 34 ¼ cents and corn slipped 14 ¼ cents for the week ending Thursday the 15th. Soybeans fell sharply from the high side of the range in response to a negative USDA Supply and Demand report. NOPA crush numbers also helped contribute on to the slide in soybean prices.

In the January 12th Supply and Demand report soybean ending stocks were held steady after a yield increase of .3 bushels per acre was offset by a 10 million bushel increase in export sales. This was a significant surprise to the market that expected ending stocks to be slashed by 17 million bushels from the December WASDE report. In response to the surprise the market sold off more than 35 cents finishing off the day near its lows.

NOPA crush numbers were released on Thursday showing that the total number of soybeans crushed in the month of December was 165.383 million bushels falling just shy of 165.384 which is the monthly crush record set in December 2013. Despite the fact crush was near record highs, this report disappointed many analysts whose average guess was to see 166.9 million bushels crushed last month. This surprise further pressured soybeans causing the oilseed to close out the day at $9.91 ¾ just a fraction of a cent above the extreme lows of the range soybeans has traded in since late October. Producers should be alert in this trading environment looking to hedge prices if soybeans were to fall below $9.91 on strong volume.

Wheat continued to trade lower with Thursday’s trade session being the 7th consecutive day lower. Demand continues to lag after a sharp run-up in prices triggered by Russian export curbs. Expectations for Russian sales to be pushed onto U.S books have yet to be realized and U.S. wheat continues to be uncompetitive on the global market. This week’s export sales for wheat were on the low side of analyst expectations booking only 284,000 metric tons sold. Wheat sales were up 89% week over week, but sales need to pick up significantly to help reverse the near term trend of tumbling wheat prices. On Wednesday Egypt’s GASC set a tender to buy an unspecified amount of wheat from global suppliers, which was met by France who sold 240,000 tons of wheat to GASC. Russian and U.S wheat was not offered.

Corn prices also fell after a disappointing USDA Supply and Demand report. Although the report appeared bullish at first sight, the revision lower in demand is a great cause for concern. Corn production came in below analyst expectations as USDA trimmed the final yield to 171 bushels per acre versus their December forecast of 173.4. Even after factoring in the lower production ending stocks are still at 1.877 billion bushels which will take an improvement in demand to help eat through. The most striking part of this report for me was that feed use was revised lower by 100 million bushels.  The bottom line for corn is that there will be no further revisions in 14/15 production, ending stocks are still high and it will be hard to warrant new highs in corn on softening demand. The near-term outlook for corn is neutral to bearish.

 

January 16 – Morning Comments

The grains were mixed in the overnight with corn  up 1 ¾ cents, soybeans down 2 cents and wheat up 3 ¼ cents going into the morning pause in trade. In a report from FAS this morning, China canceled 285,000 metric tons of Soybeans which will likely pressure the market lower this morning. FAS also reported a 101,600 metric ton old crop sale of corn to unknown destinations.

NOPA crush numbers were released on Thursday showing that the total number of soybeans crushed in the month of December was 165.383 million bushels falling just shy of 165.384 which is the monthly crush record set in December 2013. Despite the fact crush was near record highs, this report disappointed many analysts whose average guess was to see 166.9 million bushels crushed last month. This surprise further pressured soybeans causing the oilseed to close out the day at $9.91 ¾ just a fraction of a cent above the extreme lows of the range soybeans has traded in since late October. Producers should be alert in this trading environment looking to hedge prices if soybeans were to fall below $9.91 on strong volume.

Keep a close watch on March corn in the 60 minute chart today after yesterday the contract printed a bounce off $3.76. Another test of that level would leave me suspicious that corn could continue lower.

Chinese flour mills purchased 83.6% of the 2 million metric tons of high protein wheat offered to lock in import quotas for high-protein wheat. Another 630,000 metric tons of Chinese wheat will be offered at regular auctions on the 20th. It was also stated in an announcement today that China will sell 139,000 metric tons of imported high protein wheat from state reserves on January 21st in an effort to provide relief to a tight domestic market. U.S. wheat has closed lower for seven consecutive sessions and since December 19th has only posted four days out of eighteen where the contract closed higher than it opened.

January 15 – Morning Comments

In the overnight session we have seen some buyers come back into the market with corn up 4 ½ cents, soybeans up 6 ½ cents and wheat in Chicago up 4 ¼ cents. Yesterday, corn and soybeans both found some support with soybeans dipping below $10 during the day but closing the session at 10.10 ¾. This morning 127,000 metric tons of old crop corn sales were reported for delivery to Japan.

Also out this morning will be NOPA crush numbers which may add a sharp amount of volatility to the market. Expectations for December crush is for 166.9 million bushels of soybeans which would be a record. The previous crush record was December 2013 which used 165.3 million bushels of soybeans.

The weekly export sales were released at 7:30 AM CST this morning showing that wheat met analyst expectations with sales of 284,000 metric tons sold. Wheat sales were up 89% week over week, but even with the improvement that kind of volume will do little to help wheat prices move back toward the high printed on December 18th. Last night Egypt’s GASC set a tender to buy an unspecified amount of wheat from global suppliers, the market will be watching the results closely.

Corn sales picked up this week with 818,800 metric tons compared to expectations of 550,000-750,000 metric tons. This week’s corn export sales more than doubled last week’s numbers which only booked 387,648 metric tons, well below analyst expectations. This week’s export sales show corn sales now 63% booked compared to the USDA’s January 12th expectations.

Soybean sales booked 1,133,200 metric tons of old crop sales which is up 24% from last week and well above analyst expectations of between 700,000-900,000 metric tons. Soybean export sales have now booked 92% of projected USDA export sales.

Today we will also see Informa Economics’ projected acreage for the 2015/16 marketing year.

Actual Export Sales Analyst Estimates
Corn 818,800 550,000-750,000
Soybeans 1,133,200 700,000-900,000
Wheat 284,000 250,000-500,000

January 14 – Morning Comments

The grains continued their selling in the overnight after a sharp day lower caused by significant fund liquidation. Going into the morning pause in trading corn is down 6 cents, soybeans is trading down 6 cents and wheat is 5 ¾ cents lower. March soybeans has broken through $10 and currently trades at $9.98 which is the low side of the range it has been trading in since late October. This morning two reportable sales were announced at 8 AM CST including 102,750 metric tons of old crop soybeans to unknown destinations, 100,000 metric tons of new crop soybeans to unknown destinations and 125,000 metric tons of corn to Taiwan for 2014/15 delivery. Today is the 5th and final day in the annual five day re-balancing period for commodity index funds.

Thursday the 15th will be another important day for traders to watch closely. NOPA crush numbers for December will be released at 11 AM CST and are expected to show a record for number of bushels crushed for that month. Analysts expect to see 166.9 million bushels of soybeans crushed in the month of December above the previous record of 165.384 in December of 2013. The analysts crush guesses range from 164.263-171.135 million bushels. Analysts expect the average soyoil stocks to reach 1.122 billion pounds up from 1.005 billion pounds in November.

Also on Thursday, Informa Economics will release its 2015 acreage forecast update which will include implications for U.S. production in the 15/16 marketing year.

Although the U.S. wheat market hasn’t been able to find any traction after printing highs of $6.77 on December 18th it appears French wheat has been benefiting the Russian curb in exports. Farm office FranceAgriMer cut French 14/15 soft wheat ending stocks to 4.34 million metric tons from 4.55 million metric tons last month. Exports were also increased to 8.8 million metric tons compared to 8.5 million metric tons last month.

January 13 – Morning Comments

In the overnight session the grains bounced with corn up 3 ¼ cents, soybeans were up 7 ¼ cents and wheat trading 10 ½ cents higher going into the morning pause. This morning’s trade session should be supported by a nice export sale of 105,000 metric tons of old crop corn sold to unknown destinations.

Soybeans sold off sharply yesterday after the USDA revised yield and harvested acreage higher, lifting production by 11 million bushels. Ending stocks held steady after the USDA raised the 14/15 export sales expectations. However, traders looked at the 410 million bushels of U.S ending stocks as bearish after expecting to see a 17 million bushel revision lower in yesterday’s report.

U.S production wasn’t the only place ending stocks increased. Brazilian soybean production was also revised higher by 1.5 million metric tons which helped lift global ending stocks by .9 million metric tons. With the current quality of the South American crop, and a continuation of the existing precipitation profile, we could begin to see more revisions higher in South American production over the next month which would weigh heavily on the market. With the South American crop expected to reach the peak of harvest in late February I would expect to see weaker prices over the next couple months.

In Brazil, showers are expected to cover central and northwest part of the growing region which will continue to improve the crop development. The northeastern part of Brazil is still the driest region. In Argentina, rains over the weekend helped provide relief to fields after experiencing some hot and dry weather over the last week. In the overnight more rains are expected throughout central Argentina.

Corn prices were mostly stable following the report after yield was slashed to 171 bushels per acre and harvested acres were left unchanged. However, despite the decreased production, quarterly grain stocks were larger than expected revealing weaker than expected feed usage. Ending stocks were revised 121 million bushels lower providing a positive surprise for bulls. With a bullish revision in supply behind us, and demand weaker than expected in this round of reports, I am concerned prices will not be able to make new highs in the rally that began back in October. We will need to see a strong increase in demand to be the backbone behind any further rally, especially with no foreseeable threat in South American production.