Weekly Cash Comments

Cash Commentary-

Grain basis levels continued to hold relatively stable this week with soybeans unchanged while corn basis was off 1 cent a bushel.

Basis levels have been exceptionally stagnate for some time. Indeed, going back to Nov 1, spot corn basis versus March corn futures has only improved 11 cents a bushel, with the majority of that move occurring in November. Likewise, soybeans has seen only an 8-cent advance in basis since Nov 1 off the March futures.

This week saw some weakness at the Gulf with both spot corn and soybean basis off 3 cents a bushel. But, river terminals saw an increase in basis for soybeans by 0.5 cents a bushel, while corn basis at river terminals was off 2.5 cents a bushel.

For end users, ethanol plants were weaker by 0.7 cents a bushel, but soybean plants posted a 1-cent advance on average for the week.

Futures Commentary-

Grains came under pressure this week with wheat giving up 14 cents a bushel, corn off 8 cents and soybeans posting only a modest loss 1 cent a bushel.

USDA’s monthly supply and demand report released on Tuesday did little to stem the tide of lower prices. Government forecasters increased their expectations on old-crop supply carry-out. Corn and wheat stocks showed the biggest increase thanks to a drop in USDA’s projections for exports. Soybean crush numbers were lowered as well helping boost soybean inventories to 450 MB. The USDA also raised its forecast of 2015/16 world wheat ending stocks to 238.87 MMT, above trade estimates. The figure would be the largest in history if realized.

In South America, the week started with favorable rains in Argentina’s dry areas and ended with more rain expected in the coming weeks. Central and southern Argentina will see regular rounds of showers and thunderstorms and enough rain should fall to maintain favorable soil conditions. Northern Argentina will see less rain than areas to the south with northwestern Argentina driest overall. Subsoil moisture in northwestern Argentina is still adequate and should be supportive of crop development for a while longer, but greater rain will be needed soon.

In export news, USDA announced flash sales of US corn to Japan and an unknown destination this week, totaling nearly 300,000 MT. But, weekly sales reported by USDA for the week prior were disappointing with net sales for old- and new-crop combined totaling only 365,000 MT versus expectations of 1,000,000 MT going into the report.

Outside markets were on shaky ground this week as global weakness continues to weigh on equities. The US dollar has fallen sharply over the last two weeks off of its highs, and many analysts look for the long-standing bull market for the US dollar to end. This would be a welcome change for US ag markets as a strong dollar has eroded US export competitiveness in the past 6 months, especially for wheat and corn.

With all of the risk in global equity markets, the silver low of $14 is quickly turning into a silver buy. Prices have shot up over 12% in the past two weeks! And are likely to see a return to the $25-mark as the US dollar weakens.

 

Grain Hedge now offers the ability to purchase physical silver and gold to be delivered directly to you. Gold and Silver at today’s prices are at historically attractive buying levels…Silver even more so.

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Morning Comments – February 12

Grains were mixed overnight with beans giving up some of yesterday’s impressive gains, while wheat held up in positive territory. Corn was fractionally lower. Outside markets were reversing yesterday’s sharp action with equities, crude and the US dollar shooting higher while bonds were sharply lower.

The Korea Feed Association (KFA) issued a tender overnight to purchase up to 130,000 MT of corn from optional origins. The tender sought arrival of the corn around July 20 in two consignments of up to 65,000 MT.

Egypt’s state buyer GASC received five sales offers in an international tender to purchase wheat on Friday as serious concern continued over tough new quality rules which have disrupted the country’s massive wheat imports, traders said. Participation in Friday’s tender by international grain trading houses was again low compared to tenders in past months following concern about with Egypt’s limits on imports of wheat containing the ergot fungus, traders said. The lowest offer was $185.25 a MT FOB for wheat sourced from France.

Stocks got a bit of a boost this morning as US retail sales for January were in line with analyst estimates of +0.2%. Retail Sales less autos and gas +0.4% vs. +0.3% expected, +0.1% prior. Oil was higher following yesterday’s news that OPEC countries “might” begin to discuss production cutbacks.

Morning Comments – February 11

Global markets continued to fall overnight as risk in European banks sent shares lower abroad and pushed S&P futures sharply lower in the overnight. Grains were mixed with soybeans and wheat posting modest gains and corn putting on a fractional loss.

In corn, yesterday saw EIA ethanol output up 10,000 BPD to 969,000 BPD, but the bearish news was the growing levels of stocks. Weekly ethanol stocks ballooned to 22.96 MBLS, up 594,000 BLS to reach its highest level ever. The good news for corn was a big export deal announced Wednesday morning of 243,000 MT of US corn to Japan. The good news for grains continues to be the sharp selloff in the US dollar, which should help improve the US competitive position in global grain markets.

South America continues to be favorable and USDA confirmed what they expect to be a record large crop in soybeans with Argentina’s crop expected to be 58.5 MMT versus USDA’s forecast last month of 57.0 MMT.

Fresh cracks appeared in global markets on Thursday as investors sought the safety of Japanese yen, gold and top-rated bonds while dumping U.S. dollars on bets the Federal Reserve could be done raising interest rates. Even the absence of Tokyo for a holiday could not stop the dollar from hitting a 15-month low on the yen, and gold finally broke major chart resistance to reach its highest since May. Silver was also up sharply on the global weakness and fall in the US dollar.

WEEKLY EXPORT SALES (in thousand metric tons)

Actual Expected
Corn 365 800-1,100
Soybeans 601 300-600
Wheat 299 150-350

 

Morning Comments – February 10

Grains were mixed overnight as corn and wheat came under pressure while soybeans posted modest gains. In outside markets, equity futures had a rare rally going into the morning trade while crude oil tried to maintain positive territory ahead of EIA’s inventory numbers.

Yesterday’s supply and demand report from USDA did little to reverse the trend of lower prices as government forecasters increased their expectations on old-crop supply carry-out. Corn and wheat stocks showed the biggest increase thanks to a drop in USDA’s projections for exports. Soybean crush numbers were lowered as well helping boost soybean inventories to 450 MB. The USDA also raised its forecast of 2015/16 world wheat ending stocks to 238.87 MMT, above trade estimates. The figure would be the largest in history if realized.

In overnight news, Japan announced the results of its regular wheat tender. The US garnered about a third of the deal totaling 146,000 MT while Australia and Canada factoring heavily in the offer. Russia will ban imports of corn and soybeans from the United States starting from Feb. 15, a spokesman for Russia’s agricultural watchdog, Rosselkhoznadzor, told Reuters on Wednesday. Earlier on Wednesday, the watchdog said its deputy head, Yulia Shvabauskene, had told the United States about concerns related to the phytosanitary safety of corn and soybean imports. Since September Russia imported 396,000 MT of US beans and there’s no outstanding (still to ship) sales on the US books.

European stocks rose on Wednesday, rallying after losses in Asia, as concerns about the health of banks that have hammered shares globally in recent days eased and oil prices recovered from Tuesday’s steep falls. Investors and traders awaited Congressional testimony from Federal Reserve Chair Janet Yellen for clues to the outlook for monetary policy. Sharp falls in global stocks and weak U.S. economic data have led markets to slash expectations for the pace and extent of Fed interest rate rises to follow December’s first hike in nearly a decade.

Oil rose on Wednesday, after having posted its third-biggest daily fall since the 2008 financial crisis the day before, supported by the possibility of major producers cooperating to tackle a supply glut that has sent prices to 12-year lows. Iran’s oil minister said Tehran was ready to negotiate with Saudi Arabia and the Kremlin’s oil tsar Igor Sechin proposed producing countries reduce output by 1 million barrels per day – without saying whether non-OPEC member Russia would cut. While traders and delegates from OPEC doubt any deal between the group and rival producers – which would be the first in over a decade – will happen, talk of it has boosted the market.

Metals drifted lower in overnight trade as gold took a break from its recent high of $1,200 an ounce, the highest since June 2015, but remains supported by safe haven demand amid tumbling stock markets and concerns over the health of global economy. Silver also pulled back overnight as the US dollar found some stability with investors waiting on fed chair Yellen’s comments today.

 

Morning Comments – February 09

Markets continued to weaken overnight with grains, stocks and crude all under pressure.

In grains, prices continued to be pressured following Monday’s setback as traders await fresh data from USDA in their monthly Supply and Demand report. The report will be released at 11 am CDT today, and below are the expectations going into the report.

US Ending Stocks (in million bushels)

Expected Range USDA Jan
Corn 1,809 1,752-1,852 1,802
Soybeans 445 425-470 440
Wheat 947 937-975 941

World Stocks (in million metric tons)

Expected Range USDA Jan
Corn 208.25 203.5-210.0 208.94
Soybeans 78.97 76.36-81.0 79.28
Wheat 231.48 229.66-233.0 232.04

 

Tunisia’s state grains agency has issued an international tender to purchase 67,000 MT of soft milling wheat. China is on Lunar Holiday this week and will be absent from the market.

In outside markets, stock equity futures were close to another 1% loss to start the day.  Tokyo shares fell sharply in Tuesday trading, following tumbling markets across Europe and the US. The Nikkei 225 closed down 5.4% or 918.86 points at 16,085.44. It was its worst one-day fall since mid-2013.

 

Morning Comments – February 08

Grains were lower overnight sinking to fresh lows on the month, while stock futures and crude oil started the day with big losses.

Overnight, Ukraine raised its grain export forecast for the 2015/16 season to around 37 MMT from 36. The increase comes from rising corn demand and expectations of a big corn crop next year. Wheat growers who suffered crop losses as a result of a severe drought last year and frost in winter would likely reseed much of the affected fields with corn. The drought has put the harvest across as much as one third of Ukrainian farmland at risk of poor yields.

In Argentina, the most important rainfall of the week will occur today and Monday hitting Argentina’s driest region from eastern Cordoba through central and southern Santa Fe northeastern Buenos Aires, Uruguay and southernmost Corrientes. Rainfall in these drier areas will range from 0.80 to 2.50 inches and local totals over 4.00 inches. Two other significant rain events are slated for summer grain and oilseed crop production areas through the balance of the next two weeks. The first event occurs Friday into Sunday, Feb. 14, and the second event occurs Feb. 16 -18. If all three rain events occur as advertised corn and soybean production areas will be plenty wet and poised for good production potentials.

In outside markets, European stocks slid to fresh 16-month lows dragging down US stock futures and crude oil. Overnight, China’s foreign reserves fell for a third straight month in January, as the central bank dumped dollars to defend the yuan and prevent an increase in capital outflows. China’s foreign reserves fell $99.5 billion to $3.23 trillion in January, the lowest level since May 2012, central bank data showed, but higher than the median forecast of $3.20 trillion from economists surveyed in a Reuters poll. The size of the drop was second only to the $107.9 billion fall in December, the largest monthly decline on record. The central bank has intensified efforts to prop up the yuan after it staged a surprise devaluation in early August.

Weekly Cash Comments

Cash Commentary–

Soybean basis came under pressure this week giving up 2 cents a bushel, while corn basis continued to flat line at unchanged on the week.

Corn basis, although on average across the country it was unchanged for the week, did find some modest strength on the Eastern Seaboards well as in parts of Nebraska and South Dakota as a massive blizzard midweek shut down grain flows. Corn piling continues to be fairly prominent still in the Western Cornbelt and will act as a constraint on any significant basis improvement. At the Gulf, basis levels slipped 4 cents a bushel although river terminals were more stable only giving up 1 cent a bushel. At ethanol plants, corn basis was unchanged for the week.

For soybeans, basis levels fell under weakness this week as higher futures brought on more farmer selling and a 10 cent loss at the Gulf export market signaled a significant slowing in the US export program. River terminals lost 5 cents a bushel on average although losses of 10 to 15 cents were fairly common at some locations. At soy plants, basis levels were unchanged on average, although plants in the Southeast were up 5 to 10 cents a bushel.

Futures Commentary-

Grain prices found some modest strength this week with soybeans leading the complex higher on a 7 cent advance and corn gained 3. Wheat was unchanged for the week.

This week’s EIA’s weekly ethanol report showed production off 2,000 BPD to 959,000 bpd, while stocks climbed sharply by almost 1 million barrels to 22.36 million barrels on the week. Crude oil was up sharply on Wednesday gaining $2 a barrel on the US dollar plunge as well as news that Venezuela was looking to enter into talks with other nations to reduce output. However, the warning flag on oversupply continues to get deeper in the red as EIA crude oil stocks showed that weekly US crude oil inventories were up 7.8 million barrels when analysts only expected a 4.8 increase. Likewise, gasoline stocks ballooned by 5.9 million barrels compared to only a 1.7 million barrel increase that was expected. Weekly export sales topped 1 MMT this week, beating analyst expectations.

In soybeans, weekly export sales were disappointing amounting to a net reduction for the week in sales after China’s big cancellation of 395,000 MT. Brazil’s Conab pegged the soy crop at 100.9 MMT, which was lower than their previous estimate of 102.1 in January, but still slightly higher than USDA’s estimate of 100.0. Weather models point to favorable growing conditions as most of Argentina’s driest areas will get adequate rains next week. Production potentials will likely be restored near normal and the bottom line for Argentina is still a very good production year. In the meantime, Brazil will experience a favorable mix of rain and dry weather during the next two weeks supporting good crop development for nearly all of the nation.

For wheat, weekly sales were also disappointing coming in at 66,000 MT versus trade expectations ranging from 200-00,000 MT. Wheat conditions in key growing states are trending fairly well as compared to last year. States in the Plains to Western Cornbelt are posting better than last year condition ratings with the exception of Nebraska. In Oklahoma, the wheat crop is rated 74% good-to-excellent, which although lower than last month’s reading of 77%, is still highly improved over last year’s condition of only 41%.

 

Morning Comments – February 05

Grain markets were mostly quiet overnight with corn and wheat posting fractional changes while soybeans advanced around 3 cents a bushel. In outside markets, the US dollar inched higher after being routed in the last two trade sessions while crude oil and stock futures also were quiet, posting modest gains.

Thursday, Stats Canada estimated all wheat stocks there at 20.7 MMT versus expectations of 21.8, while canola stocks were pegged at 12.1 MMT up from expectations of 11.5. Overnight, Egypt had only 4 offers on its wheat tender as their quality restrictions continue to impede grain companies in offering supplies.

For South America, weather models point to favorable growing conditions as most of Argentina’s driest areas will get adequate rains next week. Production potentials will likely be restored near normal and the bottom line for Argentina is still a very good production year. In the meantime, Brazil will experience a favorable mix of rain and dry weather during the next two weeks supporting good crop development for nearly all of the nation.

The wait for U.S. monthly jobs numbers steadied stock markets on Friday and allowed the dollar to recover after what has so far been its weakest week in more than six years. After posting a strong number of 292,000 in December, January Non Farm Payroll is expected to cool down within the range of 170K to 245K while the unemployment rate is expected to hover in between 4.9% to 5% range. The actual report released at 7:30 am CDT this morning showed weaker than expected payroll numbers of 151,000 but the unemployment rate ticked down to 4.9%. Silver futures continued to inch higher overnight as weakness in the US economy is spurring prices to reach their highest mark since November.

Morning Comments – February 04

Grains were higher overnight with corn and wheat up 2 cents while soybeans were up 4 cents. In outside markets, the US dollar continued to move lower giving up 0.5% after losing 1.6% yesterday, which is supportive for grains. Stock futures were drifting lower as was crude oil. Silver and gold futures were still on the rise as economic risk leads to investors turning to safe havens of precious metals.

On Wednesday, EIA’s weekly ethanol report showed production off 2,000 BPD to 959,000 bpd, while stocks climbed sharply by almost 1 million barrels to 22.36 million barrels on the week. Overnight, Brazil’s Conab pegged the soy crop at 100.9 MMT, which was lower than their previous estimate of 102.1 in January, but still slightly higher than USDA’s estimate of 100.0. Conab sees Brazil’s corn crop at 83.3 MMT vs 82.3 MMT in January and USDA at 81.5 MMT.

Algeria’s state grains agency OAIC bought between 450,000 MT and 500,000 MT of optional-origin milling wheat in a tender this week, European traders said on Thursday. OAIC paid around $178 a MT, cost and freight included, for the wheat, which was likely to be sourced in France and also partly in the UK.

Crude oil was up sharply on Wednesday gaining $2 a barrel on the US dollar plunge as well as news that Venezuela was looking to enter into talks with other nations to reduce output. However, the warning flag on oversupply continues to get deeper in the red as EIA crude oil stocks showed that weekly US crude oil inventories were up 7.8 million barrels when analysts only expected a 4.8 increase. Likewise, gasoline stocks ballooned by 5.9 million barrels compared to only a 1.7 million barrel increase that was expected.

The US dollar was back on the defensive in early trade in Europe after a collapse in expectations of a further rise in U.S. interest rates this year drove its biggest daily fall in over two months on Wednesday. Against a basket of currencies, the greenback fell another 0.5 percent to 96.796, it’s lowest since early November. The euro hit a 3-1/2 month high of $1.1161 EUR=EBS, extending its gains from an explosive sell-off a day earlier.

WEEKLY EXPORT SALES

Actual Expected Last Week
Corn 1,129 800-1,000 817
Soybeans -43 400-600 647
Wheat 66 200-400 294

 

 

 

Morning Comments – February 03

Grains dipped lower overnight as the slog thru choppy trading continues. S&P futures and crude oil were modestly higher after Tuesday’s sharp sell-off.

Yesterday saw some fresh highs in soybeans with front-month March trading as high as $8.89, its highest price since mid-December, before backing off into the close at $8.85. Weather models overnight increased the chance of rain for Argentina next week. The current week’s weather is expected to be dry, so next week’s rain forecast will be important in preventing crop stress going into mid-month.

For corn, trade continues to be extremely limited between $3.73 and $3.64 with most of the volume in the past two weeks around the $3.70 mark. Today’s ethanol report is expected to show a modest recovery in weekly production as well as higher ethanol stocks after last week’s sharp drop in both measures. Ethanol margins have improved in the past few weeks, but are likely hovering below break-even when all costs are considered. Yesterday, ADM posted weaker than expected earnings, blaming ethanol as one of the limiting factors in company profits.

In crude oil, yesterday the API reported a +3.8 mil build in crude inventories, +6.6 mil in gasoline, and +0.4 mil in distillate. This morning, U.S. private employers added 205,000 jobs in January, above economists’ expectations, a report by a payrolls processor showed giving stock futures a modest lift going into the opening bell.