Morning Comments – October 07

The grains are moving higher with corn up 3/4 of a cent, soybeans up 6 cents and wheat up 3 1/2 cents this morning. The outside markets are mostly supportive with the dollar unchanged, the E-MINI S&P up .61 percent and crude oil up 48 cents this morning.

The grains have been drifting higher over the last couple days but be wary as corn and wheat near resistance levels. Corn resistance at $4.02 could be relatively potent if corn has the momentum to test it. The resistance level was a gap on July 27th and was unsuccessfully tested back on August 10th. If prices can close above that price level we could see further short covering added to this rally. Wheat resistance is at $5.33 ¼ cents which was also a high back on October 10th. With wheat and corn only cents away from testing these resistance levels both corn and wheat could find it hard to continue the climb higher in today’s session.

The Midwest harvest should be mostly uninterrupted over the next couple weeks. The Planalytics 6-10 day forecast shows 50-60 percent drier than average weather throughout the heart of the grain belt. The 8-14 day forecast also shows no significant moisture entering the Midwest which will provide a large window to progress through the bulk of harvest.

Morning Comments – October 06

In the overnight session the grains traded a bit higher with corn up 1 3/4 cents soybeans down 1/2 a cent and wheat up 4 1/2 cents. The outside markets are mixed with the U.S dollar trading .22 percent lower, E-Mini S&P futures .1 percent lower and crude oil up 41 cents this morning. On Friday the USDA will release its October Supply and Demand report.

Crop progress was reported yesterday after the market closed and showed that corn harvest was behind analyst expectations with only 27 percent of the crop harvested below the four year average of 32 percent complete. Analysts were expecting to see corn harvest advance to at least 30 percent complete this week. Soybean harvest progressed strongly last week with 42 percent of the crop rated good to excellent, beating analyst expectations of 41 percent and ahead of the 4 year average of 32 percent harvested. Soybean harvest jumped 21 percent this week. Crop conditions remained steady for corn with 68 percent of the crop rated good-to-excellent. Soybeans on the other hand jumped 2 percentage points in the good-to-excellent category to 64 percent.

Export inspections were strong for soybeans on Monday providing strong support for the oilseed. For soybeans export inspections totaled to 1.1 million metric tons last week which was well above the expectations which ranged from 450,000-600,000 metric tons expected by analysts. Corn inspections disappointed with 469,697 metric tons inspected for export and wheat met expectations at 557,109 metric tons.

Keep a close watch on Corn which is breaking out of its consolidation pattern on the 100 day moving average. At Grain Hedge we believe it is quite likely that we retest $4 and probably move even higher based on the technical trading of the grain. Remember, the gap at $4.02 will likely act as resistance in the near future.

Morning Comments – October 5

In the overnight session the grains traded higher with corn up 1/2 a cent, soybeans up 3 3/4 cents and wheat up 3 cents. The outside markets are mostly supportive with the U.S. dollar lower by a fraction of a percent, the S&P trading marginally higher and crude oil up 56 cents this morning. Traders are anticipating the Friday release of the USDA October Supply and Demand Report.

Wheat continues to move higher on dryness concerns in Ukraine and Russia. Both countries precipitation is running roughly 40 percent behind normal and forecasts of dryness and cold weather over the next 10 days continues to help support under wheat.

Egypt’s GASC purchased 60,000 metric tons of wheat from Ukraine and another 60,000 metric tons of Russian wheat with an average price of $199.72 dollars per metric ton.

Weather will remain mostly clear throughout this week with Thursday bringing some showers to the grain belt. The 6-10 day forecast shows drier than normal conditions throughout the majority of the grain belt with Ohio showing slightly wetter conditions. The 8-14 day forecast continues to bring dryness throughout the Midwest providing little opportunity for weather to disrupt harvest in the near term.

Morning Comments – October 2

Grains were modestly lower in the night trade with corn and soybeans off 2 cents a bushel, and wheat down 3. In other markets, S&P futures were up 0.4% while crude oil was up 1%.

Soybeans were hard hit in yesterday’s trade as news continues to be bearish from US harvest. Merchants continue to report bean yields are better than last year by 5 to 10 bushels per acre, and as yields grow, farmers are becoming more willing to make cash sales. Yesterday, FC Stone pegged the soybean crop at 3.919 BB, above their Sept outlook of 3.791 BB, but still below USDA’s Sept projection of 3.935 BB. For corn, they put the crop at 13.541 BB versus last month’s forecast of 13.457 BB and USDA’s 13.585 BB.

In international news, wheat has been moving higher thanks to dryness in Australia and Russia. However, US export business in wheat continues to disappoint with Thursday’s announcement of only 77,000 MT of wheat sales for the week compared to 250-450,000 MT expected. In South America, one private crop watcher estimates Brazil 2016 soybean crop closer to 99 MMT vs USDA of 97 MMT and Argentina closer to 60 MMT vs USDA at 57.

In stock futures, trading was higher overnight after a lower close on Thursday. Trading has been unpredictable so far this week ahead of this morning’s release of the jobs report for September. This release has taken on even more significance as Wall Street looks for signs U.S. economic strength is still intact after the Federal Reserve’s decision to keep interest rates unchanged in September. Economists expect 200,000 jobs to have been added to nonfarm payrolls in September, up from 173,000 in August. The unemployment rate is forecast to remain steady at 5.1%, while year-over-year growth in average hourly earnings expected to climb to 2.4% from 2.2%.

Oil found strength this morning from ongoing fears about the escalating violence in Syria and expectations of strong economic growth domestically. The oil market was factoring in a risk premium over Syria, where Russia and the US are conducting bombing campaigns. The situation was complicated by the arrival of hundreds of Iranian troops in Syria to join a ground offensive in support of government forces, a sign the civil war is turning still more regional and global in scope. Oil is also being supported by economic optimism ahead of US data that is expected to show the creation of more than 200,000 jobs in September.

Morning Comments – October 01

Grains were mixed overnight with wheat up 3 and soybeans up 2, but corn traded fractionally lower. Outside markets were higher for crude oil, gaining $0.85 a barrel or 1.9 percent while S&P Futures were marginally higher on a 0.13 percent improvement.

Yesterday’s quarterly grain stocks report had little follow through impact on market prices as inventory levels were mostly on par with expectations. The most bullish of the numbers was for wheat  stock levels thanks to lower than expected spring wheat production. Wheat stocks on hand as of Sept 1 were 2,089 MB versus trade expectations of 2,149 MB. Soybeans were also lighter than expected with old-crop carryout pegged at 191 MB as compared to 205 MB. Corn was mostly on the mark as stocks were estimated to be 1,731 MB versus 1,739 MB.

Overall the report figures were deemed neutral by the trade and market participants will go back to watching crop harvest reports from the fields. So far, it would appear yields are coming in better than expected especially for soybeans. Merchants in IN & IL are saying soy yields from farmers are coming in very good and in most cases surpassing last year’s yield and in some instances reaching all-time highs.

In demand news, weekly ethanol output reported on Wednesday was up 5,000 BPD to 943,000 BPD. Overnight export news was relatively quiet with only Japan showing any noted interest in US commodities, by making a regular purchase of 128,489 MT of wheat to be sourced from the US, Canada and Australia. Weekly export sales reported this morning by USDA were better than expected for soybeans, on par with expectations for corn and worse than expected for wheat.


Weekly Value Pre-Report Estimates
Corn 748.2 700-900
Soybeans 2,506 1,300-1,700
Wheat 77.1 250-450

In equity markets, S&P futures (ESZ5) were up nearly 1 percent in early night trade but retreated by the end of the overnight session to only a 0.2 percent gain. Equity markets on Wednesday recovered some of their losses improving about 1.5 percent on the day but closed out the third quarter of the year with its worst quarterly performance in four years. Despite the gains, the major indexes are still set to post steep losses for the quarter with the Dow down 8.9 percent for the third quarter in its worst performance since the third quarter of 2011 when the blue-chip index tumbled 12.1 percent. The rally on Wednesday was helped by encouraging news about the labor market. Businesses added 200,000 private sector jobs in September, according to a report by payroll processor ADP.

For crude oil (GCLX5 / QMX5), prices were up sharply as sentiment was boosted by a modest improvement in economic data out of China. China’s official purchasing manager’s index, a gauge of nationwide manufacturing activity, ticked up slightly last month to 49.8 from 49.7 in August, beating analysts’ expectations. Markets were also tracking the developments in Syria, where Russia launched its first airstrikes on Wednesday. The intervention added to the uncertainty in the Middle East, the world’s biggest oil producing region.

Morning Comments – September 30

In the overnight session, the grains traded higher with corn up 3/4 of a cent, soybeans up 3 cents and wheat up 1 cent. Soybeans are trading just a few cents below the $8.90 which has held back four attempts to move higher since August 24th. After so many failed attempts, I would be surprised if this resistance level holds in the coming days. However, trade action will be mostly driven by the USDA Grain Stocks report which will be released out at 11 AM CST.

Expectations are for the quarterly grain stocks as of September first to show corn at 1.739 billion bushels which would be slightly above the September WASDE projection of 1.732 billion bushels. The average guess for soybeans is to have the quarterly grain stocks number show only 205 million bushels which would be a 5 million bushel decline from the September WASDE report. Wheat stocks are expected to be reported at 2.149 billion bushels which would be up substantially from last year when stocks were 1.907 billion bushels on September 1st.

On Wednesday the EU raised its SRW production estimates to 144.6 million metric tons, up sharply from the 140.6 million metric tons forecast last month. However the forecast for corn production declined to 58.4 million metric tons from 58.7 million metric tons reported last month.

Dryness in the FSU continues to cause concerns about germination headed into winter.  Australia forecasts show no relief in sight dryness has gripped their landscape for the last month. Traders are concerned about the dryness in Australia as El Nino typically brings drought to the eastern part of the country.

Morning Comments – September 29

In the overnight session, the grains are mostly unchanged with corn down 1 cent, soybeans up 3/4 of a cent and wheat trading down 4 cents. The U.S. dollar increased a fraction of a percent in the overnight and crude oil jumped 73 cents after selling off during yesterday’s session. The weather looks mostly clear with some showers later on this week. The most recent models show that planting delays seem unlikely in the short run.

The crop progress report was released at 3 PM CST on Monday and showed that corn harvest had not moved along as much as analysts expected. Only 18 percent of corn was harvested which was below the expectations of 21 percent and the four year moving average of 23 percent harvested during this time of the year. The harvest pace for soybeans advanced from 7 percent last week to 21 percent which beat expectations and is well over the four year moving average of only 16 percent harvested.

Crop conditions remained mostly unchanged with corn rated good-to-excellent holding steady at 68 percent. Soybean conditions rated good-to-excellent slipped 1 percent this week to 62 percent.

Yesterday, export inspections were strong for wheat which beat analyst expectations. Wheat recorded 651,194 metric tons inspected for export which was above the 350,000-550,000 metric tons expected by analysts. Corn met expectations by recording 809,383 metric tons and soybeans missed expectations to the low side by recording only 530,493 metric tons.

Dry weather is expected to continue in Ukraine which is running around 40 percent below the average precipitation over the last 90 days. Soil moisture levels are low and there is concern that the dryness is hurting wheat germination in that region. Ukraine’s dryness coupled with the dry forecast in Australia over the next couple weeks has wheat traders wary.


Morning Comments – September 28

In the overnight session the grains were mixed with corn up 3/4 of a cent, soybeans down 5 1/4 cents and wheat up 6 1/2 cents this morning. The U.S. dollar is trading a fraction of a percent higher and crude oil is down 86 cents this morning. Last Friday, the Chairman of the Federal Reserve, Janet Yellen, announced that a rate hike will most likely come at the end of the year.

This morning the USDA announced that 1,000,000 metric tons of soybeans was sold to China for 16/17 delivery and 249,000 metric tons of soybeans to unknown destinations for this marketing year. Last week soybeans rallied 15 cents on strong export sales and will most likely react positively to the news of additional sales this morning. In the weekly commitment of traders report released on Friday, non-commercial traders increased their net short positions in corn and soybeans but trimmed their short position in wheat.

This week’s weather looks to be drier throughout the Midwest which will help speed along harvest. However, the plains look to receive precipitation in the second half of this week. The extended forecast shows that it will be wetter than normal in North Dakota down through Nebraska and including Iowa and Minnesota in the 6-10 day forecast with temperatures remaining mostly average for this time of the year.

Weekly Cash Comments

Cash Commentary-

Soybean basis was off sharply this week giving up 5 cents a bushel, while corn basis was relatively quiet and unchanged for the week.

Harvest has gotten into full swing with USDA reporting at the start of the week that 10 percent of the corn crop has been harvested and 7 percent of the soybean crop. Heavy rains around Nebraska and Iowa late in the week stalled harvest progress, but the 10-day outlook shows clear and dry weather which should accelerate the harvest progress. Yield reports so far have done little to sway the expectation of bumper crops for both corn and beans that the market has factored in. Historically, big crop years lead to lower basis levels at harvest, but it starts to improve rapidly after harvest. This year seems to be no exception, with both corn and soybean basis generally less than 5-year average levels. We would expect basis levels to start improving around mid-November into the next calendar year.

For soybeans, spot basis was off 5 cents this week but was significantly weaker at river terminals where losses averaged 10 cents a bushel. Barge rates continued to climb this week as grain movement starts to pickup. At soybean plants, losses of 20 cents a bushel were fairly common this week as the market adjusts fully to new-crop supplies hitting the market.

Futures Commentary-

Grains were mixed this week with wheat increasing 15 3/4 cents, corn increasing only 1 3/4 cents and soybeans falling 16 1/2 cents. Soybeans continue to struggle with near ideal weather, improving crop conditions and harvest beginning in many states.

On Monday, USDA’s crop progress report showed another uptick in soybean ratings from 61 percent good-to-excellent last week to 63 percent this week. Corn conditions remained unchanged at 68 percent of the crop rated good-to-excellent. Harvest pace for beans was pegged at 7 percent while corn improved to 10 percent cut. With the brunt of harvest still ahead, it would seem that any rallies in the next 2 weeks would be short-lived.

Wheat prices moved higher this week on increasing concerns about the dry weather in Australia and the Black Sea region. There are some minor concerns in southern Ukraine where it has been too dry to consider sowing winter grain. The pace of sowing winter wheat in Ukraine is running slightly behind schedule but it is early with typically around 20 percent of the crop planted at this point in the year. In Australia, dryness is starting to push crop estimates lower, with the crop expected to be 24-26 MMT versus 26 MMT by USDA. The wheat rally early in the week was capped on Thursday after the Russian deputy prime minister proposed to change the wheat export duty to 50 percent of the customs price minus 6,500 Roubles per ton on October 1st. They also announced that the Russia could export as much as 30 million metric tons of grain this marketing year if total production increases to 100 million metric tons.

On Wednesday, the EIA announced that ethanol production decreased 23,000 barrels per day to 938,000 barrels per day. Ethanol production is above last year’s levels at this time of the marketing year by only seven thousand barrels, but above the 4 year moving average by 67 thousand barrels per day. Ethanol stocks are up 609,000 barrels per day to 18.9 million barrels of inventory.

Export sales were on the low side of expectations this week for wheat with 282,800 metric tons for delivery in 15/16. Wheat sales were down 25 percent from the previous week but still within the range of analyst estimates between 250,000 and 400,000 metric tons. Corn sales were disappointing, booking only 426,300 metric tons in 15/16 which was a 20 percent decline in sales from last week. Corn expectations ranged between 550,000-750,000 metric tons. Soybean sales beat analyst expectations by booking 1,316,000 metric tons which was a 44 percent increase from last week. Analyst’s expectations ranged from between 1,000,000-1,200,000. There were also a number of reportable sales this week which included a 313,000 metric ton sale of soybeans to unknown destinations, and a 260,000 metric ton sale to China for 15/16 delivery as well.

Morning Comments – September 25

In the overnight session the grains traded higher with soybeans leading the way up 9 1/4 cents. Corn jumped 2 cents and wheat climbed 3 ½ cents to help erase some of the losses seen yesterday. Crude oil is trading 37 cents higher and the U.S dollar is up .6 percent after the Fed Chairman Janet Yellen said she expects rate hikes later on this year. It was announced this morning an export sale of 260,000 metric tons of U.S. Soybeans to be delivered to China for 15/16.

Soybeans are higher this morning after China inked a deal in Iowa to purchase 13.18 million metric tons of U.S. soybeans to be delivered in 16/17 valued at 5.3 billion dollars. The deal is viewed by traders as mostly “frame contracts” with the details to be settled at a later date.

There were a few tenders this morning with the Taiwan Flour Millers association issuing an international tender to purchase 89,150 metric tons of milling wheat and the Korea Flour Mills Corp. purchasing 23,000 metric tons of wheat.

In this week’s Chinese state auction for corn only 35,861 metric tons of corn was sold making up only .7 percent of the total amount of corn offered this week. The corn was sold at an average price of 2,271 yuan per metric ton. This week’s state corn sales were the worst performing state auction this year.