Soy Basis has Follow through Weakness

Last week’s 50-cent plunge in spot soybean basis seemed to lose some steam this week, but there was still continued weakness. Spot soybean basis average a 7-cent decline for the week, while spot corn was steady on average across the country.

For corn, basis levels were mostly steady although the Gulf export market was up 4 cents but the PNW market slipped 6 cents a bushel. Ethanol buyers on average as a group were off 1 cent for the week, but in Iowa and Nebraska some buyers boosted their basis by a dime or more.  On the river, corn basis was off nearly 3 cents a bushel. The prolonged rains of late are starting to take their toll on the Upper Mississippi River. Barge traffic on the river will be impacted by high water as Lock and Dam 24 in Clarksville, Mo., closed to navigation on Friday. Lock and Dam 25 at Winfield, Mo., will close to navigation on Saturday.

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In soybeans, basis levels were weaker at the Gulf, slipping 8 cents a bushel while PNW markets were off 15 cents on the week. Although export demand for old-crop beans has been waning, domestic users are helping keep a floor under the market. As a group, soybean crushers were up 3 cents a bushel for the week, with plants in the Western Cornbelt showing 10 to 15 cent advances in some cases

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May 31 – Morning Comments

Soybeans charged higher overnight as new-crop November flirted with $13. Corn was mixed while wheat prices were lower.

Wheat prices fell for the second straight session on Friday due to growing worries about the export implications of a GMO strain in US Wheat.  Japan has already canceled a shipment, while other Asian buyers said they would monitor the situation.

For soybeans, tight old-crop stocks continue to underpin the market as not only futures basis levels have started to improve a bit after last week’s steep slide. Overnight, the Taiwan Sugar Corp. rejected all offers and made no purchase in a tender for 23,000 MT of U.S.-origin corn and 12,000 MT of U.S.-origin soybeans which closed on Thursday, European traders said on Friday. Prices were said to be too high. There were hopes among importers that global corn prices could continue to fall so making it worthwhile to delay purchases, one trader said.

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WEEKLY EXPORT SALES (in thousand metric tons)

  OC-Act OC-Exp NC-Act NC-Exp
Corn 85.7 0-200 798.6 600-800
Soybeans -108 0-200 756.6 400-600
Wheat 35.9 0-200 728.3 250-450

 

May 30 – Morning Comments

Grains were lower overnight led by wheat as news of GMO in US wheat caused concerns about exports.

On Wednesday, it was announced that there was an unapproved genetically modified (GMO) variety of the grain found in the state of Oregon.  Japan, the top importer of U.S. wheat, has already cancelled a tender to buy U.S. western white wheat. Analysts fear more countries could follow.

For soybeans, China cancelled an order for 147,000 MT of old-crop soybeans on Wednesday. However, prices continue to hold firm as slow plantings keep traders weary of potential yield and acreage losses flooding is becoming an issue.

More rains are expected from late Thursday into the weekend which will stall corn and soybean plantings in the U.S. Midwest. Nearly all of the Midwest should receive rain with the heaviest rainfall of from 1.0 to 3.0 inches or more in Missouri, eastern Kansas, Iowa and Illinois. In corn, basis levels continue to hold firm but some end users have backed off in the past week thanks to better farmer selling.

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May 29 – Morning Comments

Corn continued to move higher overnight trying to extend its winning streak to 5-straight sessions. Soybeans were modestly higher overnight while wheat was slightly lower.

Corn continues to be underpinned by forecasts of more rain in U.S. grain belts which could further delay plantings. The USDA said that corn planting was 86% complete as of May 26, up 15% from a week earlier. The corn progress was down from 99% a year ago and behind the 5-year average of 90%.

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For wheat, rains domestically are seen as a benefit to the final stages of crop development while international production looks to be robust. Overnight, analyst group Soviet Econ projected Russia’s wheat harvest at 50 MMT, up from 38 MMT in 2012. They also pegged the country’s exports higher at 19 MMT versus 16 MMT last year. Overnight, South Korea bought feed wheat, likely to be sourced from the Black Sea region.

In soybeans, USDA announced another sale of new-crop beans totaling 120,000 MT on Tuesday. However, old-crop business continues to be dominated by South America. Analyst Oil World projects exports from Brazil in May could top 9 MMT, up from 7.3 MMT a year ago in May.  In the US, farmers planted 44% of their soybean crop as of May 26, compared with 87% a year ago and the 5-year average of 61%. It was the slowest pace for soybeans since 1996, when farmers had seeded just 35% of their crop by the end of May.

May 28 – Morning Comments

Corn and soybean prices found renewed support after the holiday weekend as overnight prices rallied. New-crop corn and soybeans were up the most, gaining 7 and 10-cents respectively. Wheat was lower by 2 cents a bushel.

Corn climbed thanks to heavy rains renewing concerns about planting delays. U.S. growers finished planting 71% of the corn crop in the week ending May 19. Corn planted after mid-May typically has lower yields due to delayed pollination. However, rains also benefit already planted corn. In export news, the Taiwan Sugar Corp. has issued an international tender to buy 23,000 MT of U.S.-origin corn and 12,000 MT of U.S.-origin soybeans.    Shipment was sought between July 14-28 from the U.S. Gulf or between July 29-Aug. 12 from the U.S. Pacific North West coast.

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For soybeans, rains also are causing concerns about planting delays for soybeans, but underpinning the market is the ongoing export demand for new-crop deliveries. In Argentina, soyoil  exports are seen rising about 40% to a range of 5 million to 5.2 MMT.

In wheat, prices are coming under pressure as international weather continues to be mostly favorable, albeit with some moderate drought concerns in Russia. A recent tender by Iraq showed the lack of US price competitiveness. Offers indicate there will be plenty of grain coming out of the Black Sea area. Serbian and Russian offers were the lowest at US$316/MT and US$319/MT CNF respectively; Australian, Canadian, and German wheat US$50/MT higher and US wheat US$90/MT higher.  In addition, a senior weather forecaster pegged Ukraine’s 2013 wheat harvest at 19.3 MMT, up from 15.8 last year.

May 24 – Morning Comments

Grains were mixed over night after a wild ride on Thursday left traders searching for direction.

Soybeans on Thursday marched higher through most of the session at one point trading as high as 40-cents above the previous close, but ended the day up only 10. This morning’s trade is churning below the key $15 mark. Yesterday, Argentine port workers ended a four-day-old strike setting the stage for resumption of crucial soy and corn exports from the South American grains powerhouse. A recent turn higher in export demand and strong crush margins in the midst of plummeting cash basis levels has helped re-ignite fears of tight old-crop stocks.  For the week, spot soybean basis has lost 60 to 80 cents a bushel at many key buyers.

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For corn, good weather continues to take its toll on new-crop soybean futures. Early estimates for next week’s planting pace report suggest 85% of the corn crop might be planted by this weekend, up from 72% last week.  For old-crop, export sales for the week were 104,600 MT, in line with expectations but below the pace needed to reach USDA’s annual forecast of 750 MB for the year. Overnight, Israel and Taiwan bought corn from South America.

In wheat, strong new-crop weekly sales of 713,600 helped firm prices on Thursday and that strength is carrying through this morning.  Argentina released its first estimate for 2013/14 wheat planting area, forecasting farmers would seed about 4 million hectares with the grain, up from 3.6 million last year.

May 23 – Morning Comments

Corn and bean futures were down slightly overnight following Wednesday’s strong rally.

Private exporters reported the sale of 360,000 MT of U.S. corn to China. Another 180,000 MT was sold to an unidentified buyer which traders said was likely China. In ethanol, weekly production was up 18,000 BPD TO 875,000 BPD for the highest mark of the year and the highest since 883,000 BPD during the week of June 22, 2012

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In soybeans, yesterday’s rally hit an eight-month peak, with a port strike in major exporter Argentina increasing the focus on tight short-term supply. Argentine port workers strike in grains hub Rosario is in for its fourth day today. The parties met Wednesday  but failed to reach a deal on wages, as dozens of cargo ships are stranded in the Rosario ports of San Lorenzo and San Martin, unable to leave with their loads. Dozens more are lined up outside of the ports waiting to get in. Another negotiating session is set for today.

Wheat markets were also supported by signs of buying interest from importers after a price pullback this week.   Algeria bought 400,000 MT of milling wheat in a tender for August shipment. Analyst Strategie Grains cut their EU Soft Wheat Crop forecast 200,000 MT from last month to 130.9 MMT, although it is still expected to be up 5% on the year.

WEEKLY EXPORT SALES (in thousand MT)

  OC-Act OC-Exp NC-Act NC-Exp
Corn 104.6 100-200 341.6 100-300
Soybeans 183.5 0-100 838.9 350-450
Wheat 239.4 0-200 713.6 300-400

 

May 22 – Morning Comments

Corn and wheat prices found modest strength overnight while nearby soybeans were off slightly.

For corn, export demand continues to be limited. Overnight, Taiwan’s MFIG corn purchasing group  rejected all offers and made no purchase in a tender to buy up to 60,000 MT of corn, citing too high prices. However, China likely bought 5 cargoes or more of corn for Sep and Oct shipment on Tuesday, a trader said. That followed the 2 cargoes USDA reported sold to unknown on Monday, which was believed to be China as well. On the weather front, some showers are expected throughout he Midwest over the next 10 days, but not enough to disrupt planting progress. In addition,  warmer temperatures are expected which should help speed crop development.

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In soybeans, cash basis levels continued to crash at key buyers yesterday. In many cases, basis levels are off 40 to 60 cents a bushel in the last week as strong sales and slowing export demand help build pipeline stocks for end users.  In Argentina, striking port workers, who went on strike Monday, say they are set to talk with management today. The government is keen to see the strike end so that grains exports can resume from main shipping hub Rosario. On Tuesday, Oil World projected that tight stocks before the new-crop harvest will cause the US to import 32 MB of soybeans in Aug/Sep from Canada and South America.

For wheat, recent price drops have helped find some new buying interest, but overall global supplies seem to be abundant keeping prices on the defensive. Jordan has again issued an international tender to purchase 150,000 MT of milling wheat to be sourced from optional origins but  disagreements about a new quality inspection scheme has reduced tender participation by grain export houses in recent tenders.  Russia’s Grain Union has raised the top end of its 2013 harvest forecast range due to the good condition of winter grains, its head said on Tuesday, indicating that crop risks due to dry weather this month were limited.

 

May 21 – Morning Comments

Grains were sharply lower overnight thanks to the latest planting pace. Corn and wheat posted 10-cent losses while front-month July soybeans was unchanged but new-crop November fell 7 cents.

U.S. farmers took advantage of good weather in the last week to plant corn at a record-fast rate, pushing progress to 71% versus 28% last week.  Seedings, which had been record slow as of May 12, were nearly back to average levels as of Sunday. With soil moisture levels recharged and planting pace back on track there seems little to divert the trend from its downward move over the near-term. On the export front, corn exports will need to average about 15 MB a week for the remainder of the marketing year to reach USDA’s annual forecast of 750 MB for the year. This seems unlikely as exports in the last two months have averaged about 12 MB a week.

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For soybeans, spot basis levels came under pressure again on Monday, extending the two-day loss to around 30 to 45 cents a bushel at many key processors and river terminals.  In Argentina, port workers at the main grains hub of Rosario went on strike over wages on Monday. Although most of the work stoppages are short-lived, those that go on for days can impact the global flow of grains.

In wheat, the US winter wheat crop condition slipped slightly last week as 31% of the crop is rated in good-to-excellent condition.  Russia’s Institute for Agricultural Market Studies raised its 2013 wheat crop forecast by 2.5% due to a bigger-than-expected harvest in its largest growing region and despite hot and dry weather in other regions. In Australia, wheat planting is expected to accelerate as much-needed rains are forecast to hit the country’s dry east coast.  Timely rains would ease the threat of significant losses amid an uncertain global crop outlook after analysts warned Australian yields could be hurt if the dry weather that delayed planting on the east coast persisted

May 20 – Morning Comments

Grains started the week in positive territory following Friday’s strong close.

In corn, a stronger than expected cattle on feed number Friday afternoon showed May 1 cattle on feed at 97% of this time last year, versus trade estimates of 96.1%. Also on Friday, private Informa Economics projected U.S. 2013 corn plantings at 96.827 million acres, below the USDA’s current estimate of 97.3 million. Informa said it reduced corn acreage in the western Corn Belt states of North Dakota and Minnesota compared with the USDA’s figures, while adding acres east of the Mississippi River. Despite the smaller corn seedings, Informa forecast the U.S. 2013 average corn yield at 160.9 bushels per acre , above the USDA’s current forecast for 158 and put corn production at 14.398 billion bushels, topping USDA’s forecast of 14.14 billion. Analysts expect seedings to be 50 to 65% complete by the end of last week, up from 28% a week earlier, although that would still be a record slow pace for this point in the season

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For soybeans, Friday’s rally in the futures market saw cash basis levels tumble as grain buyers had active  bean sales. Soy basis plunged 15 to 25 cents a bushel at many key buyers in the Midwest on Friday.

In wheat, the US HRW crop received welcome rains late last week and into the weekend, while rainfall in Australia is helping improve planting prospects and better crop weather is being reported in the Black Sea region.