Grain Basis Collapses – For Now

With nearby July Futures reaching first notice day on Friday, basis levels plummeted to be on par with the expiring contract. For the week, spot corn basis was off 15 cents a bushel while spot bean basis was off 25 cents a bushel.

The brunt of both the bean and corn collapse was felt in the Western & Eastern Cornbelt as basis levels there had been at exceptionally lofty levels over the last month, tied to end-user demand. Along river markets tied to grain delivery for the CBT contracts, basis levels fell relatively less as they had failed to keep step with the outlying markets as they moved higher.

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On Friday, USDA’s latest stocks and acreage numbers gave the market new direction.  For both corn and beans, stocks came in lighter than expected as of June 1. This, combined with a late start to the growing season for new-crop corn and beans, could make for an interesting Aug/Sep window for end users to get their needs met. Some inland end-users are starting to look at sourcing grain from the river & offloading it to trucks to meet their supplies. Look for basis levels to weaken this coming week, but in all likelihood tighter stocks will keep basis levels biased to the upside for key end users.

 

Jun 28 – Report Expectations

This Friday, June 28th, at 11 AM Central Time the USDA will release their Planted Acreage and Quarterly Grain Stock reports. Below are trade expectations for the reports and what Grain Hedge analysts are looking for out of the numbers. Please keep in mind that June 28th is also first notice day for July corn, soybean, and wheat contracts. If you need help rolling or liquidating July positions before June 28th do not hesitate to call our office. 877-472-4607
Projected corn acreage will get a lot of attention on Friday after this spring’s wet conditions slowed planting in much of the corn belt. On average, analysts are expecting the USDA to reduce corn seeding by 2 million acres from the 97.3 million acres projected in the June WASDE report. Estimates for what the USDA will report on Friday are quite wide, with some analysts looking for corn acreage projected below 94 1/2 million acres.Soybean acreage is expected to be raised slightly as some delayed corn acres have most likely moved into soybeans. On average, the trade expects soybean planted acreage to be raised 800,000 acres from the USDA’s June WASDE projections.
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2013/14 U.S. Planted Acreage
June WASDE
Report
Planted Acreage
Expected  
Corn
97.30
95.31
Soybeans
77.10
77.93
All Wheat
56.40
55.9
*Million Acres
June 1st Grain Stocks

June 1, 2012
June 1, 2013
Expected 
Corn
 3,148
2,845
Soybeans
 667
442
Wheat
 743
745
*Million Bushels
June 1st soybean stocks will be watched especially close on Friday, as projected ending stocks remain razor thin. In the June WASDE report the USDA projected ending stocks of 125 million bushels for the 2012/13 marketing year, representing just 4% of total use. With soybeans likely to be harvested later than average this year, any unexpected decline in soybean stocks could have very bullish implications on the front month.

Jun 27 – Morning Comments

Grains were mostly higher overnight with the exception of new-crop corn, which continues to come under pressure from good weather prospects.

Warm temperatures and scattered showers over the next two weeks in the U.S. Midwest are expected to help the newly seeded corn and soybean crops. Frequent scattered thundershowers will occur in the eastern Midwest through much of the next two weeks. Drier weather was expected in the western U.S. Midwest but updated weather forecasts on Wednesday indicated a little wetter weather possible in the Dakotas later next week.

New-crop corn has lost 5 percent over the last six sessions, but with Friday’s barrage of key supply data trading should continue to be quiet until then.  The mid-year report has triggered large price movements in three of the last four years.

In international markets, a South Korea feed manufacturer issued a tender for 140,000 MT of optional origin corn for November delivery, while Jordan’s Ministry of Trade and Industry has issued a tender to buy 150,000 MT of milling wheat.

WEEKLY EXPORT SALES (in thousand MT)

  OC-Act OC-Est NC-Act NC-Est
Corn 336.7 100-200 153.6 150-250
Soybeans 14.5 0-100 451.1 250-450
Wheat 731.8 350-550    

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Jun 26 – Morning Comments

Grains were mixed overnight with corn and wheat posting 3-cent gains while soybeans were off 4.

In wheat, some short-covering ahead of Friday’s USDA report is helping to give prices an uptick as is thoughts of Chinese demand. China is expected to be a buyer of quality wheat after rains during last month’s harvest damaged some 10 MMT, over 8% of the annual output of the world’s top producer of the grain. In Kansas, wheat harvest continues to show better than expected yields.

For corn, traders look for lower acres in Friday’s USDA acreage report after a wet spring delayed planting. Analyst expectations are for a 2 million acre drop to 95.3 million acres, as compared to the March forecast by USDA.

There are more river logistics problems on the horizon. Mississippi River lock 16 near Muscatine, IA is forecast to close due to high water on June 28. Lock 17 at New Boston was seen closing on June 27. Almost every lock between 12 and 22 is now forecast to close between June 27 and July 2. That is pretty much every lock on the Mississippi River from Bellevue, Iowa, to Saverton, Missouri.

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Jun 25 – Morning Comments

Grains managed a modest recovery overnight following Monday’s mostly lower trade. In night trading, corn and wheat prices were up 4 cents a bushel, while new-crop soybeans were up 8.

Nearly ideal corn and soybean growing weather is expected in the U.S. Midwest for at least the next two weeks. Temperatures should remain warm this week with highs in the upper 80s (degrees Fahrenheit) to low 90s F then cool down to the 70s F and 80s F by the weekend and remain moderate through next week. Showers will continue the next 48 hours in the northern Midwest bringing an additional 0.50 inch up to 2.00 inches. Next week it will be drier and mild which should aid winter wheat harvest in the Plains.  USDA’s latest data shows 20% of the winter wheat crop harvest, up from 11% last week but off the 5-year average pace of 37%.

For corn and beans, crop conditions improved slightly moving to 65% good-to-excellent, up from 64% last week. Although mostly complete, some acres still haven’t been planted for both corn and soybeans leaving doubts about whether USDA’s planting estimates from March will stand. Friday’s new acreage report is expected to show a nearly 2 million acre drop in corn planting, but about an 800,000 acre increase in soybean plantings. As of Sunday, USDA reported only 92% of the crop planted slightly off the 5-year average of 95%.

In wheat, domestic basis levels were showing pressure on Monday as harvest brings more supplies to the market. Wheat export premiums at the US Gulf were flat on Monday as pressure from rising supplies and poor export demand was largely offset by a nearly 3 percent drop in futures. US wheat was way out of the running in an Iraqi tender that closed over the weekend. French and Russian wheat offers are running cheaper into other key markets.

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Jun 24 – Morning Comments

Grains were off sharply overnight as near ideal weather has traders banking on improved crop conditions. New-crop corn and soybeans were off more than 10 cents overnight while wheat futures were off 9 cents.

In wheat, yield reports from south central Kansas are turning out favorable thanks to the moisture in late winter and spring. Test weights are averaging 60 pounds a bushel, according to Kansas Wheat. Early yield reports indicate the crop at 50 bushels an acre in south central Kansas. In spring wheat country of North Dakota, as well as Canada, excessive rains are causing floods especially in Alberta.

For corn, moisture levels across the U.S. Midwest are adequate to support growth in corn and soybeans, but the market is on high alert for any signs of sustained heat and dryness because of tight old-crop carryout.  It will be warm this week in the Midwest and the Plains, the high in St. Louis will reach 95 F on Wednesday and the high in Chicago will be 91 on Tuesday, but cooler weather is expected by the weekend through next week with the highs easing to the mid-80s in most of the Midwest and the mid to upper 70s F in Chicago. A Reuters poll ahead of the June 28th acreage report shows on average U.S. corn plantings of 95.313 mln vs USDA March est 97.282 mln, soy 77.933 mln vs USDA March 77.126 mln, spring wheat 12.132 mln vs USDA March 12.701 mln.

In international markets, tenders have been limited of late although Israel buyers issued a tender to purchase up to 85,000 MT of corn and 50,000 MT of feed wheat.

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Volatile Cash Grain Basis Continues

Cash grain markets continue to see volatility as end users try to capture remaining old crop supplies while at the same time trying to back off from record-high basis levels. For the week, average spot corn basis fell 2 cents a bushel while average spot soybean basis (against July futures) rose 14 cents a bushel.

For corn, Western Cornbelt ethanol plants were the big drivers this week as losses of 10 cents or more were fairly typical. With nearby needs fairly well met, some buyers began toll in Sep futures and take some of the spread off their basis. Along the Mississippi river, terminals were fairly stable to a bit higher in some locales. However, IL river markets didn’t fair as well finding losses of 5 cents fairly typical.

spotcorn_2013_06_21

In soybeans, basis levels against the July futures have firmed especially at Western Cornbelt crushing facilities. Gains of 30 to 40 cents in basis against the July futures were fairly widespread at end users in Iowa and Nebraska. For river markets, basis levels were more tame as shipments for old-crop delivery cool. Weekly shipments of less than 3 MB of late are well below the 40 to 50 MB pace seen 5 months ago.

spotsoy_2013_06_21

Jun 21 – Morning Comments

Grains continued lower overnight as broad-based selling in commodities and equities has appeared to stabilized in international markets. Nearby corn lost 5 cents, while wheat was down 2. Soybeans were off fractionally.

In wheat, Egypt said they would not be importing wheat anytime soon after a trade minister on Thursday and said they would be in the market before June 30. Egypt’s stocks are said to be high enough to last until the end of December. Wheat buyers in Asia are looking to replace Indian and Australian cargoes in the lower-end feed grain market with cheaper supplies from the Black Sea, which will be returning to the region after a three-year gap.

In corn, basis levels continue to come down as end users and river terminals drop bids on spot delivery. Many end users are rolling to the Sept contract for pricing as needs for the near-term have been met.

For soybeans, Abiove, the Brazilian vegetable oils association, cut its soy crop forecast by 500,000 tons to 81.6 MMT, a little lower than the 82.0 MMT projected by USDA. Also, the Buenos Aires grains exchange reaffirmed its estimate of a 48.5MMT Argentine harvest, which remains significantly below other trade estimates and USDA;s forecast of 51 MMT.

best_corn_2013_06_20_sml

Jun 20 – Morning Comments

Grains were lower overnight with wheat and soybeans falling 10 cents, while corn lost 6 cents a bushel.

Grains fell under pressure from broad-based commodity selling and a firming dollar as the U.S. Federal Reserve signaled it was ready to slow down the pace of bond purchases. Market sentiment was dampened further after economic data from China hinted at weakening of the world’s second largest economy. Corn continues to be underpinned by tight old-crop supplies and the ongoing concerns about lower than expected production for the 2013 crop. Weather forecasters are seeing hot and dry conditions in the coming weeks which will help crop development, but  concerns that the heat and dry will continue into July have some fearing for crop losses.

best_corn_2013_06_19_sml

In wheat, the market rallied sharply yesterday as China showed renewed interest in wheat, buying 200,000 MT of French wheat for fall delivery.  As a further support for wheat prices, Lanworth cut by nearly 1.3 MMT, to 693.0 MMT, its forecast for world wheat production in 2013-14, with a downgrade to the Ukrainian harvest offsetting upgrades to some other origins, including Australia.

For soybeans, spot basis continues to hold firm as a pickup in old-crop export business along with strong crusher demand has helped turn basis ;evels higher in the past week. On Wednesday, Informa cut their forecast of US soybean acres by 530,000 acres to 77.8 million acres.

WEEKLY EXPORT SALES (thousand metric tons)

  OC-Act OC-Exp NC-Act NC-Exp
Corn 133.4 50-100 77.1 150-250
Soybeans 52.6 0 108.5 350-550
Wheat 432.7 350-550    

 

Jun 19 – Morning Comments

Grains were mixed overnight with corn and wheat posting modest losses while soybeans inched higher.

For corn, basis levels seem to be coming under pressure as end-users begin to roll out of July into September and take some of the spread off the top. Western Cornbelt end users were mostly lower yesterday dropping 5 to 10 cents in some cases. A notable exception was Decatur which has seen its basis move up in the last few days after being relatively uncompetitive.  South Korea’s Nofi bought 69,000 MT of optional origin (including Black Sea) corn for arrival by October 30, and a further 58,000 MT to arrive by November 15.

In wheat, India’s cabinet on Friday is expected to allow a move to add another 2 MMT of wheat for export, bringing the total offered to 6.5 MMT as the government looks to cut stockpiles of wheat.  Wet weather continues to plague US winter wheat harvest, slowing the pace in the Plains, and also causing quality concerns in SRW wheat territory in the Eastern Cornbelt. China, as well, seems to be having issues with wet weather during wheat harvest as sprouting is starting to be an issue.

For soybeans, a South Korea feed manufacturer bought 60,000 MT of soymeal overnight believed to be sourced from South America. On Tuesday, it was announced that China bought 240,000 MT of new-crop soybeans from the US. Also, the US attaché in China pegs Chinese soybean imports up sharply in the coming year, at a record 67.5 MMT, but many in the trade remain skeptical. Shanghai JC Intelligence, a respected local analysis group, estimated the figure at 60.5 MMT, saying that the USDA has “grossly overestimated China’s demand” for soybeans.

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