Cash Grain Commentary – Jan 31

Basis levels continued to be steady to slightly weaker. On average, US corn basis was unchanged for the week, while US average soybean basis slipped one cent a bushel.

For corn, Gulf basis levels firmed this week by 5 cents a bushel as tight supplies for export and expanding export demand underpin the market. However, upstream river markets saw a lesser increase as ice poses problem for barge navigation and rates have climbed steadily over the past week.  For ethanol, it was generally a week of lower basis with one-cent losses on average. But losses of 3 to 5 cents were fairly common among some key plants. Weather continues to limit pipeline supplies which should underpin basis levels. Snow fall of about 6 inches is expected to blanket the Midwest over this weekend.

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In soybeans, basis levels were generally weaker especially at export sensitive areas. Although the Gulf was down only 2 cents a bushel, but average river terminal basis levels are were off 5 cents a bushel. Double digit losses were fairly common especially along the Illinois river where ice has limited grain flows. For crushing plants, basis levels actually bucked the trend by improving 1-cent a bushel.  Western Cornbelt plants were up a nickel in some cases. In the East, bad news came for North Carolina with the announcement that Cargill would be idling its Raleigh plant this spring as a result of weak soymeal demand.

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Jan 31 – Morning Comments

Corn was slightly weaker overnight following Thursday’s sharp gains on booming exports. Front-month March beans were up 3 cents while wheat posted fractional gains in the night session.

Thursday’s export sales report showed astonishing high corn business for the week as old-crop sales topped 1.8 MMT, well above expectations of 750,000 MT at the high end. In addition another large sale of 127,000 MT was announced Thursday morning to an unknown destination. FOB corn basis offers at the Gulf held on Thursday following strong gains earlier in the week. Japan remains in the market for spring shipment corn and the Gulf remains short corn which is helping to support river market basis levels. Some ethanol plants are also showing signs of bumping up basis especially as more snow is expected in the coming week which could limit farmer deliveries.

For soybeans, weekly export sales of 865,000 MT came in on par with trade expectations of 750,000 to 1,050,000 MT. However, the surprise in the numbers may have been the lack of any significant cancellations, with China being rumored to have cancelled US bean exports for South American origins. However, reports of bird flu in China may curb some demand, as well as the Lunar New Year celebration that has begun and will last the next week, cutting back on Asian business. Cargill announced on Thursday it would idle its Raleigh, NC facility this spring amid reduced demand for soymeal.

In wheat, positive export sales helped wheat bounce off of its lowest level in over 3 years. US export sales for the week totaled 795,000 MT, well above expectations of 300,000 to 500,000 MT going into the report. In Australia, drought has been persisting for some time giving some concerns about wheat planting in another 4 months. Furthermore, meteorologists are starting to predict the threat of an El Nino later in the year, which would be linked to dryness in eastern Australia.  Overnight export tender business was quiet, with Lebanese government’s grains buyer looking to purchase 25,000 MT of milling wheat.

Jan 30 – Morning Comments

Soybeans sold off further losing 4 cents in the overnight session following Wednesday’s sharp decline. Wheat managed to come back 4 cents and corn was up 2 cents.

For beans, harvest continues to be in the early phases in Brazil, but the first vessel of new-crop Brazilian beans was loaded yesterday at the Port of Paranagua. Average yield reported by a private firm for farmers in Mato Grosso was 47.3 bushel per acre. The weather in Mato Grosso is favorable for harvesting and farmers are working up to 20 hours a day to get the beans out of the fields. On the export front, China was rumored to have canceled 300,000 to 400,000 MT of US beans, which also is pressuring the bean market.

In wheat, the market was off sharply on Wednesday following some penetration of key support on the technical charts. However, fundamentally, the US wheat market has not seen much in the way of big sales after big deals by Saudi Arabia and Egypt went mostly to foreign interests. Winter kill continues to be an issue in the US, with frigid temps expected to persist over the next week. But, it will be difficult to maintain that concern in the market in the face of large global supplies. Overnight, Jordan tendered for 100,000 MT of milling wheat.

For corn, good export activity of late has helped underpin the corn market. Along with regular buyers like Japan and Mexico, non-traditional buyers of Egypt and Spain have also bought significant quantities of US corn.  Corn export premiums at the Gulf were steady to firm on strong demand, with rival exporters charging more for their corn than the US. March and April premiums are up 10 or 15 cents a bushel this week.

WEEKLY EXPORT SALES (in thousand metric tons)

Actual Expected
Corn 1,943.6 550-750
Soybeans 865.8 750-1,050
Wheat 796.9 300-500

 

Jan 29 – Morning Comments

Grains were lower overnight in relatively quiet trade. Corn and beans were down a penny, while wheat gave up 2 cents in the night trade.

In beans, a USDA attaché has raised its estimate of Brazil’s soybean crop to 89.5 MMT, above USDA’s official forecast of 89 MMT. The attaché also raised its forecast of Brazil soy exports to a record 46 MMT topping USDA’s official figure of 44 MMT. However, “uncertainty persists in transportation logistics and global market prices,” it said. “Transportation and logistical improvements from 2013 to 2014 are marginal and hence these improvements are expected to proffer only marginal relief,” the report said.  A drier trend in parts of the country’s crop belt in recent weeks has had little negative impact, the attaché said. “Parts of Brazil have experienced irregular rains in late December and early January.  The mild disruption in precipitation does not appear to have had any significant impact on production,” the report said.

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In wheat, the US got a small chunk of the Egypt wheat deal announced on Tuesday. Egypt’s GASC bought 240,000 MT of wheat with most of it going to Russia, but the US getting a 60,000 MT deal for SRW wheat. France was shut out of the deal after the GASC lowered its moisture content requirement on the wheat to 13%, which could hamper any future deals for France. In the US cold temps continue which has been giving some mild support to the wheat market due to some chances of winterkill.

For corn, political unrest and icy cold weather is hampering the Ukrainian corn market. Ukrainian exporters are finding it difficult to get supplies as farmers there face logistical problems from ice and cold weather. Adding to the problem is the resignation on Tuesday of Ukraine’s Prime Minster and the ongoing political unrest. Currency values there are at a 4-year low against the dollar and farmers are holding grains back as a hedge against the risk. Slowing exports out of Ukraine should help the US cause in moving corn. In the US, basis levels found some support on Tuesday at key river terminals as Gulf basis levels inched higher.

Jan 28 – Morning Comments

Grains were mixed overnight with wheat up 3 cents a bushel, while corn and beans were unchanged to modestly lower.

Soybeans continue to lack conviction on price direction. Monday brought impressive exports with weekly inspections totaling 73.8 MB versus trade expectations of 50 to 58 MB. Also helping support the market was an announcement on Monday by USDA that a private firm had sold 183,000 MT of new-crop delivery beans to unknown destinations. However, a record-large South American crop continues to weigh on the market. Soybean premiums at the Gulf were weaker on Monday as Brazilian soy is offered at a steep discount to old-crop US beans. There continues to be Chinese interest in new-crop US soy, but sales have dropped off from the torrid pace of recent weeks. Next week is the Lunar New Year holiday, which will keep a lid on Chinese demand.

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In wheat, Saudi Arabia bought 715,000 MT of wheat on Monday with optional origin sources at the discretion of the sellers. Some of the wheat could come from the US but Europe, Australia, and Canada are part of the mix too. Late Monday, Egypt’s GASC announced another round of tenders to buy wheat. However, a moisture requirement of less than 13% could limit French wheat in the deal. Also supporting the market is on the ongoing winter freeze in the Midwest, although the overall risk seems limited to small sections of SRW wheat areas.

In corn, weekly exports were at 28.7 MB, at the high end of expectations of 23 to 28 MB. Also on Monday, USDA announced an old-crop sale of 119,888 MT to unknown destinations. This adds to the 370,000 MT of old-crop sales announced on Friday. River logistics in the US continue to be a struggle. Navigation on the Illinois is getting extremely difficult. Shippers are not able to assemble tows of more than 6 or 8 barges due to heavy ice accumulation, industry sources said. Two urea barges that were taking on water near Havana, Illinois, late last week were determined to have had their hulls damaged by gorged ice.

Jan 27 – Morning Comments

Corn was under modest pressure overnight while the bean and wheat market posted slim gains in the night trade.

Beans continue to be conflicted between positive demand in the export market, and an outlook for record large South American supplies hitting the market in coming weeks. In Brazil, ships are beginning to lineup to move the record large crop. On Friday, there were already 39 ships waiting at the No. 2 grain exporting port Paranagua and 11 in the top exporting port of Santos. A Brazilian export firm expects exports there to reach 2.5 MMT in February as compared to only 959,000 MT in the same month last year. However, in the US demand has not really shown signs of faltering yet. Friday’s export sales showed an impressive week of 1.6 MMT for old and new-crop deliveries. Also, U.S. exporters shipped a record amount of soymeal last week as farmers in Argentina, the top exporter of the animal feed, hoarded soybeans amid a plunging peso. U.S. exporters loaded out 398,591 MT of soymeal, primarily to Asian destinations such as South Korea, Thailand and the Philippines. That was the biggest weekly shipment based on records dating back to 1990, according to U.S. Agriculture Department data released on Friday.

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In corn, news continues to be limited to give the market something to be bullish about. However, Friday’s Cattle on Feed Report did show higher than expected cattle numbers. According to USDA Jan 1 inventory numbers were 95% of last year versus analyst expectations of 93.8% of last year going into the report. Corn basis levels saw modest support on Friday at export points as well as a few interior processors.

For wheat, weekly export sales announced on Friday were not much to give the market a boost. Weekly wheat exports for old crop were at 421,400 MT, and were within expectations. Brazil was a big buyer of HRW with 112,500 MT. Overnight, an outlook for more bitter cold weather in the US, continued to lend mild support as the potential for some winter kill was possible.

Weekly Cash Grain Comments – 1/24/2013

It was a week of mostly steady to weaker cash grain basis around the country. Corn held mostly steady with the US average unchanged from last week, while beans slipped 2 cents on the week on average across the US.

In corn, this week’s lack of upside follow through in the futures market combined with snow and cold temps through much of the Midwest kept farmer movement relatively subdued.  At the Gulf, there was modest strength with spot basis premiums there increasing by 4 cents a bushel. River markets along the Ohio and Illinois river saw the modest immediate benefit of that improvement with gains of 3 to 7 cents fairly common.  On average across river terminals, basis levels added 1.3 cents a bushel over last week. At corn ethanol plants, basis levels were mostly unchanged with only a handful of plants in the Western Cornbelt showing 5 cent improvements on the week.

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For soybeans, it’s been a painful week for farmers holding unpriced beans with futures and basis levels eroding to the point where most spot soy prices are below $13. At the Gulf, basis levels plunged 16 cents a bushel on the week as thoughts of China switching bean sales to South America kept the market on the defense.  Not surprising, river terminals were hard hit with losses compounded to the tune of 20 to 25 cents along the Illinois River.  At soy crushing facilities, there was moderate weakness at some plants but overall as a group they were mostly unchanged.

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Jan 24 – Morning Comments

Soybeans came under selling pressure overnight with front-month March futures giving up 10 cents a bushel. Corn and wheat were down 2 in the night session.

Pressure from the upcoming South America crop continue to weigh on beans. Yesterday, the Buenos Aires Grain Exchange estimated Argentina’s upcoming 2013/14 soybean harvest at 53.0 MMT, compared with 48.5 MMT last year.  Planting by Argentine farmers progressed by 2% during the week, according to the report, with 98.4% seeded as of Thursday.  Recent rains helped growers get their seeds into the ground during the week, it said. The rains were much needed after an extremely hot, dry December slowed planting and stunted development of young soy plants.  Overnight, a widespread area of thundershowers favored much of Cordoba, southern Santa Fe, southern Entre Rios, and north-central/eastern Buenos Aires with 1 to 3” totals common. This was very helpful for corn/soy and will limit additional crop stress to only 10 or 15% of the belt for now.

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For corn, news has been limited to get the markets out of their sideways trend of the past 6 weeks.  Overnight, China said they would keep rejecting U.S. corn shipments containing an unapproved genetically modified strain at least until the end of March, shrugging off pressure from Washington to swiftly approve the variety developed by crop chemicals giant Syngenta AG. Under Chinese regulations, the earliest approval of the  genetically modified MIR 162 strain could be late March, when the agriculture ministry’s biosafety committee holds its annual meeting. If no decision is made, the next review would be in June. On a more positive note, exports are saying the US corn prices are now fairly competitive against rival countries. US corn prices are now at a discount to Ukraine for March on out. The regulars like Japan have been booking springtime shipments. Demand from Egypt, which normally buys from Ukraine, has also been strong, they say.  Overnight, a group of Israeli private buyers has purchased about 90,000 MT of corn which can be sourced optionally from the Black Sea region or the United States in an international tender.

In wheat, the market found support yesterday from a large Saudi tender of 600,000 MT and frigid temperatures in the Eastern Cornbelt which could put at risk some of the US SRW wheat crop. Overnight, Libya bought 30,000 MT of wheat from the Baltic Sea region.

WEEKLY EXPORT SALES (in thousand metric tons)

  Actual Expected
Corn 693.4 250-650
Soybeans 1,673.1 300-625
Wheat 429.4 300-600

 

Jan 23 – Morning Comments

Grains found modest support overnight, with wheat an unlikely leader to the upside with a 5-cent advance.  Corn also advanced a healthy 3 cents a bushel while beans lagged behind on a 2-cent gain.

In wheat, low prices have helped spawn more interest from international buyers. Overnight, Taiwan bought 73,400 MT of US milling wheat with most of the volume going to dark northern spring and hard red winter varieties. Saudi Arabia and Ethiopia also announced tenders overnight for wheat, with the Saudi tender looking for as much as 660,000 MT. Also supporting wheat is the polar plunge hitting the U.S. Midwest this week, which poses a slight risk of freeze damage to about 15% of the region’s soft red winter wheat crop, primarily in parts of Missouri and Illinois.

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For soybeans, the market continues to find stiff resistance from ongoing rains in Argentina.  In South America, showers scattered through central Argentina overnight but were most notable in southern Cordoba, far northeast Buenos Aires, and southeast Entre Rios. Looking ahead, weather models seem to be in agreement for a wetter forecast late in the 6 to 10 and 11 to 15 day periods, although Cordoba may again be short-changed in spots. Regardless, this would limit stress to less than 1/4 of the belt. In the U.S. cash market, basis levels have been coming under pressure in the past two days especially in export sensitive areas as concerns about slowing Chinese demand limits grain buyers’ appetite.

In corn, the news has been limited of late, although Wednesday morning brought a new sale to Japan. USDA announced that Japan had bought 105,664 MT of US corn for new-crop 2014 delivery. However, overnight Taiwan’s MFIG corn purchasing group rejected all offers and made no purchase in a snap tender to buy 60,000 MT of corn from the United States. The lunar new year holidays start in Asia next week so China and other countries will be on holidays late in the week, which is likely to keep any new export news fairly limited. Domestically, corn basis has been mixed with river terminals backing off since the start of January as a weaker demand from China has slowed buying interest. Ethanol plants as a group are holding up fairly well, but some plants have been on the decline in recent days with competing export buyers backing off.

Jan 22 – Morning Comments

Beans were having a hard time holding on to gains in the night session following Tuesday’s 36 cent pummeling. Corn and wheat continued to buck the bearish bean trend posting 2 cent gains in the overnight session.

Soybeans fell hard on Tuesday thanks to widespread rains in Argentina over the extended weekend, as well as an outlook for more rain events over the remainder of the week. After a period of hot and dry weather, rains in Argentina are a welcome change during this critical crop development time. Adding to the negative tone was rumors that a bean sale to China had been switched from US to South America. Weekly export inspections were the only bright spot on Tuesday but did little to slow the slide, as weekly exports came in above expectations at 56.6 MB for the week, as compared to 55 to 55 MB expected.

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In corn, the market has been able to hold on to modest gains in the wake of the bean decline. But, sharply higher prices in the near-term seem unlikely as  worries about slowing sales to China persist; China imported 637,045 MT of U.S. corn in December, down 19% from November, official customs data showed, as Beijing has been rejecting U.S. cargoes due to the presence of an unapproved genetically-modified strain. Weekly export inspections came in at 29.8 MB versus trade expectations of 20 to 25 MB. Only 137,000 bushels were headed for China this week. Corn basis was weaker in eastern rail markets and at a river terminal on the upper Mississippi. The softer tone in basis and sluggish futures  resulted in a fairly quiet day in the cash corn market on Tuesday.

For wheat, export inspections on the week were disappointing with only 15.5 MB as compared to expectations of 17 to 22 MB going into the report. Overnight tender activity seemed fairly quiet although Algeria bought 500,000 MT. Purchases covered both April and May and the origin of the wheat was optional but France was thought most likely to supply some of it.