Mar 31 – Morning Call

On Monday, March 31st at 11 AM CT, the USDA will release the Prospective Planting and Quarterly Grain Stock reports. This report has been a large market mover in years past, and will set the tone for the 2014/15 growing season. Below are trade expectations coming into the report. Tune into GrainTV, found on the Grain Hedge homepage following the report for a full breakdown of the numbers.
The 2014/15 growing season is expected to be a year of change, as soybeans and wheat retake acres lost to corn over the last two growing seasons. On average, analysts expect corn to be cut by 2.7 million acres from the 95.4 million acres planted in 2013. With new crop corn prices remaining relatively weak between August and December 2013, many farmers will be using this year to return to a more normal crop rotation.

U.S. Planted Acreage (Million Acres)

2013/14
Reported
2014/15
Range
2014/15
Average
Corn
95.4
90.5 – 94.0
92.7
Soybeans
76.5
78.5 – 83.6
81.1
All Wheat
56.2
54.8 – 57.7
56.3
Soybeans are expected to increase acreage year-over-year, with the average analyst looking for a 6% increase over the 76.5 million acres planted in 2013. Every analyst polled agreed that soybean acreage would be increased in 2014, but the magnitude is still a subject of debate. There is a wide range of estimates, with some well respected analysts looking for soybean acres to surge as much as 8 million acres compared to 2013. Any acreage number above 82 million would have bearish implications on the new crop soybean contract which has already rallied nearly $1 per bushel since January lows.


March 1st Quarterly Grain Stocks (Million Bushels)
March 1, 2013
Reported
March 1, 2014
Expected
Corn
5,400
7,010
Soybeans
998
989
Wheat 1,235
1,042

 

Old crop corn demand has remained strong, with our models indicating export sales running 252 million bushels ahead of pace to meet USDA expectations. Ethanol has been a strong consumer of old crop corn, as surging domestic ethanol prices have pushed crush margins above $3.00 per bushel in Eastern Iowa. Feed usage will be followed closely in Monday’s Quarterly Stocks Report. The March 21st Cattle on Feed report showed slightly stronger placements than expected, but the market has received few indicators as to the impact that PEDV has had on hog feed usage.

China has remained a strong buyer of old crop U.S. soybeans even at a time when sales typically are lost to South American harvest. Our models show soybean sales running 217 million bushels ahead of pace to meet USDA expectations. The soybean market will be most sensitive to any surprises from the Quarterly Stocks report, with the March USDA projecting stocks/use at just 4.3% for the current marketing year.

Mar 28 – Morning Comments

Wheat gave up a large share of Thursday’s 13 cent gain in the overnight trade, slipping 9 cents back to the $7 area. Corn and beans were lower as well with modest 2 cent gains.

Markets continue to wait for Monday’s round of USDA reports. The Planting Intentions Report will be the first formal survey of farmers for the 2014 crop and is expected to show lower corn and higher bean acres for the coming year. Analysts look for corn plantings to fall in 2014 to 92.7 million acres, off from the 2013 plantings of 95.4 million. The range of estimates, however, is quite wide going from a low of 90.5 to a high of 94.5 million. For beans, traders expect plantings to come in at 81.1 million versus 76.5 in 2013. Again, a wide discrepancy exists among analysts with the range of estimates going from 78.5 million to 83.6 million. In wheat, analysts expect all wheat acres to be at 56.3 million, on par with last year’s plantings of 56.2.

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In wheat, yesterday’s latest drought monitor showed an expanding drought situation in the Plains especially in Oklahoma. Private weather firm Planalytic’s also released their first wheat estimate of the season showing winter wheat yields at 45.7 bushels per acre as compared to 47.4 bushels per acre.

On Thursday, Argentina’s government projected the soybean crop at 54 MMT, on par with USDA’s latest forecast, but pegged the corn crop at 29.8 MMT, quite a bit higher than the USDA projection of 24 MMT. FOB Gulf soybean basis offers fell 2 cents late Thursday on softer export interest. Traders continue to assess rumors of Chinese cancellations, with the latest suggesting some Chinese importers are having problems obtaining letters of credit from Chinese banks. Even so, nothing has shown up yet that suggests cancellations will make a dent in the 100 MB overage of export sales relative to USDA’s annual forecast of 1,530 MB.

Mar 27 – Morning Comments

Grain markets were mixed overnight with beans higher by 8 cents, wheat lower by 3 cents and corn unchanged in the night trade.

Wheat prices have been selling off of late on what traders say is a better chance of rain in the Plains. However, the rain is mostly limited and of little size. In Amarillo, TX 0.04 of an inch fell yesterday. Areas of Oklahoma and Texas have slim chances of rain in the next few days. Egypt’s GASC is rumored to be tendering for wheat early next week especially if the USDA reports on Monday are bearish. Overnight, Egypt’s minister announced the country will cut wheat imports by 1 to 1.5 MMT in the next fiscal year by reforming a subsidized bread policy it sees as inefficient.

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In corn, USDA’s attache in Brazil pegged the corn crop there at 72 MMT, higher than the official USDA forecast of 70 MMT. Weekly corn export sales for old-crop were a well above expectations at 1,408,300 MT, with traders only expecting 525,000 to 725,000. Outstanding sales, which is the amount of grain committed to but not shipped, is a record high 18 MMT. Going back to 1990 when USDA started collecting the data, the previous high was 16 MMT in 1996.

For beans, net sales of old-crop delivery were negligible this week with only 11,900 MT. Traders had been expecting 100,000 to 250,000 MT. But, even so, the total commitments are still well above USDA’s annual forecast for the year.

WEEKLY EXPORT SALES (in thousand metric tons)

  OC Actual OC Expected NC Actual NC Expected
Corn 1,408 525-725 28.4 0-200
Soybeans 11.9 100-250 534.9 300-500
Wheat 400.5 325-475 327.5 50-250

 

 

Mar 26 – Morning Comments

Grains were lower overnight with modest losses across the board. Soybeans led the complex to the downside giving up 5 cents a bushel, while corn and wheat slipped 1 cent in quiet trade.

Participants got their first look at pre-report expectations for the March 31st planting and stocks reports. Reuters surveyed key analysts and found on average analysts look for corn plantings to fall in 2014 to 92.7 million acres, off from the 2013 plantings of 95.4 million. The range of estimates, however, is quite wide going from a low of 90.5 to a high of 94.5 million. For beans, traders expect plantings to come in at 81.1 million versus 76.5 in 2013. Again, a wide discrepancy exists among analysts with the range of estimates going from 78.5 million to 83.6 million. In wheat, analysts expect all wheat acres to be at 56.3 million, on par with last year’s plantings of 56.2.

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In export news, Argentina’s Rosario port returned to normal shipments yesterday following dredging activities that halted movement. Overnight, South Korea’s largest animal feed maker Nonghyup Feed purchased 189,000 MT of U.S. and South American origin corn in a tender which had sought up to 210,000 MT for July/August arrival.

Dry conditions continue to be an ongoing issue in the Southern Plains. Moderate rains are expected today over arts of Kansas and Oklahoma, but beyond that the next expected rain event is 10 days out. Although it is still early in the crop development phase, there are some spots along the southeast edge of the Plains already jointing. If conditions from mid-April onward continue to show drought then this could start to hurt yields.

Mar 25 – Morning Comments

Grains were weaker overnight with wheat giving up 5 cents and corn down 3 cents. Soybeans had slim fractional losses in the night trade.

In beans, exports continue to be unusually brisk giving the market a reason to trade above $14 near term. Monday’s export inspections showed 732,132 MT for the week, bringing the total for the year to 39.6 MMT with USDA projecting 41.6 MMT for the entire marketing year. In Argentina, port problems continue to plague bean shippers there. About 80 ships were halted on Monday at Rosario as dredging activities were conducted to try and deepen the waterway. Three grain ships have run aground there prompting the Coast Guard to order dredging and halt ship movement.

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For wheat, crop conditions declined again this week in the Southern Plains. In Kansas, 33% of the wheat was rated good/excellent, down from 34% a week earlier. Oklahoma was at 17% good/excellent, down from 18% the previous week. The amount rated poor/very poor rose to 42% from 37% a week earlier. For Texas, 11% of the wheat was rated good/excellent, down from 13% a week earlier. USDA said 55% of the Texas wheat crop was rated poor/very poor, up from 52% last week. Climate models show an increased chance of an El Nino weather event later this year, the Australian Bureau of Meteorology said on Tuesday. The Pacific Ocean is “very likely to warm in the coming months”, with models surveyed by the BOM calling for sea surface temperatures to reach El Nino threshold during the southern hemisphere winter. El Nino is associated with droughts in Southeast Asia and Australia and floods in South America.

Ukraine has kept up a high level of grain exports in March, shipping 2.4 MMT abroad so far this month, the agriculture ministry said, even while it has been embroiled in a conflict with Russia. In Russia, Sovecon sees 2014 grain crop at 88 MMT, up from its previous forecast of 86 MMT, but lowers its export forecast to 22 MMT from a previous figure of 24.1 MMT. Taiwan’s MFIG corn purchasing group has rejected all offers and made no purchase in a tender to buy 60,000 MT of corn which closed on Tuesday. This marks the 2nd tender in a row that Taiwan has rejected on the basis of prices being too high. Overnight, China’s quality watchdog at the northern city of Tianjin turned away 21,800 MT of U.S. corn after detecting an unapproved genetically modified corn strain (GMO), the official Xinhua news agency reported late on Monday.

 

Weekly Basis Commentary – 3/24

Corn basis fell ¾ of a cent across the U.S this week while soybeans rebounded nearly 2 cents.  Basis along the river showed relative strength and helped lead soybeans higher, while North Dakota, South Dakota and Eastern Minnesota basis continues to show significant weakness.

Corn basis settled ¾ of a cent lower this week with ethanol declining 1 ¼ cents and river basis backing off 2 cents during the same time period. Both North Dakota and South Dakota continued to show exceptional weakness, sliding over 3 cents this week.  Rail availability continues to back up grain at facilities in North and South Dakota causing basis to plunge this month. In North Dakota, basis has plummeted 23 cents in March alone, with South Dakota showing similar losses. One ND grain merchandiser reported delays of 8-10 weeks for shuttle freight and 12 weeks for single car. There is no single reason to blame for these delays; instead it seems to be a combination of issues. Some of the major contributors to rail delays have been the increased rail demand for transporting petroleum products out of ND, a shortage of rail crews and the abnormally harsh winter across the north which has caused logistics and maintenance problems along the line.

North Dakota soybean basis has also been impacted negatively by the rail delays dropping 17 ¾ cents in the last week. However, despite the basis woes in ND, SD and western MN, the U.S average soybean basis was actually able to improve 2 cents. River basis rebounded sharply this week posting a gain of 10 ¾ cents, mostly due to the basis strength at river facilities along the Mississippi in IL and IA. Soy plants improved 5 cents this week.

For producers in ND, SD and Western MN looking to make grain sales in the coming weeks, look for end users to show relative basis strength in the weakened marketing environment. For more local grain insight and marketing tips please contact Grain Hedge at 877-472-4607.

Mar 24 – Morning Comments

Grains started Sunday night in the red with beans down 10 and wheat down 7, but gained ground throughout the night. Going into the close of night trade, nearby May beans are up 10 cents, wheat is up 7 and corn is up 6.

Exporters at the Gulf are seeing more competition from South America and there have been rumors over the past week of Brazilian soybeans moving into the U.S. Gulf or Wilmington, DE. Estimates have ranged from 2-3 early in the week, to as high as 12 cargoes by the end of the week.  Gulf basis levels slumped on Friday even with the slide in futures prices.

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In wheat, conditions are still dry through the Southern Plains. The best chance for moisture in the next 10 days seems to be Wednesday into Thursday, but after that weather looks to be dry out to the first week of April. In Canada, leaders of the union representing 3,000 conductors, yard workers, and traffic coordinators at Canadian National Railway Co narrowly rejected a second tentative contract deal with Canada’s biggest railway. The Teamsters Canada Rail Conference said in a statement that it still has a valid strike mandate and added that its leaders will meet with counsel to decide on its next move. Canada continues to have sever logistics problems moving grain to export markets this season.

In the US rail costs have been skyrocketing, driving down basis levels especially in the Northern Plains. Northern shuttle trains are said to have traded as high as $7,500 a car this week, which is the equivalent of paying $2 a bushel to ship your wheat.  Overnight, Taiwan’s maize industry procurement association MFIG has issued a tender to purchase up to 60,000 MT of corn to be sourced from the United States, Brazil or Argentina. The tender sought shipment between May 26 to June 14, and the deadline for offers is Tuesday, Mar 25. In its previous tender for 60,000 MT of corn on Mar. 19, MFIG rejected all offers and made no purchase as prices were regarded as too high.

 

Mar 21 – Weekly Comments

The grain markets have rallied substantially over the course of the last couple of months.  This rally appears as though to have lost some steam as the bullish news to drive the markets higher has become scarcer.  Adding to the lack of bullish news is the anticipation for large acreage to be planted to soybeans and a large South American crop to be finished harvesting.  Some key technical resistance areas are also keeping a lid on prices for the time being.

Corn has traded in a relatively tight range recently, unable to close above recent highs around $4.90 and staying above support in the $4.77 area.  Fundamental demand has kept a bid under the market.  Ethanol rebounded from a sharp decrease last week adding about 22,000 barrels per day of production to rise to 891,000 barrels per day.  Crush margins at Iowa plants and prices for DDGs will continue to provide economic incentive to produce ethanol at a high level.  Export sales beat expectations and were reported as 745,800 MT on the old crop.  For the marketing year, corn is running approximately 239 million bushels ahead of the seasonal pace to meet the current USDA projections.

Soybeans suffered significant technical damage in Thursday’s price action.  Early in the session, the market approached near-term highs around $14.60.  Soon after selling hit the market leading to only 2 cent gains on the day.  Technicians could view this as a signal that this market is now poised to move lower.  Adding to the bearish technical landscape is rumors that China may or has cancelled cargoes of Brazilian beans and rerouted to the U.S.  These rumors are yet to be confirmed.  Demand remains seasonably strong with NOPA crush figures beating expectations and export sales running about 225 million bushels ahead of pace to meet USDA projections.  Export sales this week were reported as 202,200 MT for the old crop.

Wheat hit the highest level since last June 26th on Thursday only to sell sharply after.  Technical selling hit the market hard after touching the multi-month high.  The rally has been pushed by political unrest in the Black Sea region and dry conditions in the Southern Plains.  Mid-day forecasts showed better chances of precipitation for the areas in need allowing the market to sell.  Export sales remain steady and were reported as 401,800 MT on the old crop.  For the marketing year, wheat export sales are about 24 million bushels ahead of the seasonal pace to meet the USDA projections.

The rally for the grains over the last couple of months needs new bullish information to keep charging higher.  The markets are hovering around near-term highs, but have suffered some setbacks as the bullish fuel has been few and far between.  The focus of traders and producers is moving towards the March 31st USDA reports.

 

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March 22 – Morning Comments

Grains were mostly lower overnight with corn and wheat retreating 3 cents and 6 cents respectively. Front month May soybeans moved up 3 cents in relatively quiet trade.

In beans, upside pressure on the market continues as old-crop stocks continue to be depleted under strong demand from exports and domestic crushing. China was an early season buyer of beans from the US and has not had any significant cancellations of their outstanding purchases. As of March 6th, US soybean export commitments have reached 44.3 MMT versus USDA’s annual export forecast of 41.6 MMT.   Overnight there was talk of a leading Chinese soy buyer trying to resell cargoes set to be exported from South America in April and May as bird flu outbreaks reduce demand, hoping that the United States will take the shipments.  The company is in talks to resell five or six cargoes from Brazil, equivalent to about 360,000 MT of soybeans.

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On Wednesday, ag marketing firm Doane released its planting survey based on responses from more than 1,100 growers in 44 states. They project US corn plantings of 90.9 million acres, off from the 2013 plantings number of 95.4 million. For soybeans, they see 83.6 million acres being planted in 2014 versus 76.5 million in 2013. These estimates are quite a bit different than USDA’s Ag Outlook Forum projections in February which suggested 92 million corn acres and 79.5 million soybean acres in 2014. The first USDA survey on plantings will be released on March 31st. The Taiwan Sugar Corp. has rejected all offers and made no purchase in a tender to buy 20,000 MT of U.S.-origin corn and 15,000 MT of U.S.-origin soybeans.

In wheat, prices shot higher on Wednesday as dry conditions in the US Plains continue to plague growing conditions there. Worldwide, dry weather is becoming the norm in Australia and China which could threaten wheat supplies there. The next chance of rain in the hard red winter wheat areas of the southern Plains is late next week which means the next round of crop ratings on Monday should show further declines from Texas to Kansas. In the cash market, farmers were active sellers of wheat as bids approached the $7 mark. Basis levels were sharply lower for most of the country on Wednesday with losses of 10 cents or more fairly common.

Mar 19 – Morning Comments

Soybeans continued to move higher overnight with front-month May futures gaining 16 cents a bushel. Wheat and corn were down slightly with 3 and 2 cent losses.

U.S. soybeans rose for a third consecutive session as strong demand for domestic crushing and exports keeps the old-crop situation tight. Processors in Nebraska and Missouri were up about a nickel on Tuesday as farmer sales have dwindled. CIF soybean basis at the Gulf was higher on Tuesday as exporters need nearby supplies. Bids now through mid-April were +85K, up 5-11 cents. LH April is up 6 cents at +80K.

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In wheat, Egypt’s GASC bought 175,000 MT of wheat from combined sources of Russia, US and Romania. In the Ukraine, tensions are rising on the Crimea Peninsula as a Ukrainian servicemen was killed in a military conflict. Russia is now claiming control of the region with world opposition running high on the takeover. So far grain trade has not been disrupted but the geopolitical risks will likely continue to keep corn and wheat prices supported on the potential threat to a primary export market.

For corn, Taiwan’s MFIG corn purchasing group has rejected all offers and made no purchase in a tender to buy 60,000 MT of corn which closed on Tuesday. Prices were regarded as too high. Chinese feed mills have recently booked two more cargoes of corn, equivalent to about 110,000 MT, from Ukraine under a loan-for-grains deal signed in 2012, a Chinese buyer said on Wednesday. The fresh deal were in additional to 163,550 MT which have already arrived in China since late 2013, according to China National Complete Engineering Corp (CCEC), which signed the deal with Ukraine firms in 2012.