June 30 – Morning Comments

USDA REPORT AT 11:00 CENTRAL TIME TODAY

The USDA will release the Planted Acreage and June 1st Quarterly stocks today at 11:00 AM Central Time. The planted acreage report will give the new crop contracts direction into the summer months. In general, traders expect large soybean sowings and a corn number down 4 million acres from 2013. Have questions about hedge or speculative positions coming into the report? Our number is 877-472-4607 and we’d be happy to speak with you.

2014/15 U.S. Planted Acreage (Million Acres)

March 31st
Reported 

June 30th
Expected 

Corn

91.7

91.725

Soybeans

81.5

82.154

Wheat

55.8

55.818

Traders expect the USDA to report 2014/15 soybean acres at 82.15 million acres, up nearly 700,000 acres from the record acreage projected in the March 31st Planting report. Assuming yield potential remains favorable, this acreage figure would push U.S. production to 3.7 billion bushels for 2014/15, up 12% from 2013/14. It is important to keep in mind that this surge in U.S. production is coming at a time when global ending stocks are expected to increase 22% in 2014/15.

Corn remains a different beast in the upcoming marketing year, with few acreage revisions expected in Monday’s report. On average, analysts only expect the USDA to raise corn acres by 25,000 acres from their projection in the Prospective Planting report. This slight increase would still have overall corn acres down 4 million acres year over year, and leave overall production unchanged from 2013 assuming good current yields. World corn stocks are expected to only increase 8% year over year, well below the surge in global ending stocks expected for soybeans.

Quarterly Grain Stocks (Million Bushel)

June 1 2013 

Reported

June 1 2014

Expected 

Corn

2,766

3,722

Soybeans

435

378

Wheat

718

598

Traders expect the USDA to report the smallest June 1 soybean stocks since 1977. Corn stocks are expected to expand by nearly 1 billion bushels from June 1st 2013 following the large 2013 crop. Wheat stocks are expected to be down just over 100 million bushels from 2013 levels. Soybean usage is mostly known between NOPA crush numbers and export sales, but considering the exceptionally tight stocks the old crop soybean market will be very sensitive to any surprises out of today’s stock report.

June 27 – Cash Grain Basis Comments

Corn basis was unchanged on average this week but we again observed weakness along the upper Mississippi river system. Flooding remains a major problem for barge traffic and as a result grain buyers have been moving spot corn basis lower for the last two weeks. This week saw spot corn basis along the river down 2 cents, with many facilities backing off basis 5-10 cents. Corn has been most impacted by recent flooding, as corn shipments are making up the majority of grain shipments down river. Lock 27, north of St. Louis, reported that corn accounted for 93% of grain shipments down river for the week ending June 21st. With flood waters expected to crest late this week and into the weekend, river basis will have an opportunity to rebound as delays along the river clear up.

Soybean basis was off 2 ½ cents on average across the country, with the river system and crush plants showing relative strength. Old crop export sales worked to strengthen basis at the gulf and major river systems, with soy buyers along the river averaging a half cent increase over the last week. Thursday’s export sales report showed a resurgence of demand for old crop U.S. soybeans in response to the slide in prices seen early on in June. Export inspections have remained strong throughout June giving us reason to believe the USDA may have to revise their export sales forecast in the coming WASDE report.

Monday will be an important day for spot basis traders as the USDA releases June 1st quarterly grain stock estimates. Traders expect the USDA to report June 1st stocks at just 378 million bushels. If expectations are realized, that would be the lowest June 1st soybean stock figure since 1977. Convergence of old and new crop cash prices will be a major issue in the coming weeks, as buyers roll from July to August or September futures. At the moment the spread between July and August is 54 cents and the spread between July and September at $1.66 per bushel.

Kansas City wheat basis increased 2 ½ cents this week across the country as harvest picks up in the southern states. This year should be a particularly difficult year for merchandisers in the winter wheat regions as the heat and drought slashed yield into a fraction of what is considered normal production in that region. On the 23rd, Texas reported its winter wheat was 69% harvested, Oklahoma was 74% harvested, Kansas was 24% harvested and Nebraska had not yet begun harvest. We expect futures prices to continue to be pressured by large global wheat stocks, but domestic basis is to increase in compensation for the tight domestic stocks.

June 27 – Morning Comments

USDA Acreage Report on Monday, June 30th, at 11:00 AM central time

First notice for July contracts is Monday, June 30th. Please roll into August/September

Today’s trade session will mostly be focused on Monday’s reports with market participants building and adjusting positions going into the weekend. Wheat should be affected by the Canadian acreage numbers which came out 7.4% below last year’s seedings. Canada reported 24.1 million acres of wheat planted, while market expectations were for 24.5 million. The lower acreage surprise could act as a supporting factor in today’s trade, but certainly isn’t hugely bullish considering the large global ending stocks this year. Canada also reported that Canola planted 20.2 million acres which was slightly above trade expectations and up from the 19.9 million acres in 2013.

Below are trade estimates for Monday’s USDA report and our bias on the numbers. Have questions about hedging or speculative positions coming into the report? We are available between 8AM and 4PM central time each day and would be happy to talk.

2014/15 U.S. Planted Acreage (Million Acres)

March 31st
Reported 

June 30th
Expected 

Corn

91.7

91.725

Soybeans

81.5

82.154

Wheat

55.8

55.818

Soybeans
Traders expect the USDA to report 2014/15 soybean acres at 82.15 million acres, up nearly 700,000 acres from the record acreage projected in the March 31st
Planting report. Assuming yield potential remains favorable, this acreage figure would push U.S. production to 3.7 billion bushels for 2014/15, up 12% from 2013/14. It is important to keep in mind that this surge in U.S. production is coming at a time when global ending stocks are expected to increase 22% in 2014/15.

In light of these bearish fundamentals, the new crop soybean market has remained
relatively strong in recent weeks. With November 2014 soybeans closing at $12.40 this morning we feel there is more downside, than upside, looking toward harvest prices. With this in mind, it is our opinion that now is a good time to protect a portion of expected production using a futures or option strategy.

Corn
Corn remains a different beast in the upcoming marketing year, with few acreage
revisions expected in Monday’s report. On average, analysts only expect the USDA
to raise corn acres by 25,000 acres from their projection in the Prospective Planting
report. This slight increase would still have overall corn acres down 4 million acres year over year, and leave overall production unchanged from 2013. World corn stocks are expected to only increase 8% year over year, well below the surge in global ending stocks expected for soybeans.

Considering a corn market which has traded lower in recent weeks and the questions surrounding new crop acreage, we feel corn has a larger chance of holding a bullish surprise in Monday’s report. Call the office to discuss pricing strategies as we come into Monday’s USDA report. Our number is 877-472-4607 and can be reached between 8AM and 4PM central time each day.

June 26 – Morning Comments

Soybean export sales were reported at 317,200 – well above trade expectations for around 150,000 tonnes sold. This morning’s report included the large reportable sale of 140,000 tonnes to unknown destinations from last week . This was a very strong week for U.S. soybean exports, considering the fact that excluding the large reportable sale it would have been the largest week for U.S. soybean sales since March. Keep an eye on the July and August soybean contracts as the market opens this morning.

Corn export sales were reported at 321,000 tonnes, also above trade expectations for this morning’s report. Our models now indicate that U.S. export sales of old crop corn are running 145 million bushels ahead of pace to meet USDA expectations. Wheat export sales were very strong, but in line with trade expectations.

The cash basis at the gulf has increased 20 cents in the last week as moisture during flowering has elevated the levels of Vomitoxin. The quality of SRW wheat does not meet quality standards leaving exporters willing to pay a premium for high quality wheat. The Kansas City wheat market was also supported by confirmation that Brazil has postponed the usual 10% import tariff for up to 1 million tonnes of wheat through August 15th, a terrify that usually applies to U.S. and Canadian wheat. Brazil was forced to take action after concern about supplies from Argentina which is Brazil’s primary source of wheat.

For corn and soybeans traders are mostly focusing on the USDA acreage report and quarterly stocks numbers. Soybeans quarterly stocks will be closely watched as analysts expect the smallest stocks since 1977.  This morning soybeans is trading higher, moving up through its 100 day moving average, but still within the consolidation range that we have traded in since the 13th.

June 25 – Morning Comments

Grains are pausing today following weakness in Tuesday’s trade. Coming into the morning trade break we see corn down 2, soybeans unchanged, and Chicago wheat off 3. Next week’s USDA reports are a focus of the trade as we move the trough this week.

The USDA will release updated acreage expectations next Monday, June 30th. Below are USDA figures from the prospective planting report, and trade expectations for Monday’s Planted Acreage report. On average, analysts expect 91.73 million acres of corn, 82.154 million acres of soybeans, and 55.82 million acres of wheat reported planted. The soybean market looks the most vulnerable coming into the report, as prices have remained respectively strong even as traders expect 500,000 or more acres added to the 2014/15 planting estimate. Considering current prices and potential downside, we would be more aggressive pricing soybeans than corn coming into this report.

Prospective Planting Reported (March 31) Planted Acreage Expected (June 30th)
Corn 91.7 91.725
Soybeans 81.5 82.154
Wheat 55.8 55.818

 

The plains wheat areas will be most wet in the next couple days and see moisture again by the middle of next week but the magnitude of the precipitation should not be enough to risk serious damage to the crop. By this weekend it is expected to see moisture return to the northern plains with parts of Minnesota seeing 1-1.5 inches in the northern and south eastern parts of the state.

June 24 – Morning Comments

Yesterday crop progress showed that both corn and soybean conditions had fallen since the week before as hard rains throughout the Midwest flooded some fields and damaged fragile new growth. Corn’s good to excellent rating dropped two percentage points from the week before to 74% while the soybeans good to excellent rating dropped only one percent to 72%.  Despite the drop in crop conditions, this is still far superior to the 65% good to excellent corn and soybean conditions we started out with last year. Despite the heavy rain negatively impacting some fields, the overall benefits to a wet spring are still a bearish factor over the market.

Soybeans moved lower in the overnight session as traders position themselves for Monday’s planted acreage report. Acreage numbers from the USDA will set the tone for prices moving forward, with some analysts feeling an acreage approaching 82 million acres is possible. Considering current prices, we feel it is a good time to forward price or protect with futures/options a portion of expected production. Considering the large acres and current growing conditions, a weather scare will be required to significantly rally this market.

Export inspections were reported yesterday, with wheat beating analyst expectations, corn meeting expectations and soybean inspections coming in well below expectations. This week wheat inspections were reported at 581,453 MT, Corn inspections were reported at 987,936 MT and soybeans were 61,847 MT.

Barge rates have held mostly steady this spring, even as the Mississippi River remains closed between St. Paul and Savage, Minnesota. So far this closure has done little to impact barge freight along the lower portions of the river but will be a situation to be monitored by basis traders. Declining futures and light farmer selling have worked to firm basis in recent weeks.

June 23 – Morning Comments

Grains are moving higher this morning, with old crop soybeans leading the charge. At the moment we see corn unchanged, soybeans up 16 cents and Chicago wheat up 2.

July soybeans surged 16 cents higher in the overnight, spurred on by improving Chinese economic data. The survey, conducted by HSBC, showed that factory activity increased during the month of June. This was the first expansion of factory orders in six months and has helped support domestic Chinese prices in the overnight. Dalian exchange soy products are up across the board in the overnight session with soy oil leading things higher – up 2%. Positioning ahead of next Monday’s USDA report will be a theme this week. With new crop soybean prices approaching $12.50, and the potential for a bearish acreage surprise, we still feel that now is a good time to protect the downside.

Wheat demand seemed was a prevalent theme over the weekend with Egypt’s state grain buyer GASC buying 180,000 metric tons of Russian and Romanian wheat, Saudi Arabia purchasing 780,000 metric tons of hard and soft wheat and private importers in Pakistan purchased 55,000 metric tons of Black Sea wheat. Unfortunately, the sales were won almost entirely by European and Black Sea region sellers, giving little support to the U.S. wheat contract.

This week’s forecast looks to bring more moisture to the hard wheat regions of the U.S with the most significant moisture expected today, Wednesday and Thursday. The moisture, though welcome to replenish the parched soil, comes during a time that complicates harvest and causes increased concern of sprouting and decreased protein levels in this year’s crop.

Crop progress and conditions will be out at 3:00 pm central this afternoon. Corn and soybean ratings have the potential to drift lower after last week’s heavy rain across the grain belt. We do not feel last week’s rain will have a meaningful impact on final production, and we continue to hear from the majority of producers that this year’s crop is one of the best in years.

June 20 – Morning Comments

Soybeans seemed to find resistance in the overnight at the 100 day moving average after closing below the level on Tuesday. Soybeans could continue to be pressured as domestic feeders have access to ample DDG’s after China banned U.S imports of the feed due to the non-approved GMO seed variety MIR 162. With ample supplies of DDG’s domestically, feeders are turning using them instead of Soymeal which has weighed on meal prices recently. Soymeal exports have stayed relatively strong with old crop exports reported at 54,800 metric tons on Thursday which was in line with expectations. It was also reported that an animal feed maker in the Philippines bought 160,000 metric tons of U.S. soymeal in a tender that closed on Tuesday. Traders viewed that tender as an indication that South American are still relatively expensive on the global market.

Corn futures are moving lower in the overnight session, helped out by negative demand side news from China. A senior government official indicated that China may work to further reduce corn stocks following several weeks of state grain auctions. Chinese corn stocks are estimated at 150 million tonnes and the government has struggled to liquidate stocks at the current floor price of around $360 per tonne. If China is getting aggressive about liquidating stocks this floor price will need to be lowered and U.S. prices may need to follow suit if they are to remain competitive from an export perspective.

Wheat futures are drifting lower this morning but we are starting to get indications that demand is returning to this market. Overnight it was reported that Brazil had booked 6-8 cargoes of U.S. HRW wheat in the last 48 hours. Also in the overnight it was reported that the Taiwan Flour Millers association made a purchase of 100,000 tonnes of U.S. milling wheat. Demand side numbers will be important to finding a bottom a world wheat ending stocks remain very large.

June 19 – Morning Comments

The grain markets are moving higher this morning with corn up 2 ¾ cents, wheat up 6 cents and soybeans trading up 2 ¾ cents.

Weekly export sales showed slightly weaker wheat and corn bookings but continued to show strength for soybeans. Wheat sales came in at 372,600 MT for 14/15 delivery which was just about the low side of trade expectations this week. Corn booked only 109,000 MT of 13/14 which was well shy of expectations that ranged from 300,000 to 500,000 MT and Soybeans posted another strong week of export sales booking 97,900 MT for old crop. Soybeans continue to book export sales late in the marketing season and we expect even better sales in next weeks report triggered by the price declines in the last couple weeks. Yesterday, a single day sale of 140,000 MT was reported by FAS showing there is demand to meet the falling prices. According to our models soybeans is now 101 million bushels ahead of pace to meet the USDA expectations.

Ethanol production was released yesterday and showed the largest weekly production on record. Ethanol crush margins remain very strong historically, despite Chinese DDG cancellations pressuring the domestic DDG market. Ethanol production should remain a supportive story for corn moving through the summer months.

Areas of South Dakota, Iowa, Minnesota, Wisconsin and Illinois are under flash flood warnings this morning following heavy rain. Social media has been filled with photos of flooded corn/soybean stands, bringing some support into the market. We wouldn’t expect this week’s flooding to have major impacts on harvested acreage.

June 18 – Morning Comments

Soybeans are leading the grain market higher this morning on a technical bounce following yesterday’s sharp selling. The USDA reported export sales of 140,000 metric tonnes this morning. Unwinding of the July/November bull spread has been a contributor to weakness on the old crop, and this morning we are finally finding footing in the July/November spread.

Corn is up a penny on very light news in the overnight. Good to excellent ratings continue to weigh on December futures.

Wheat is trading a bit higher here this morning as weather favors growing conditions for corn and soybeans but complicates the situation for wheat. Moisture that could have been much more helpful a couple months ago is slowing the harvest for the winter wheat and causing quality concerns for the already suffering crop. Kansas, Western Oklahoma and the Texas Panhandle should receive more rain on Thursday and Friday and the 6-10 day forecast looks to bring the region above normal precipitation. The wheat market went into this morning’s trade pause at $5.96 after having erased 86% of the bullish move that occurred between February and the May 9th WASDE report.