December 31 – Morning Comments

In the overnight session corn slipped ¾ of a penny, soybeans fell 5 ¼ cents and wheat fell 3 cents. Today is First Notice day for soybeans, soymeal and soyoil. First day deliveries included 20 contracts of soybeans, no soymeal and 1,143 contracts of soyoil which was well above expectations.

Last night, temperatures fell to as low as -20 in parts of the northwest plains with 1/3 of the winter wheat belt subject to the freezing temperatures. With only 1-3 inches of snow cover, winterkill damage has certainly occurred. Temperatures should ease over the next few days but by late weekend more low temperatures will put the winter wheat crop at risk throughout Nebraska and northern Kansas.

South Korea is disinfecting farms around the country in an effort to try to contain the spread of Foot-and-mouth disease and bird flu. Foot-and-mouth disease had been confirmed in the center of the country but a recent case just 30 miles out of Seoul has the country on alert.

 

 

December 30th – Morning Comments

In the overnight session corn traded down 3 ¼ cents, March soybeans slipped ¼ cent and wheat fell 5 ¾ cents as it tests the 20 day moving average on the daily chart. This morning a reportable sale of 157,500 metric tons of corn was sold to Mexico for 14/15 delivery.

Wednesday the 31st is the first notice day for January Soybean, Soyoil and Soymeal contracts. To avoid delivery make sure all long positions have been liquidated by the close of trade today. Thursday January 1st, the market will be closed. Trading will resume on Friday at 8.30 AM CST. The USDA will release the weekly export sales report on Friday January 2nd.

Weather in the U.S. will be monitored closely by wheat traders as a cold blast from the north brings temperatures below zero in much of the plains region. Snow accumulation of 1-3 inches will help insulate some of the crop from the harsh temperatures, but 1/3 of the winter wheat crop will be at risk of winterkill tonight.

South American weather is continuing to provide adequate moisture for crop development. Argentina corn crop is 60% planted which is 5.5% behind last year’s pace due to excess moisture which has slowed progress. The two week weather outlook anticipates normal rainfall to continue benefiting crops in this region.

Morning Comments – Dec 29

Grains were mixed in the overnight session with wheat adding 7 cents a bushel and trying to recover from big losses at the end of last week. Soybeans were up 3 cents a bushel  but traded as much as 10 cents higher, while corn was up a penny.

In wheat, Russia has stated they will impose their wheat export tariffs starting Feb 1 which will be roughly $40 per metric ton. In addition, Russian railways will begin imposing a tariff on freight of 134% beginning January 29. Overnight, Iraq’s state grains board purchased 200,000 MT of hard wheat to be sourced from Canada (100,0000 MT) , the United States (50,000 MT) and Australia (50,000 MT). Russian wheat was not offered in the tender competition. In the US Plains, bitter cold is expected to bring temperatures in the minus double digits to some areas of NE, KS & CO but snow cover is expected to help insulate the winter wheat crop.

For soybeans, South American weather continues to be generally favorable although southern Argentina has some crop concerns.  In Mato Grosso, Brazil’s top soybean producing state, early harvested beans were coming in at impressive yields of around 52 bushels per acre. Usually, early maturing soybeans have sub par yields due to the shortened life cycle but farmers there say near perfect weather and a lack of disease and insect pressure helped turn in a stellar crop.

In corn, upward momentum seems to be waning as we reach the end of the year. Fund rebalancing is expected to occur with the start of the New Year, which could lead to sizable sales of long corn positions by index funds.

Export sales released at 7:30 AM CST this morning showed exceptionally strong corn sales at 1,705,6000 MT versus trade expectations of 500,000 to 800,000 MT while soybean old-crop sales of 635,800 MT were on the high side of expectations which ranged from 450,000 to 650,000 MT. A new-crop sale of 1,500,000 MT to China had been reported by USDA previously. Wheat was at the mid-point of expectations with only 328,6000 MT of sales versus trade estimates of 250,000 to 450,000.

EXPORT SALES (in thousand metric tons)

Expected Actual
Corn 500-800 1,705.6
Soybeans 450-650 635.8 (OC) / 1,501 (NC)
Wheat 250-450 328.6

 

December 26th – Morning Comments

The markets are scheduled for open at 8:30 CST this morning with corn, soybeans and wheat expected to open unchanged to slightly higher with the outside markets providing a positive influence. Export sales are delayed until Monday due to the Christmas holiday.

Russia has officially introduced grain export duties starting February 1st. The duties will be roughly 15% of the customs price plus an additional $7.5 euros with a minimum duty set at 35 euros per metric ton. Grain exports are continuing out of Russia in the near term despite talks on Wednesday that grain movement had halted as a result of export restrictions.

Midwest temperatures are expected to drop next week with a threat of winterkill on New Year’s Eve. Snowfall today will provide a slim 1-3” of cover over parts of the plains which will help protect the crop, but parts of Nebraska, Kansas and Colorado will still be at risk. In Europe and FSU the temperature outlook has turned colder over the next two weeks but snow accumulation will keep crop threats low.

Rains have developed in Argentina providing relief for some of the driest corn and soybean acreage, but slowing the progress of wheat harvest in those regions. Heavy rains are expected in southern Brazil with some areas forecast to receive 6-8 inches before easing next weekend.

Wednesday the weekly EIA ethanol production and stocks report showed an increase in production by around 2,000 barrel per day which was another marketing year high of 992,000 barrels per day. Ethanol stocks declined 44,000 barrels per day to 17.62 million barrels.

December 24 – Morning Comments

In the overnight session corn traded ¼ cent higher, soybeans is down 4 cents and wheat in Chicago is down 3 ½ cents. The market closes early today at 12:00 CST today and will reopen at 8:30 CST on Friday morning.

A cold front is moving into the plains region on New Year’s Eve providing a threat of winter-kill throughout the winter wheat producing states. New snowfall is expected between 1-2 inches in most of the area, but possible sub-zero degree temperatures may threaten some of the wheat crop. Confidence on this event is still relatively low.

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Southern Brazil is likely to see heavy rains over the next 10 days which should then make its way north keeping crop concerns low throughout the country. Argentina is expected to get precipitation in the north and north eastern parts of the country, with another rain event expected next week which should provide relief to some of the dryer areas of the country. The driest areas currently include central and southwest Cordoba, western Buenos Aires and La Pampa which accounts for about 15-20% of corn and soybean production. The rains next week should provide relief to nearly half of the driest areas.

The head of Russia’s Grain Union said Russia may not be able to supply wheat to Egypt’s GASC in January due to the export curbs now existing in Russia. GASC’s Mamdouh Abdel Fattah responded by stating “Traders have to abide by their contracts.”

December 23 – Morning Comments

The markets were mostly mixed in the overnight session with corn down ¼ cent, soybeans down 4 cents on the January contract and wheat up 3 ¼ cents higher. The U.S. made a wheat sale to Taiwan for 78,320 metric tons of milling wheat for delivery between February and March 2015.

Next week will usher in colder weather which may threaten the winter wheat areas throughout the U.S. There is potential for temperatures to dip below zero in in Nebraska, Colorado, Kansas and Missouri which could leave winter wheat areas vulnerable with limited snow potential over the next few weeks to help.

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The wheat market was unable to rally yesterday despite the news that Russia will be imposing an export duty. The market seemed to view this headline as justification for the rally throughout last week and not as fresh bullish news. Traders have mostly factored Russia out of the export scene for now leaving the market to sort out the relatively high price for U.S. wheat. Domestic wheat is trading around $30 per metric ton higher than Europe, Russia and the Black sea.

Yesterday, export inspections were released with all grains beating analyst expectations. Soybeans recorded 2,234,262 million metric tons while analysts expected between 1.5 and 2 million metric tons. Wheat recorded 442,055 million metric tons inspected which was well above the high side of expectations at 400,000 metric tons and corn recorded 790,415 metric tons inspected for export with analysts expecting between 575,000-700,000 metric tons.

 

December 22 – Morning Comments

Corn and soybeans are trading lower by ½ a cent and 3 cents respectively, while wheat is trading up 3 ¼ cents on more export news out of Russia. A reportable sale of 166,600 metric tons of corn was reported this morning to be delivered to unknown destinations for the 14/15 marketing year.

This is a holiday shortened trade week with Wednesday observing an early close at 12 CST. Thursday the grain markets will be closed for Christmas and Friday the markets open at 8:30 CSTwith a regular close. Volume is expected to be light which can allow for unexpected price movement.

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Over the weekend, the Egyptian state grain buyer GASC announced it had bought 300,000 metric tons of wheat from France and Russia. Out of the tender France won a majority of the sale booking 240,000 metric tons of wheat. According to Interfax news agency, Russia is planning on imposing a grain export duty. It is widely believed by the market that Russia is for the most part out of the export scene, but the export duty represents a more formalized trade restriction.

Rains over the weekend continue to help crop development in Argentina and Brazil, giving the market little reason to be concerned about South American production.

 

 

Weekly Cash Comments

Cash Commentary-

Grain markets found heightened volatility this week with corn futures posting gains while soybeans traded lower. In the cash market, basis for both corn and soybeans were unchanged on average across the country this week, but that masks a fair amount of movement by end users and exporters.

For corn, ethanol users backed off on bids by a penny a bushel this week, but there are signs that more weakness could be in store for the ethanol sector. In Iowa, spot ethanol prices tumbled 32 cents a gallon to reach $1.68 a gallon. At the start of December, ethanol prices were as high as $2.42 a gallon. So far, ethanol production continues to exceed last year’s tally at this time of year but that should change as current margin are now a $1 a bushel lower than the same time last year. On the export front, sales have been pace to reach USDA’s export target for their year but recent approval by China to accept Syngenta’s MIR 162 variety may give a slight boost there for corn & DDG exports. Basis levels at river terminals were up 2 cents on average thanks to some weakness in barge rates.

In soybeans, the Gulf export market was off 9 cents on basis for the week which triggered some weakness at river terminals even with falling barge rates. On average, river terminals were off 4 cents a bushel. At soybean plants, basis levels were off 2 cents a bushel.

Futures Commentary-

Corn and wheat led the market higher for the week ending December 18th, 2014. Corn added 12 ½ cents, wheat improved 57 ¾ cents and soybeans declined 7 ¼ cents on the week. The wheat market continued to focus on the developments in Russia as another announcement from the Veterinary and Phytosanitary Surveillance Service restricted grain export certificates for some countries.

Coming into this week there were two major soybean demand announcements that analysts were watching closely. The first was NOPA crush numbers which analysts were expecting to set a record high for November and the second was a publicized purchase event where six major soybean buyers from China were expected to buy large amounts of soybeans on the 16th.

NOPA crush numbers were released on Monday at 11 AM CST and came in on the low side of analyst expectation with 161.211 million bushels crushed in November. The average expectation for this report was 165.404 million bushels compared to last year’s November total of 160.145. Analysts ranged from 161 to 176 million bushels.

Tuesday the 16th the Chinese soybean buyers signed agreements to purchase of 1.5 million metric tons of soybeans which seemed to do little for the market. Analysts viewed this sale as “routine” compared to a similar signing event back in September which produced 4.5 million metric tons of sales.

With both soybean demand announcements producing little excitement by the market, there is a reason to be concerned that prices could start to come under pressure in the near future. Bull markets need to be fed positive news, and with Brazil soybeans 100% planted and Conab expecting a 4.9% increase in soybean acres year over year there is little in the way of Bullish news coming from South America. Brazil’s soybean crop is currently rated 75% good and 25% average with rain expected to improve crop development in the 15 day forecast. In Argentina they are still planting due to excessive rainfall in the northern regions early on in the season. There has been some dryness in parts of the growing region which could hurt final yield numbers but the longer term outlook is for increased shower activity.  No major concerns have developed in Argentina yet.

This week China has approved a genetically modified strain of corn developed by Syngenta which was the reason behind many rejected cargoes of DDG’s and corn late last year. The strain being approved could foreshadow stronger demand for corn or corn based products out of the U.S.  Last week Chinese firms bought 900,000 metric tons of DDG’s from the U.S. for delivery between December and March.

On Wednesday the EIA report showed another increase in weekly ethanol production. Production jumped 2,000 barrels per day, setting another marketing year high at 990,000 barrels per day.  Despite the strong weekly numbers there seems to be a slowdown on the horizon. The average ethanol prices in Iowa have been declining over the last couple weeks with late November ethanol prices going from $2.31-$2.52 dollars per gallon to around $1.88-2.15 per gallon. Crush margins have fallen accordingly from $3.42 per bushel to around $2.90.

December 19 – Morning Comments

Grains fell sharply in the overnight session with wheat leading the slide lower on a 19-cent decline. This follows yesterday’s 24-cent fall from its high on the March contract of 6.77. For corn, prices were off 6 cents in the night trade while beans fell 7 cents.

In wheat, Russia’s Association of Grain Exporters said overnight it had stopped buying grain on the domestic market for export due to what it described as state pressure.  Russia has started to restrict exports by toughening quality controls and reducing railway loading of grain to cool local prices as the country tackles a currency crisis linked to plunging oil prices and Western sanctions.  Although bullish on its face, the fact that Russia would pull out of the export market has been the driving force behind the price rally in recent weeks, and as such the “buy the rumor sell the fact” mentality might be kicking in.  In Germany, the winter wheat sown area for the 2015 harvest has been expanded by 2.8%, the national statistics office said on Friday.

In corn, South Korea’s Feed Association bought 60,000 MT of corn overnight to be sourced from the US or South America, while MFG out of South Korea bought 120,000 MT also optional origin with the US as a potential originator.

In Argentina, port workers went on strike Thursday demanding a year-end bonus as high inflation has cut into wage earning power there. Some private economists put the inflation rate at Argentina at 40%, far higher than official government estimates.  For growing conditions, Argentina is expected to see rains easing in the near-term which should help wrap up planting which has been behind pace.  Meanwhile, Southern and Central Brazil are expected to benefit from widespread rains over the next 1 to 5 day period.

December 18 – Morning Comments

In the overnight session the grains are trading sharply higher with corn up 5 ¼ cents, soybeans up 7 ¼ cents and wheat up 15 ½ cents this morning. This morning we saw large single day reportable sales of 126,000 metric tons of corn to unknown destinations, 1.5 million metric tons of soybeans to China for 15/16 and an 89,264 metric tons sale of spring wheat to Mexico for 2014/15.

Weekly exports sales were released at 7:30 CST this morning showing wheat sales improved 8% on the week, booking 476,300 metric tons of sales which was on the high side of analyst expectations. Corn sales met expectations with 693,500 metric tons, but declined 28% from the previous week. Soybean export sales fell 14% this week booking 696,000 metric tons. Soybean sales met expectations and is still running well ahead of pace to meet this year’s USDA expectations. Cumulative sales for soybeans are now at 41 million metric tons which is well ahead of expectations for this time of year which are around 34 million metric tons.

Yesterday ethanol production was released showing another increase in weekly production. Production jumped 2,000 barrels per day, setting another marketing year high at 990,000 barrels per day.  Despite the strong production numbers this week there seems to be a slowdown on the horizon. The average ethanol prices in Iowa have been declining over the last couple weeks with late November ethanol prices going from $2.31-$2.52 dollars per gallon to around $1.88-2.15 per gallon. Crush margins have fallen accordingly from $3.42 per bushel to around $2.90.