Weekly Cash Comments

Cash Commentary-

It was another week lower in the grain futures markets as the prospects of another bumper crop this fall keep prices on the defensive. In the cash market, basis levels only showed modest improvement for soybeans, which gained 1-cent a bushel while corn basis was unchanged for the week.

For corn, basis levels were mostly flat with ethanol plants showing no real movement as a group. However, in Iowa there was some noticeable weakness in spot basis with numerous plants in the region posting 2 to 5 cent losses on the week. For river terminals, basis was higher by nearly 3 cents a bushel this week. In Saint Louis, spot basis moved up to +23N this week cents and is up 18 cents in the last two months.

For soybeans, there was a bit more strength overall this week as compared to corn thanks to sharp gains at crushing facilities. Soybean plants as a group were up 3 cents a bushel, but gains of 5 cents a bushel were fairly typical especially at Western Cornbelt facilities. At the Gulf, export basis was up 2 cents a bushel on the week, but river terminals as a group were only up 1 cent. With ample pipeline supplies and slowing export demand it will be difficult for basis levels to post any significant gains at this time of year.

Futures Commentary-

This week the grains traded sharply lower with corn down 11 1/2 cents, soybeans down 12 1/2 cents and wheat falling 33 1/4 cents this week. Wheat consolidated around its 100 day moving average all of last week before breaking through its short term trading range and falling 23 cents Monday. Wheat remains stuck in a clear downtrend and continues to feel pressure from large global ending stocks as a strong U.S. dollar pressuring export sales.

The International Grains Council raised its forecast for global 2015/16 corn and wheat output on Thursday. The council raised wheat production to 715 million metric tons up from a previous projection of 705 million metric tons. Although this is a substantial jump from previous forecasts, it is still below last year’s production levels of 721 million metric tons. The world corn crop was revised higher by 10 million metric tons to 961, below last year’s production levels of 997 million metric tons.

Heavy rains which ranged from 1-4 inches fell across Texas, Oklahoma and parts of Kansas on Tuesday causing localized flooding and adding to the concern of winter wheat crop quality. This is the 5th week in a row that significant rains have fallen throughout the southern plains. More rain is expected later this week before the outlook turns drier for the first half of June.

Crop progress was released after the close of trade on Tuesday and showed that 92 percent of corn was planted as of May 24th which is ahead of the four year average of 88 percent. Soybeans are also ahead of pace with 61 percent of soybeans planted compared to the four year average of 55 percent. Spring wheat is now 96 percent planted. The USDA released their first crop condition ratings for corn in yesterday’s report which showed 74 percent of the crop was rated good to excellent just two percentage points behind the first crop conditions report of 2014 on June 1st. Winter wheat conditions throughout the U.S. were left unchanged.

Export sales were mostly in line with expectations for old crop, but new crop sales for corn and soybean were disappointing. Old crop soybean sales beat analyst expectations at 322,400 metric tons which was up sharply from last week’s sales of 98,909 metric tons. The buyers this week included China, the Netherlands, Germany, Japan and others. Soybean sales continue to show above average export demand late in the marketing year. However, this morning the Argentine soy crushers union stated that he expects a salary agreement which would end the strike that has negatively affected the local market and slowed exports form the Rosario Region.

Old crop corn and wheat sales met expectations with corn showing sales of 654,600 metric tons of old crop and wheat recording 42,500 metric tons. Sales were down 19 percent and 43 percent respectively but managed to fall within the range of expectations.

On Thursday, the weekly ethanol production numbers showed an increase in production by 11,000 barrels per day to 969,000 barrels per day. Stocks declined this week by 337,000 barrels to 20.1 million barrels. Ethanol production has picked up sharply in the late part of May which is typical going into the driving season. Ethanol production is up 4.8 percent over last year compared to the USDA’s corn used for ethanol balance sheet item which suggests only a 1.3 percent increase.

Morning Comments – May 29

In the overnight session the grains were mixed with corn up 2 1/2 cents soybeans down 1/2 a cent and wheat down 1 1/2 cents. The U.S. dollar is mostly unchanged with crude oil 74 cents higher. Rains are likely to continue in the southern plains over the next few days and then a drying trend is likely to take hold for the first part of June.

Yesterday, the weekly ethanol production numbers showed an increase in production by 11,000 barrels per day to 969,000 barrels per day. Stocks declined this week by 337,000 barrels to 20.1 million barrels. Ethanol production has picked up sharply in the late part of May which is typical going into the driving season. Ethanol production is up 4.8 percent over last year compared to the USDA’s corn used for ethanol balance sheet item which suggests only a 1.3 percent increase.

Export sales were mostly in line with expectations for old crop sales, but new crop corn and soybean sales disappointed. Old crop soybean sales beat analyst expectations at 322,400 metric tons which was up sharply from last week’s sales of 98,909 metric tons. The buyers this week included China, the Netherlands, Germany, Japan and others. Soybean sales continue to show above average export demand late in the marketing year. However, this morning the Argentine soy crushers union stated that he expects a salary agreement which would end the strike that has negatively affected the local market and slowed exports form the Rosario Region.

Old crop corn and wheat sales met expectations with corn showing sales of 654,600 metric tons of old crop and wheat recording 42,500 metric tons. Sales were down 19 percent and 43 percent respectively but managed to fall within the range of expectations.

On Thursday GASC purchased 240,000 metric tons of which 75 percent was sourced from Russia and 25 percent was sourced from Romania.

Russia has taken measures to limit exports in the event of a sharp decline in the Rouble by setting a wheat export tax at 50 percent minus 5,500 Roubles per metric ton. The government set a minimum tax at 50 Roubles per ton. The export tax was designed to limit wheat exports in the event wheat prices reached 13,000 Roubles.

 

 

Morning Comments – May 28

In the overnight session the grains traded higher with corn up 3/4 of a penny, soybeans up 3 cents and wheat in Chicago up 3 3/4 cents. Yesterday wheat continued trading lower throughout the better part of a day but bounced off support and closed 6 1/2 cents off its intraday lows. Both $4.84 and $4.85 were previous lows from March 6th and April 16th respectively and provided some buying support during yesterday’s session.  During today’s trade session we might see continuation of the bounce seen yesterday, but it is important to remember that wheat is still firmly stuck in a downtrend and that selling pressure is likely to be the more dominant force in the long run.

The International Grains Council raised its forecast for global 2015/16 corn and wheat output on Thursday. The council raised wheat production to 715 million metric tons up from a previous projection of 705 million metric tons. Although this is a substantial jump from previous forecasts, it is still below last year’s production levels of 721 million metric tons. The world corn crop was revised higher by 10 million metric tons to 961, below last year’s production levels of 997 million metric tons.

Purchasing activity seems to be picking up as the state grain buyer for Egypt set a tender on Wednesday for an unspecified amount of wheat from global suppliers this morning. Japan bought 100,262 metric tons of U.S. wheat in a tender that closed on Thursday and Algeria purchased 540,000 metric tons of grain last week from optional-origin which was more than the 450,000 reported.  The dollar is trading only slightly higher this morning after jobless claims rose to 282,000 metric tons from 275,000 a week earlier.

Morning Comments – May 27

In the overnight session corn is trading down 1 3/4 cents, soybeans are up 3 cents and wheat is down 8 cents going into this morning’s pause. The U.S. dollar is higher again this morning by .35 percent on continued worries out of Greece and the Euro zone. Crude oil is trading down 9 cents.

Crop progress was released after the close of trade yesterday and showed that 92 percent of corn was planted as of May 24th which is ahead of the four year average of 88 percent. Soybeans are also ahead of pace with 61 percent of soybeans planted compared to the four year average of 55 percent. Spring wheat is now 96 percent planted. The USDA released their first crop condition ratings for corn in yesterday’s report which showed 74 percent of the crop was rated good to excellent just two percentage points behind the first crop conditions report of 2014 on June 1st.

The wheat market is trading lower again today after breaking out of the consolidation pattern printed last week on the 100 day moving average. Wheat is pressured by the stronger dollar, the declining Russian ruble and an announcement by the Russian agricultural minister today that Russia expects grain harvest to exceed the most recent forecasts and reach 2014 levels which totaled to 105 million metric tons of grain.

Morning Comments – May 26

In the overnight session the grains are trading lower with corn down 2 1/4 cents, soybeans down 1 cent and wheat down 4 3/4 cents. The U.S Dollar is trading up over a percent this morning and crude oil has slipped 68 cents.  Japan is seeking to buy 100,262 metric tons of food quality wheat from the U.S or Canada in a regular tender closing tomorrow.

Heavy rains which ranged from 1-4 inches fell across Texas, Oklahoma and parts of Kansas causing localized flooding and adding to the concern of winter wheat crop quality. This is the 5th week in a row that significant rains have fallen throughout the southern plains. The southern plains are expected to receive more precipitation later on this week before the outlook turns drier once again.

Between 1/4 inch and 1 1/2 inch of rain fell throughout the majority of the Midwest this weekend providing excellent growing conditions for the newly seeded crop. Crop progress will be released at 3 PM CST today and will show the first crop condition ratings for corn. Last week the crop progress showed 85 percent planted with soybeans 45 percent complete.

UkrAgroConsult announced that it has raised its 2015 forecast for grain harvest to 54.9 million metric tons from 52.3 million in its previous estimate. The increased grain outlook was primarily due to revision higher in wheat production. Ukrainian farmers have planted 95 percent of acreage as of May 25th. SovEcon announced it expects Russia to harvest 95 million metric tons of grain this year down significantly from the 105 million metric tons last year.

 

Weekly Cash Comments

Cash Commentary-

Basis levels for corn were off 1 cent for the week adding to the previous week’s losses, while soybean basis managed a 2-cent advance thanks to a sharply lower week on the futures market.

For corn, there was modest weakness along the river markets this week with a 3-cent loss at the Gulf providing the biggest catalyst of change to upstream facilities. Corn buyers along the East Coast and Plains saw relatively more strength this week, but ethanol plants as a group were off 2-cents a bushel. Areas of Iowa and Minnesota were especially prone to losses this week with 5-cent a bushel losses being fairly typical at some key end users.

In soybeans, basis levels improved on average by 2-cents a bushel this week, although there was a distinct dichotomy between end-user groups. For export sensitive areas, losses of 5-cents a bushel at the Gulf kept river terminals mostly weaker. Although soybean export business has been winding down this week’s sales of 165,500 metric tons was a 21 percent improvement week over week. For soybean plants, crushing facilities raised their basis by 2 cents a bushel for the week, but Eastern Cornbelt plants saw more impressive gains with some facilities up 5 to 10 cents a bushel.

Futures Commentary-

This week the grains were mixed with wheat trading up 7 3/4 cents, soybeans down 18 1/2 cents and corn down 3 cents for the week ending Thursday, May 21st. The wheat market continues to move higher on short covering, triggered by heavy rains throughout the southern plains giving rise to wheat quality concerns. Wheat traders are also following the Russian wheat crop which is forecast to experience hot dry weather over the next couple weeks and is beginning to come under stress. Chicago wheat open interest fell 18,617 to 261,576 showing that traders during this week’s rally are exiting existing positions instead of adding bullish bets.

Corn and soybeans continue to be pressured by bearish news this week. The climate prediction center is expecting to see El Nino continue throughout the summer in the northern hemisphere which may point to another year of optimal growing conditions. They estimated that there is a 90 percent chance that El Nino will continue through the summer and an 80 percent chance that El Nino will last through the end of the year. El Nino typically brings cooler wetter growing conditions to the northern hemisphere and often leads to above average yields. Also pressuring the grains is the Informa economics announcement that it forecasts corn planted acreage at 88.737 million acres which is below the recent USDA most recent estimate of 89.199 million. Informa pegs its soybean acreage at 87.185 million acres which is 2.55 million acres over the USDA.

On Monday, Russia announced that they will remove the wheat export duty until a new formula can be introduced on July 1st. By removing the export duty, it is estimated that the country’s exports will increase by 1 million metric tons this marketing year.

Export sales this week showed that wheat, corn and soybeans all met expectations. Wheat booked 74,400 metric tons of old crop sales and 128,200 metric tons of new crop. With analysts expecting to see as much as 200,000 metric tons of cancellations, this week’s sales were relatively positive. Old crop corn sales jumped 12 percent from the previous week with 812,600 metric tons booked above the 400,000-600,000 metric tons expected by traders. Soybeans also showed positive export sales this week with 165,500 metric tons of old crop sales which was a 21 percent improvement week over week. Soybeans continue to outperform sales expectations late in its export season.

On Wednesday, the EIA weekly ethanol report showed a sharp jump in production by 46,000 barrels per day to a total of 958,000 barrels per day. This decisively ends the two week slump in ethanol production that brought weekly totals below 2013 levels. However, routine facility maintenance played a big role in the early may production slump and it appears production is picking back up again as we move into driving season. Ethanol production year-to-date is up 4.8 percent compared to the USDA’s expectations which only show a 1.3 percent increase YOY. Ethanol stocks also climbed by 135,000 barrels to 20.43 million barrels this week.

The drought monitor has shown improvement over last week with the last of the severe and extreme drought in the southern Plains disappearing after four weeks of substantial rains. The rains have acted as a double edged sword providing moisture relief to parched soil, but causing quality concerns to a wheat crop late in its growing season. As a result of the heavy rains the western half of Kansas and Oklahoma and parts of Texas have been reduced to mostly moderate drought to abnormally dry from ratings like severe and extreme drought just weeks ago.

Morning Comments – May 22

In the overnight session the grains traded higher with wheat leading the way up 4 3/4 cents, corn traded up 1 3/4 cents and soybeans up 1/4 cent. The U.S. dollar index is trading about a 1/4 percent higher this morning and crude oil is down 58 cents.

Yesterday, Agroconsult raised its forecast for Brazil’s 2014/15 corn and soybean crop higher. The consultancy raised its forecast for soybean production from 95.8 million metric tons to 96.1 million metric tons, and raised their first corn crop forecast from 29 million metric tons to 30.7 million metric tons. The consultancy also raised their second crop production expectations to 51.4 million metric tons up from 50.4 in March.

Argentina exports have slowed recently as buyers hold back from purchasing grain hoping the government will turn up pressure to resolve a three week long strike by the Industrial Oilseed Complex Workers Federation.

The drought monitor has shown improvement over last week with the last of the severe and extreme drought in the southern Plains disappearing after four weeks of substantial rains. The rains have acted as a double edged sword providing moisture relief to parched soil, but causing quality concerns to a wheat crop late in its growing season. As a result of the heavy rains the western half of Kansas and Oklahoma and parts of Texas have been reduced to mostly moderate drought to abnormally dry from ratings like severe and extreme drought just weeks ago.

Morning Comments – May 21

In the overnight session the grains are trading higher, with corn up 1 1/2 cents, soybeans up 1 1/4 cents and wheat up 3 cents. The U.S. dollar is lower by 1/10th of a percent and crude oil is 48 cents higher. This morning a reportable export sale was announced for 152,400 metric tons of old crop corn to unknown destinations and 50,800 metric tons of new crop. Chicago wheat trades near its 100 day moving average (5.18 3/4) which has acted as strong resistance on Monday and Tuesday this week. Wheat traders are focusing on the heavy rains in the southern plains which have been causing concerns that the wheat will have quality issues at harvest. Wheat traders are also monitoring Russia whose forecast has turned dry over the next two weeks and whose crop is beginning to feel stress from the hot dry weather.

Export sales this week showed that wheat, corn and soybeans all met expectations. Wheat booked 74,400 metric tons of old crop sales and 128,200 metric tons of new crop. With analysts expecting to see as much as 200,000 metric tons of cancellations, this week’s sales were relatively positive. Old crop corn sales jumped 12 percent from the previous week with 812,600 metric tons booked above the 400,000-600,000 metric tons expected by traders. Soybeans also showed positive export sales this week with 165,500 metric tons of old crop sales which was a 21 percent improvement week over week. Soybeans continue to outperform sales expectations late in its export season.

Yesterday, the EIA weekly ethanol report showed a sharp jump in production by 46,000 barrels per day to a total of 958,000 barrels per day. This decisively ends the two week slump in ethanol production that brought weekly totals below 2013 levels. However, routine facility maintenance played a big role in the early may production slump and it appears production is picking back up again as we move into driving season. Ethanol production year to date is up 4.8 percent compared to the USDA’s expectations which only show a 1.3 percent increase YOY. Ethanol stocks also climbed by 135,000 barrels to 20.43 million barrels this week.

A waterway leading to Argentina’s Rosario grain hub was blocked for the last two days after a ship ran aground. This disruption comes during the busiest season just following harvest

Morning Comments- May 20th

In the overnight session the grains traded lower with soybeans leading the charge down 6 ½ cents, corn down 1 ¼ cents and wheat down 4 cents going into this morning’s pause in trade. The U.S. dollar is positive this morning by a small margin and crude oil is up 59 cents. New crop soybeans has broken through 9.27 1/2 support that was its lows back in late September and early October. This technical failure could cause additional selling pressure as stops are triggered and momentum traders look to enter positions.

Yesterday the USDA released export inspections which are normally released on Monday. The report showed that 341,097 metric tons of soybeans were inspected for export which was just over analyst expectations. Corn also showed solid export inspections with 1,108,039 metric tons of grain inspected for export which beat expectations which ranged from 900,000-1,000,000 metric tons. Wheat inspections were within analyst expectations reporting 309,562 metric tons inspected for export.

Yesterday morning we also saw a 132,000 metric ton sale of old crop soybeans for delivery to China which supports the continued late season strength in export demand out of the U.S.

Weather throughout the Midwest seems to be positive for late corn and soybean planting as a drying trend takes hold throughout the remainder of the week. Next week should bring more showers scattered throughout the Midwest. Rains will be more prevalent in the southern Midwest which could begin to delay soybean planting throughout those areas.

The plains winter wheat forecast should be dry for a couple days as we head into the weekend after localized flooding and heavy rains early this week. Next week rains will return to the region bringing the fifth week of heavy moisture to the area. Rains are unlikely to taper off until the 11-16 day forecast which now has traders concerned about winter wheat quality and disease.

 

Morning Comments- May 19

In the overnight session the grains traded lower with corn down 4 ¼ cents, soybean sown 3 ¾ cents and wheat down 11 cents. The U.S. Dollar is up over 1 percent this morning with crude oil on the defensive, slipping nearly a dollar. Freeze warnings are being issued throughout most of North Dakota and parts of South Dakota which has some traders concerned about damage to the emerging corn crop.

Yesterday crop production was released showing that winter wheat rated good-to-excellent improved 1 percentage point over last week. Continued precipitation has been providing much needed moisture, but a forecast for continued precipitation has traders concerned about winter wheat quality issues. Temperatures are expected to be cooler than average this week across the majority of the Midwest and bring significant amounts of precipitation to states like Colorado, Kansas, Oklahoma and Texas.

Spring wheat planting is mostly complete with 94% planted as of Sunday. This compares to a four year average of only 65% planted during this period. Corn planting was 10 percentage points ahead of the four year average with 85 percent complete. Soybeans is also ahead of pace with 45 percent of the crop planted compared to the average of 36 percent normally.

UkrAgroConsult announced on Tuesday that they are raising the forecast for Ukraine’s wheat harvest by 1 million metric tons to 22 million. The consultancy cited positive planting conditions and good moisture lifting the production potential this year. However, some concerns are developing for the Russian wheat crop which is expected to remain dry over the next couple weeks.

Weekly export inspections data was not released yesterday, delayed by technical difficulties. There has been no sign of the numbers yet this morning.