Morning Comments – November 30

Grains showed limited activity overnight as markets held mostly fractional gains coming out of the overnight session. In outside markets, the US dollar index continued to rise to a contract high on the Dec futures, while S&P futures and crude oil were modestly higher.

Analyst UkrAgroConsult said on Monday that warm temperatures and rain has slightly improved the condition of Ukrainian winter grain crops, but a significant portion remains in a poor state. A severe drought in the summer and autumn in half of Ukrainian regions has forced farmers to stop sowing of winter grains, leaving concerns of a poor grain harvest in 2016. The share of crops in good condition accounts for 28.1 percent as of Nov. 26 compared with 40.6 percent at the same date in 2014, UkrAgroConsult said in a statement. It said that the share of poor crops rose to 35.6 percent this year from 18.1 percent in 2014.  UkrAgroConsult this month cut its forecast for Ukraine’s 2016 wheat harvest by about 8 percent to 17.5 MMT.

Argentina’s incoming government will abolish export taxes on corn and wheat the day after it assumes office and reduce the export tax on soybeans by 5%, designated Agriculture Minister Ricardo Buryaile confirmed over the weekend. President-elect Mauricio Macri won the election last Sunday on a platform of wholesale change. He has vowed to end interventionist measures like these taxes that have hobbled growth in Latin America’s third largest economy. “The wheat and corn taxes will be eliminated from the first day, in line with what we promised,” Buryaile was cited as saying. “The tax on soy will drop by 5% percent from the start of Mauricio Macri’s term,” he added.

S&P futures (ESZ5) was modestly higher overnight. The lull in the stock market is continuing after light trading amid the Thanksgiving holiday left share prices little changed every single day last week. Investors are awaiting reports from pending home sales today to manufacturing data tomorrow and the monthly Labor Department jobs update on Friday. Federal Reserve Chair Janet Yellen will speak to Congress on Thursday and the European Central Bank will hold its last policy meeting of the year.

Crude oil prices (GCLF6 / QMF6) gained ground on Monday, but the overall trend remains bearish on oversupply issued and a strong US dollar. Oil prices have been sliding for over a year since the OPEC opted to keep production high to protect market share and bump out rivals in the U.S. and those outside the cartel. Although there has been rhetoric of late by Saudi Arabia to “stabilize prices”, the general view is that OPEC will maintain the “no-cut” policy. Any changes would be likely determined until after the effect of Iranian oil returning to the market become more apparent in coming months, analysts say.

Weekly Cash Comments

Cash Commentary-

Cash grain basis levels were mostly flat this week on average with the US soybean basis unchanged, while corn posted a modest 1-cent advance.

The recovery in soybean futures prices took their toll on some basis levels this week as soybean plants were down 2 cents a bushel on increased farmer deliveries. River terminals as a group were unchanged for the week, while Gulf basis bids were off 3 cents a bushel.

For corn, the strength here was fairly muted. While ethanol production was up sharply on the week, there seems to be little incentive for plants to push basis levels higher with plant-average basis levels mostly steady on the week. At river terminals, basis levels were off by 2 cents a bushel.

Futures Commentary-

Soybeans found support this week gaining 15 cents a bushel, while wheat was off 12 cents. Corn eked out a modest 2-cent advance on the week.

In soybeans, the week got off to a bad start as Argentina’s newly elected President Macri was expected to eliminate stifling export taxes on ag commodities. This was especially bad news for soybean prices as farmers there have been hoarding inventories in anticipation of a new presidential regime that would liberalize export policies. But, by mid-week Marci changed his tune, suggesting that soybean export taxes would be reduced 5% a year into the future, making it likely that no immediate impact was likely. In weather, soybean growing conditions in South America are generally favorable. There are some dry areas in Northern Brazil were rainfall has been running at 30% below normal, but overall there is little to suggest anything but normal yield potential for South America as a whole.

For wheat, USDA reported another uptick in US winter wheat conditions on Monday. Winter wheat is rated at 53% good-to-excellent versus 52% last week, but still off from last year’s reading of 58%. Also pressuring wheat prices is the ever mounting strength in the US dollar. Since mid-October the US dollar index is up 6.5%, which is especially harmful to US wheat prices, which rely heavily on export competitiveness to garner support.

In corn, export sales this week were a surprisingly high 2 MMT, well above trade expectations of around 1 MMT. Also this week, ethanol production was up sharply, hitting its highest weekly output since last summer.

Morning Comments- November 27

Grains were closed overnight due to the Thanksgiving Holiday and will open at 8:30 AM CDT for trading. S&P futures were modestly higher while crude oil was down in early trade.

Friday morning, USDA’s export sales report proved to be a mixed bag of news. For once, corn came in as the shining star with over 2 MMT of sales on the week. Wheat was below expectations and soybeans were within expectations.

WEEKLY EXPORT SALES

  Actual Expected
Corn 303.7 400-600
Soybeans 1,173.6 1,000-1,500
Wheat 2,036.3 900-1,300

 

In South America, rains fell in Mato Grasso over the past 2 days but are expected to diminish going into the weekend. Argentina got less rain than expected but dry spots are limited for now.

China’s stock market plunged 5.5% overnight on probes of the country’s two largest brokerages, but US and European markets were mostly unfazed. Oil prices were trending down Friday, pressured by a stronger dollar and the global oversupply of crude still clouding the outlook for the industry. Earlier this week, the U.S. Energy Department said crude stockpiles ticked up by 1 million barrels last week, bringing the total tally to 488.2 million barrels, around a level not seen in the last eight decades. U.S. oil output has also held stable, around 9.2 million barrels a day, but down from a peak of 9.6 million barrels a day in April.

Morning Comments- November 25

Grains were modestly higher overnight trying to rebound from Tuesday losses. In outside markets, crude oil gave up most of its gains from Tuesday to move lower in Wednesday, while S&P futures were up in overnight trade,

In overnight news, Egypt’s GASC was tendering for wheat, with the lowest offer coming in at $195.54 per MT from France origin. Russia and Romania also offered wheat in the latest deal, with the US not offered in the deal.

The EPA is widely expected to increase requirements for biofuels use through 2016 due to higher total fuel. The EPA in late May proposed requiring 17.4 billion gallons of renewable fuels to be blended into motor fuels next year, up from 16.3 billion gallons this year.

 

The head of the company that led the breakneck expansion of Argentine soy cultivation over the last two decades said on Tuesday the country’s grains output could climb by 50 percent over the next three years thanks to a change of government. Opposition leader Mauricio Macri beat ruling party candidate Daniel Scioli in Sunday’s election, effectively ending an eight-year, production-sapping feud between farmers and outgoing President Cristina Fernandez, who clamped down on wheat and corn exports in a bid to curb double-digit inflation.

S&P futures (ESZ5) rose Wednesday as investors shrugged off concerns over an escalation in geopolitical tensions. Investors are likely to bet there won’t be a further flare up in geopolitical tensions as long as NATO stands with Turkey. Instead, markets are more focused on the prospect of further monetary stimulus–also known as quantitative easing, or QE–at the European Central Bank’s meeting next week and whether the Federal Reserve will raise interest rates in December.

Crude oil (GCLF6 / QMF6) was lower on a de-escalation of fears about the Turkey-Russia incident on Tuesday.  Also, data from industry group the American Petroleum Institute on Tuesday showed that U.S. crude inventories rose by 2.6 million barrels in the week to Nov. 20 to 488.3 million, compared with analyst expectations for an increase of 1.2 million barrels.

Morning Comments – November 24

Grains were modestly lower overnight following Monday’s strong turnaround in prices. S&P futures were lower while crude oil was higher after Turkey shot down a Russian warplane overnight, increasing global tensions.

Wheat had the biggest losses overnight as USDA reported another uptick in US winter wheat conditions on Monday. Winter wheat is rated at 53% good-to-excellent versus 52% last week, but still off from last year’s reading of 58%. India’s wheat planting has been delayed by at least a week due to high temperatures, threatening its output of the grain yet again after hailstorms during harvest earlier this year dragged down annual production levels for the first time since 2007.  Lower wheat acreage, down around 26% so far this season, in the world’s No. 2 wheat producer.

In Brazil, the northern region has seen less rainfall than normal as the region is running 30% below normal. While there was a spurt of rain in the past week that helped seeding activities, rainfall of late has been irregular and the forecast for rain is somewhat limited. Predicted totals range between 70-110mm, below the norm of 133mm for this time of year.

Ukraine’s corn harvest is likely to increase by 12% to 25.76 MMT next year due to a larger sowing area, analyst UkrAgroConsult said on Tuesday. Ukrainian farmers are likely to increase the area sown for the 2016 spring crops, including corn and oilseeds, after a severe drought forced them to cut the area sown for winter grains, UkrAgroConsult said in a statement.

Overnight, a Russian warplane was shot down by Turkey, which claimed the plane ignored the country’s airspace and repeated warnings. S&P futures (ESZ5) were lower on the news, while crude oil (GCLF6 / QMF6) was sharply higher on increased tensions.

Morning Comments – November 23

Grains started the week on a down note, with soybeans leading the sell-off to the downside while wheat and corn were slightly lower in quiet trade. In outside markets, S&P futures and crude oil were off slightly from Friday’s close.

Soybeans came under pressure as Argentina’s presidential election results. Conservative challenger Mauricio Macri turned Argentine politics on its head on Sunday, kicking the ruling Peronist movement out of power with a promise to liberalize the ailing economy and end a culture of divisive politics. For grains, this would mean an elimination of stiff export taxes and quotas that have restrained the country’s ability to ship to world markets.

In wheat news, France is set to export wheat to Indonesia for the first time since the 2008/09 marketing season after private animal-feed companies were attracted by unusually competitive French prices. Exporters have turned to French wheat to cover optional-origin deals after Ukrainian supply became less readily available and in view of relatively expensive prices for Australian wheat. French shipments have become cheaper due to a weaker euro and a slide in ocean freight rates, while exporters are keen to find overseas outlets for a record-large French wheat harvest after a slow start to the export season.

In crude oil (GCLF6 / QMF6), prices were off sharply on Sunday’s open, but recovered this morning as Saudi Arabia’s cabinet said on Monday it was ready to cooperate with OPEC and non-OPEC countries to achieve market stability. The council (of ministers) … stressed the kingdom’s role in (achieving) the stability of the oil market and its continuous readiness and efforts to cooperate with all OPEC and non-OPEC countries to maintain the stability of the market and prices,” the cabinet said in a statement following its weekly meeting.

S&P index futures (ESZ5) were little changed on Monday, coming off strong gains last week, with the S&P 500 posting its biggest gains in almost a year and the Dow Jones industrial average turning positive for the year.  The U.S. Federal Reserve is widely expected to raise interest rates next month as labor conditions continue to improve and inflation stabilizes. Geopolitical security issues also weighed on investors’ minds with a lockdown in Brussels continuing for a third day as police hunt for a suspected Islamist militant on the run since the Nov. 13 attacks in Paris.

Weekly Cash Comments

Cash Commentary-

Grain basis was mixed this week as soybean basis took a break from its steep incline since harvest to finish the week unchanged, while corn basis continued to press higher advancing 2 cents a bushel.

In corn, gains were largely driven by ethanol plants this week. As a group, they were up 3 cents a bushel, but in the Western Cornbelt there was fairly widespread gains of 5 to 10 cents a bushel.  At river terminals, basis levels were in line with the US average gain of 2 cents a bushel as Gulf export bids remained flat for the week.

For soybeans, the biggest driver this week was a lower Gulf basis, which gave up 6 cents a bushel. That had an impact at upstream river terminals, which lost 3 cents on the week. Soy plants were unchanged as a group for the week.

Futures Commentary-

Grains were mixed this week as wheat lost 7 cents a bushel and soybeans gave up 3 cents, while corn managed a modest 2 cent gain.

In wheat, improved weather in the US Plains and Ukraine helped ease fears about stress as the crop heads into dormancy. However, the Ukrainian agriculture ministry is said to be limiting wheat exports to 16.6 MMT in the 2015/16 season. The figure could be reviewed depending on the outlook for next year’s winter wheat harvest. The 16.6 MMT figure is still above USDA’s export projection for Ukraine of 15 MMT.  Farmers in the European Union have sown 23.9 million hectares with soft wheat ahead of the 2016 harvest, an estimate reduced by 100,000 hectares from last month, and now down 1 percent on 2015/16, consultancy Strategie Grains said on Thursday. In weekly export sales, wheat came in strong at 722,000 MT as compared to expectations ranging from 200-400,000 MT.

For soybeans, weather in South America continues to be in good shape during the spring season there.  In Brazil, expansive rain coverage in the next two weeks remains likely to further limit any near-term dryness concern and will recharge topsoil moisture, although rains may be very heavy (6 to 10″ or more) in parts of Parana over the next ten days. This will threaten some pockets of excess moisture for corn/soy and will slow port loading, but the pattern otherwise aids corn and soybean development elsewhere. The Center-West soy will see showers peak Friday/Saturday, with additional chances at the middle of next week and in the 11 to 15 day. US exports of soybeans were strong as well this week coming in at 1,797,000 MT, well above expectations which were 700-1,100,000 MT.

In corn, Early in the week Mexico made a large purchase of US corn, totaling 1.4 MMT. However, there was little fresh news to drive prices higher. Ethanol production for the week was lower, while inventories of ethanol reached their highest point since summer, signaling an imbalance between demand and supply. In export sales, weekly sales were 779,000 MT versus trade expectations of 500-700,000 MT.

Morning Comments – November 20

Grains were mostly lower overnight with soybeans leading the losses to the downside.  In outside markets, S&P futures were higher while crude oil was under pressure.

Thursday brought a round of unexpectedly good news for grain with USDA reporting that corn, soybeans and wheat posting better than expected export sales for the week.  Corn sales were 779,000 MT versus trade expectations of 500-700,000 MT while wheat was 722,000 MT as compared to expectations ranging from 200-400,000 MT. Soybeans were also well above expectations which were 700-1,100,000 MT, coming in at 1,797,000 MT.

In overnight news, the International Grains Council (IGC) trimmed its forecast for world corn production in 2015/16 by 3 MMT to 967 MMT, reflecting drought-related cuts to production in China, Ethiopia and South Africa. In world wheat production, IGC pegged 2015/16 at 726 MMT, unchanged from last month’s forecast, with an upward revision from Ukraine (to 27.5 million from 26.0 million) offset by cuts for Egypt (to 8.5 million from 9.2 million) and Brazil (to 6.2 million from 6.6 million). The IGC also said that wheat’s global harvested area for the 2016/17 season was forecast to fall by almost 1 percent to 221.8 million hectares. World soybean production in 2015/16 was projected to equal the previous season’s record high of 321 MMT.

S&P futures (ESZ5) are heading for its biggest weekly gain since October. Traders will be watching  Federal Reserve Bank of St. Louis President James Bullard and Fed Bank of New York President William C. Dudley comments today for insight into the state of the US  economy.  Recent data has bolstered the case for raising borrowing costs for the first time since 2006, with the latest payroll report — released after the Fed’s October meeting — showing the biggest increase in hiring this year.

Crude oil (GCLF6 / QMF6) continued to drift lower overnight as oversupply continues to be the driving theme of the market. Market data suggests oil traders are preparing for another downturn in prices by March 2016, as forecasts for an unusually warm winter dent demand and Iran prepares for post-sanctions crude oil exports.

Morning Comments – November 19

Grains were mixed overnight with soybeans drifting lower while wheat and corn tried to hold on to modest gains. In outside markets, S&P futures were trying to take another run at the 2,100 mark while crude oil was trading lower.

In wheat, prices have been battered down in the past 4 trade sessions on improved weather in key wheat growing regions around the globe. Overnight, the Ukrainian agriculture ministry and traders’ unions have agreed to limit wheat exports from Ukraine to 16.6 MMT in the 2015/16 season. The figure could be reviewed depending on the outlook for next year’s winter wheat harvest, which may fall sharply due to unfavorable weather this fall. The 16.6 MMT figure is still above USDA’s export projection for Ukraine of 15 MMT.  Farmers in the European Union have sown 23.9 million hectares with soft wheat ahead of the 2016 harvest, an estimate reduced by 100,000 hectares from last month, and now down 1 percent on 2015/16, consultancy Strategie Grains said on Thursday.

Japan’s Ministry of Agriculture bought a total of 114,941 MT of food quality wheat from the United States and Canada in a regular tender that closed late on Thursday. Of the total, 80,000 MT was sold by the US.

In Brazil, expansive coverage in the next two weeks remains likely to further limit any near-term dryness concern and will recharge topsoil moisture, although rains may be very heavy (6 to 10” or more) in parts of Parana over the next ten days. This will threaten some pockets of excess moisture for corn/soy and will slow port loading, but the pattern otherwise aids corn and soybean development elsewhere. The Center-West soy will see showers peak Friday/Saturday, with additional chances at the middle of next week and in the 11 to 15 day.

S&P futures (ESZ5) were higher on Thursday, a day after minutes from the Federal Reserve’s October meeting flagged a December interest rate hike and pointed to a cautious approach after that. The minutes showed that central bankers are grappling with longer-term issues that may be relevant to the pace of subsequent rate hikes. U.S. interest rates futures implied a 72 percent chance of a liftoff next month, up from 64 percent on Tuesday.

On Wednesday, crude oil (GCLZ5 / QMZ5) fell below $40 a barrel for the first time since August as an EIA report showed higher crude stocks. Crude inventories rose by 252,000 barrels to 487.3 million barrels in the last week, compared with analysts’ expectations for an increase of 1.9 million barrels. Eight straight weekly increases have boosted stockpiles to close to their modern-day record 490.9 million barrels in April.

WEEKLY EXPORT INSPECTIONS

Actual Expected
Corn 779.8 500-700
Soybeans 1,797.6 700-1,100
Wheat 721.9 200-400

 

Morning Comments – November 18

Grains were modestly higher overnight with soybeans trying to lead a feeble recovery on a 2 cent advance. In outside markets, S&P futures and crude oil put up slight advances in the night session.

In grain markets, there was little fresh news on Tuesday to change the course of trading. Grain prices continued to be weighed down by ample supplies not only in the US, but in global warehouses as well. Also, the US dollar continues to show signs of moving higher after a month of nearly vertical increases. The US dollar index is up 6% in the past month, which weighs heavily on US grain prices which depend on export business to foreign countries.

In weather, areas of the world where weather was of concern have since given way to an improved growing condition. The Former Soviet Union is expected to see warm and wet weather in the next week should aid the winter wheat crop there, while precipitation expected across the US Plains this week should also be beneficial for US wheat development.  Likewise, in Brazil an increasingly wet pattern should continue to bolster the summer crop prospects of our biggest competitor in the global soybean market.

S&P futures (ESZ5) were little changed on Wednesday as investors remained cautious after a shootout between French police and militants in Paris and a bomb scare at a German soccer match. Investors are also awaiting the minutes of the Federal Reserve’s policy meeting last month. The minutes will be analyzed for clues on the central bank’s reading of the economy. The Fed is widely expected to raise interest rates at its December meeting. U.S. stocks forfeited gains on Tuesday after a soccer match between Germany and the Netherlands, which German Chancellor Angela Merkel was due to attend, was called off over fears of a bombing.

Crude oil futures (GCLZ5 / QMZ5) rose on Wednesday on reports of falling stockpiles and rising refinery activity in the United States. The American Petroleum Institute (API), an industry group, said on Tuesday that U.S. crude stockpiles fell last week by 482,000 barrels due partly to higher refinery runs. Official inventory data is due from the U.S. government’s Energy Information Administration (EIA) today, with a poll of eight analysts predicting a crude stock build of 1.9 million barrels on average in the week ended Nov. 13.