Morning Comments – December 31

Markets close at regular time today, 1:20 pm CDT. The futures market is closed on Friday, Jan 1 and reopens Sunday, Jan 3 at 7:00 pm CDT

Grains were lower to mixed in the overnight session, while crude oil and S&P futures were lower and the US dollar higher in the night trade.

Much of the middle section of the Mississippi remained closed, including St. Louis’ municipal harbor, officials said. Waters remained in moderate or major flood stages following heavy rain and snowfall earlier this week that all but halted barge traffic on the Mississippi and other rivers in the central United States. The Mississippi River at St. Louis was forecast to crest at the second-highest level ever on Thursday while river conditions could return to normal by late next week, government officials and barge traders said.

In South America, the weather forecast for the first half of January continues to suggest a surge in rain for Northern Brazil, which should ease dryness. The coming week is of critical importance and if the advertised 1.00 to 3.00 inches of rain fall across much of Brazil’s driest areas, as advertised, many crops will respond positively with a burst in more aggressive development. Early planted beans may find the precipitation coming too late since harvesting of the first crop often begins later in January and early February.

For wheat, Russia’s cold snap in winter wheat country is likely to be short-lived and is only hitting about 15% of the wheat crop. Yesterday, Jordan bought 100,000 MT of wheat.  The Rosario Grain Exchange puts the Argentine wheat harvest at 75% complete vs 88% this time last year.

In crude oil, fundamentals still point to oversupply. Crude inventories in the United States rose 2.6 million barrels last week, the U.S. Energy Information Administration said. Analysts polled by Reuters had expected a drawdown of 2.5 million barrels. Stockpiles hit record highs at the Cushing, Oklahoma delivery hub for U.S. crude’s West Texas Intermediate (WTI) futures. Gasoline and heating oil also posted larger-than-expected stock builds.

WEEKLY EXPORT SALES

Actual Expected
Corn 705 600-800
Soybeans 578 1,000-1,400
Wheat 363 250-450

 

Morning Comments – December 30

Grains posted modest gains overnight with soybeans and wheat posting a nearly 3 cent advance and corn was fractionally higher. Outside markets saw S&P futures and crude oil lower, while the US dollar firmed slightly in the night trade.

Argentina on Tuesday removed limits on how much corn and wheat the country’s huge farm sector can export. This follows the new policies earlier in the month that eliminated export taxes on corn and wheat, which plunged Argentina’s corn export price to a 25-cent discount when compared to the US over the past two weeks. The export quotas had curbed corn and wheat planting and resulted in the overplanting of soy in recent years. The government has estimated that the country’s grains production will grow to 130 MMT from the current 100 MMT.

In weather news, Brazil’s Northeast states of Bahia and northern Minas Gerais are the focus of concern were hot, dry conditions are limiting production potential. Light rain is expected in the region through the end of this week, and is expected to increase by the weekend into next week. The rain will slowly bolster soil moisture and ease some of the stress to crops. Rain totals for the seven day period ending next Tuesday morning will range from 0.75 to 2.50 inches with locally greater amounts. Moisture shortages will remain in most areas in northeastern Brazil by the beginning of next week. Even so, the remaining 95% of soy producing area in Brazil remains at or above adequate soil moisture

Heavy weekend storms caused flooding in parts of the southern U.S. Midwest, threatening the region’s soft red winter wheat crop, although the magnitude of the impact is expected to be limited. Concern was also mounting about potential crop damage in Russia. A forecast plunge in temperatures in parts of Russia could pose risks to winter grains after abnormally warm weather in recent weeks reduced the snow cover protecting them.

In crude, prices fell on the prospects of a short-lived cold spell through Europe and the US, which had provided some hopes of demand stimulus last week. Oil could draw support if U.S. Energy Information Administration data later on Wednesday shows a drawdown in U.S. weekly oil stocks. A Reuters poll of nine analysts estimated that crude stocks fell 2.5 million barrels in the week ended Dec. 25. The American Petroleum Institute, an industry group, on Tuesday reported a surprise build-up in U.S. stocks.

Morning Comments – Dec 29

Soybeans tried to recover most of their losses from Monday in the overnight session while wheat moved solidly into positive territory to start the day. Corn was fractionally lower. In outside markets,. The US dollar, S&P futures and crude oil were all higher.

Weather in South America continues to show favorable growing conditions. Rain should fall in all crop areas at one time or another and sufficient rainfall will occur to support ongoing crop development. Production potentials will be high in Argentina if the forecast verifies and Brazil’s driest areas in the northeast will get some belated relief that will at least put a stop to the declining production potentials.

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For wheat, flooding in the US Midwest is causing some mild concerns to the winter wheat crop as prolonged submersion of a week or more for the crop could kill it. Although still too early, it is a potential threat to the crop at a time when new-crop wheat prices are at their lowest point this year.

In corn, a lack of export demand combined with stories that separate cargoes of Argentina and Brazil corn are coming to the US Southeast this coming month are putting prices on the defensive. Argentina’s export corn price has dropped sharply in the last two weeks following Argentina eliminating their export tax. The US and Argentina were on par about two weeks ago, but now Argentina’s corn prices is $10 a MT or 25 cents a bushel less than US export prices.

U.S. equity futures pointed to a sharp move higher at the opening bell as oil prices rebounded and traders looked ahead to the end of a holiday-shortened New Year’s week. Yesterday, Saudi Aramco’s chairman had a lot to say, promising that the oil glut would ease up next year given how many U.S. shale producers are reducing production. But he was guarded on revenues, which could read as the Saudi’s are planning to keep pressure on prices to continue to squeeze other producers to death, which would suggest continued pumping by Saudi Arabia.

Morning Comments – Dec 28

Grains were mixed overnight with corn and wheat posting modest gains, while soybeans turned lower. In outside markets, S&P futures and crude oil were off as was the US dollar.

Last week’s USDA export sales showed strong sales for soybeans, coming in at 2.07 MMT more than double the amount expected by analysts which ranged from 0.9 to 1.1 MMT. Corn export sales were 803,600 MT versus 500-700,000 MT expected, while wheat came in at 370,300 MT versus expectations of 250-450,000 MT.

In weather news, South Africa reported a couple of locally heavy rain amounts during the long holiday weekend, but most of the precipitation was quite light and temperatures were at extreme highs for the corn crop there. South Africa rainfall this week is expected to be restricted with inadequate. Latest forecast model runs Sunday reduced rainfall in the second week with temperatures through Saturday varying in the 90s to 106 degrees Fahrenheit, creating a dismal outlook for summer crops across the nation.

In Brazil, northern Brazil which has been dry saw only spotty rainfall over the holiday and not enough to counter the 90 to 100 degree temps in the region. However, the region appears to have better rain prospects in the coming days. The greatest relief from dryness is expected Friday through January 6, although some increase in showers will occur through mid-week this week. Most of this week’s rain will be light and erratic, although greater than that of the holiday weekend and some easement from moisture stress will begin. The greatest relief from dryness is expected January 3-6, although there will be sufficient rain prior to that time for some improvement. In southern Brazil where it has been wet and cool, as temperatures are expected to increase in the forecast as rains leave the region and move northward.

Argentina’s soil moisture is still rated favorably in most of the summer crop region. The ground is saturated with moisture in the northeast and from southeastern Cordoba to northwestern Buenos Aires. A small pocket of east-central Buenos Aires was also reporting saturated topsoil conditions. Overall, most of Argentina crops will remain in favorable condition for the next couple of weeks with increasing soil moisture in the west and some gradual drying in the southeast.

In oil, the news continues to be bearish. Figures from the Organization of the Petroleum Exporting Countries imply a glut of more than 2 million barrels per day, equal to over 2 percent of world demand. Oversupply is expected to persist into the earlier part of next year. Saudi Arabia is expected to announce its 2016 state budget on Monday, and the details will be scrutinized for any indication that it may give about the likelihood of the kingdom changing its oil policy.

Morning Comments- December 23

Grains were little changed in the overnight session in listless pre-holiday trading. In outside markets, crude oil, S&P futures and the US dollar index posted positive gains in the night trade.

In overnight news, Syria bought 200,000 MT of Russian wheat while Egypt was tendering for wheat as well. The lowest price in the Egypt deal came from Argentina, which entered the world export stage after eliminating its wheat export tax two weeks ago. If Egypt buys the Argentinean wheat it would be the first time since Oct 2012. A South Korea feed manufacturer also bought 120,000 MT of US soybeans for 2016/17.

In South America, limited rainfall will occur in Brazil during the second half of this week through the middle of next week, with center parts of Brazil seeing increased crop stress. Southern Brazil continues to be too wet.  The dry weather is expected to be followed by increased moisture in the first part of January. Argentina continues to see favorable growing conditions in the two week forecast.

Crude oil is showing some signs of a modest recovery from Friday’s 11-year low. The American Petroleum Institute estimates crude inventories in the U.S. likely fell by 3.6 million barrels last week. Still, at 490 million barrels, total crude inventory is at an eight-decade high, according to U.S. government data. Official figures will be released later on Wednesday.

Morning Comments – December 22

Grains continued to trade in a narrow range with only soybeans showing any sort of real directional bias in the night session. Soybeans were up 4 cents a bushel, while wheat was up nearly 2 cents and corn posted a fractional increase. In outside markets, S&P futures and crude oil were modestly higher and the US dollar slightly weaker.

Dryness in parts of Brazil is becoming an issue as limited rainfall is expected during the second half of this week through the middle part of next week. Many center west and center south crop areas will experience net drying and some increased crop stress. The drier bias is then followed by increasing rainfall in the early days of January that, if it verifies, would result in improved crop and field conditions in the center south and north. Southern Brazil continues too wet during much of the forecast period. However, further south Argentina has had good weather for development of the corn and bean crop there.

Yesterday’s weekly export inspections report from USDA was mostly in line with expectations. Corn was able to exceed pre-report expectations 400-550,000 MT with 718,888 MT of exports. Wheat and soybeans were on par with expectations with soybeans hitting 1,463,167 MT and wheat a respectable 475,375 MT.

Crude oil was up slightly after testing an 11-year low on Monday. But, oversupply and a very mild winter is keeping the markets on the defensive. Heating oil futures weighed down the crude complex, hitting a new July 2004 low warmer-than-expected temperatures have hit seasonal demand.

Morning Comments – December 21

Grains posted modest gains overnight with soybeans leading the complex higher at one point up as much as 4 cents a bushel. In outside markets, S&P futures were sharply higher recovering from Friday’s sell off while crude oil was lower.

In Brazil, rains have become limited starting last week and into this weekend. While not widespread, the areas being affected with dry conditions are sizable enough to warrant some concerns by the market that the country will reach its full yield potential. The coming 7-10 day forecast shows limited rainfall. Much of the rain will not be enough to counter evaporation, but the mere timeliness of showers will help to slow drying rates and allow a little more time for better rain to fall before crops are seriously impacted.

Wheat continues to struggle with competition overseas. The Russian rouble has lost about 6% against the dollar since the start of December on sliding oil prices and triggered the rise in Russia’s wheat export tax. Russia’s Agriculture Ministry has proposed the government reduce or cancel its wheat export tax, Interfax news agency reported on Monday.

In crude oil, the market struggles with bearish oversupply issues, putting prices at their lowest mark in over a decade. Oil production is running close to record highs and, with more barrels poised to enter the market from the likes of Iran, the United States and Libya, the price of crude is set for its largest monthly percentage decline in seven years.

Weekly Cash Comments

Cash Commentary-

Grain basis was flat again this week with both corn and soybeans holding steady.

After rallying the first month after harvest, basis levels have been extremely flat over the past month. US average corn basis was up 17 cents in the month after harvest while soybeans advanced 18 cents. But, since mid-November there has been virtually no movement in basis levels.

This week was no exception as the only real noticeable changes were for soybeans along the river which posted a modest 1.5 cent a bushel gain. Export volumes for soybeans continue to be strong which has helped bolster river terminal basis. Crush plants were slightly lower this week, as NOPA crush figures for November confirmed a weaker crush pace than many had been expecting. At ethanol plants this week, corn basis levels were fractionally lower as was the basis at river terminals.

Futures Commentary-

Grains were lower this week with wheat suffering the biggest setback losing 11 cents while corn was down 5 cents. Soybeans closed the week only down a penny after a late week rally erased most of the losses.

Global markets responded quickly to the Fed announcing its first interest rate hike in over 9 years. The US dollar rebounded sharply which pushed crude oil and equity prices lower. In grains, the impact of higher rates was not terribly important, as oversupply and sluggish demand have led to their own problems for grain markets.

This week saw some rather disappointing news for soybeans as monthly NOPA crush numbers came in at 157 MB versus expectations going into the report of 161 MB. Weekly export sales were mostly neutral to bearish for the grains, although late in the week China bought 640,000 MT of US soybeans which helped lift prices.

In weather, South Africa’s corn crop appears to be running into problems thanks to the El Nino spawned drought hitting that country. Planting season is coming to an end and the drought has limited farmer’s ability to get the crop in the ground. Some analysts there say without suitable rains, the country could from a net-exporter of corn to a net importer of 5 MMT.

For South America, parts of Brazil are starting to get dry and cause some concern about soybean production.  It is estimated that about 20% of the corn/soybean crop in Brazil is under stress from dry weather.

In Argentina, political maneuvers by the new President there had grain markets on the defensive. Early in the week, President Marci repealed the export tax on wheat and corn, while lowering the export tax on soybeans. At the end of the week, Argentina’s peso was allowed to float for the first time in 4 years, immediately causing it lose 25% of its value. This will help farmers there to sell grain that has been stockpiled as an inflation hedge.

Morning Comments – December 18

Soybeans added to its gains overnight, with front-month January futures trading above $8.80 for the first time in a week. Corn was mostly flat while wheat was modestly lower. In outside markets, the US dollar fell after two days of meteoric increases following the Fed interest rate hike, while crude oil and stock index futures were lower.

While the news continues to be mostly bearish for grains, the approaching holidays may be causing short covering by fund traders. Soybeans posted a key reversal yesterday closing up nearly 15 cents even after Argentina’s currency plunged 25% on Thursday as the new President allowed the currency to float for the first time since 2011.

Yesterday, Informa released new US acreage projections for 2016, pegging the corn crop at 88.9 million acres versus 90.1 previously, and soybeans at 84.5 versus 85.3 in their last forecast. Yesterday also brought a large soybean deal with China, with 424,000 MT being sold for 2015/16 delivery.

Crude prices continued to slump overnight.  The losses were a continuation of Thursday’s slide, when data provider Genscape Inc. said stockpiles at Cushing, Okla., the delivery point for the benchmark U.S. futures contract, rose by nearly 1.4 million barrels in the week that ended Tuesday. Nearly all of that came in the last half of the week, according a person who had reviewed the report. The Genscape report came one day after the U.S. Energy Department reported a much larger than expected 4.8 million-barrel increase in U.S. crude stockpiles in the week that ended Dec 11.

Morning Comments – December 17

Grains were weaker overnight as soybeans and wheat fell by around 5 cents, while corn hovered around the unchanged mark in the night session. Outside markets continued to adjust to the interest rate hike announced yesterday by the Fed, as the US dollar continued to strengthen, S&P futures rallied and crude oil sunk to fresh lows.

Argentina will let their currency float starting today, setting the stage for a large devaluation in their currency and bring on active farmer selling there. In other monetary news,  the US dollar hit a two-week high against a basket of major rivals on Thursday after the U.S. Federal Reserve raised interest rates for the first time in almost a decade and signaled four more hikes are to come next year.

In overnight news, Japan bought 124,000 MT of food quality wheat from the US and Canada in their regular tender. The US accounted for 94,000 MT of the deal. A South Korea feed maker bought 195,000 MT of optional origin corn overnight.

French consultancy Strategie Grains on Thursday pegged the 2016 EU corn crop at 64.9 MMT up 13% from last year’s short crop, while wheat is expected to come in at 143.6 MMT off 4% from last year.

Crude oil continues to be pressured by oversupply issues. Weekly inventory data from the U.S. Energy Information Administration showed an increase of 4.8 million barrels of crude oil stocks. Analysts polled expected the agency to report that crude-oil inventories fell 1.4 million barrels last week.

WEEKLY EXPORT SALES

Actual Expected
Corn 579 700-950
Soybeans 887 900-1,300
Wheat 320 250-450