Morning Comments – February 25

Grains posted modest gains going into Thursday’s break, while outside markets were relatively subdued in quite, two-sided trading.

In wheat news, Egypt announced another tender yesterday for shipment Mar 26-Apr 4. Also, Saudi Arabia announced a large tender for 770,000 MT of hard wheat. India is also expected to be entering the market soon as weather issues there have cut back on supplies.

This morning, USDA’s Ag Outlook Forum provided the first look at 2016 USDA acreage projections. Although not based on formal surveys, it provides a basis for the markets prior to the first official survey released at the end of March.  USDA’s chief economist pegged corn plantings up 2 million in 2016 to reach 90.0 million. Trade expectations were for a 1.5 million acre increase. For soybeans, USDA expects a 0.2 million acre drop in 2016 versus the trade looking for a 0.6 million acre increase. Wheat acres are expected to drop 3.6 million versus only a 2.2 million acre drop expected by analysts.

Crude oil got a lift on Wednesday as EIA inventory data was in line with analyst expectations. The report showed a bump in crude stocks on the week by 3.5 million barrels, versus trade expectations of a 3.4 million barrel increase. Crude managed to rally over a $1.50 a barrel on that news, but has been on the defensive since then.  However, at 507.6 million barrels, the latest increase pushed total domestic crude inventory to another weekly high and 74 million barrels higher compared with last year. In monthly data, which doesn’t line up exactly with weekly data, inventories last exceeded 500 million barrels in 1930.

WEEKLY EXPORT SALES

  Actual (OC+NC) Expected (OC+NC)
Corn 1,066 700-1,200
Soybeans 328.6 300-700
Wheat 486.2 200-400

 

Morning Comments – February 24

Grains continued their weakness from Tuesday by starting Wednesday in negative territory. Outside markets were also weaker for the S&P and crude oil.

Yesterday saw wheat futures carve out new contract lows and hit their lowest price for nearby futures in 5 years. Rains crossing Oklahoma and eastern Texas brought beneficial moisture to the southern U.S. Plains winter wheat belt. Also, continued pressure from huge global supplies and weak US export demand continue to weigh heavily on the wheat market.

Traders will turn their attention to Thursday’s USDA Ag Outlook Forum. Average analyst estimates are for USDA to pencil in higher corn and soybean acres in to their outlook for 2016. Analysts expect an average corn number of 89.648 mln versus 88.0 in 2015. For soybeans, 83.302 mln versus 82.7 on 2015 and wheat at 52.4 mln versus 2015 acres of 54.6.

Crude oil fell sharply on Tuesday with continued losses to start the trade day today. Saudi’s oil minister spoke at a conference in Houston, suggesting no end to the pain for the oil industry and giving no inclination of cutting back on production. Late Tuesday, the American Petroleum Institute, an industry group, said that U.S. stockpiles increased by more-than-expected 7.1-million-barrel last week. The Energy Information Administration will release its official data later on Wednesday and analysts polled by The Wall Street Journal expect an increase of 2.4 million barrels.

Morning Comments – February 23

Grains were lower overnight giving up most of Monday’s gains. In outside markets, S&P futures were modestly lower as was crude oil.

Grains got a bit of a lift on Monday as USDA’s weekly export inspections report showed corn and soybean exports for the week above analyst expectation. This pushed grain prices to their highest point in two weeks but they quickly backed off as abundant global supplies continue to pressure prices.

In overnight news, there was fresh export activity. A South Korea firm bought 67,100 MT of US milling wheat while the Philippines and Thailand had tenders out for feed wheat. Saudi Arabia said it would be tendering soon for wheat, marking their first foray into the wheat market this year. Also, South Africa announced they would relax some of their tough rules on GM crops so it can ramp up corn imports from the US and Mexico to avert a food crisis.

Ukraine’s grain harvest is likely to fall 10 percent to 52.2 MMT in 2016 due to a sharp decrease in winter wheat output caused by poor weather during the sowing, analyst UkrAgroConsult said on Tuesday. The wheat harvest is likely to decrease to 17.3 MMT this year from 24.8 MMT in 2015, the consultancy said in a statement.

Oil markets settled up as much as 6 percent on Monday as speculation about falling U.S. shale output and a rally in equities fed the notion that crude prices may be bottoming after a 20-month collapse. Prices began the week with a rebound in Asian trade, reacting to Friday’s U.S. rig count data. The number of oil drilling rigs in operation fell to a December 2009 low after nine straight weeks of cuts. Oil got a further boost after the International Energy Agency, the world’s oil consumer body, said U.S. shale oil production could fall by 600,000 barrels per day (bpd) this year and another 200,000 bpd in 2017. However, a Reuters poll forecast that U.S. crude inventories rose 3.2 million barrels last week to record highs above 504 million barrels. EIA will release their latest inventory data Wednesday morning.

 

 

Weekly Cash Comments

Cash Commentary-

Grain basis levels continue to be mostly flat across the US with corn inching higher by 1-cent a bushel while soybeans was unchanged for the week.

In soybeans, there was little movement overall as soy plants and river terminals as a group held steady on the week. Slowing export demand along with a wind down in the season for soybean exports is keeping basis levels flat.

For corn, export business is beginning to pick up as a weaker US dollar in the past two weeks has improved the competitive position of corn in the world market.  River terminals bid up corn basis by nearly 2 cents a bushel although the Gulf basis slumped by about 1 cent a bushel.

Futures Commentary-

Grains found support this week with corn and soybeans advancing 6 cents while wheat followed on a 4-cent gain.

Weather in South America continues to be favorable. Argentina has seen excellent rain coverage this week and soil conditions are still rated favorably for yield potential. Follow up rain in the next couple of weeks intermixed with warmer than usual temperatures and brief periods of drying will maintain a nearly ideal environment for high yielding crops. Brazil has seen beneficial rains as well although it is slowing harvest progress in some parts of the country and delaying port shipments for the time being.

On Tuesday, NOPA crush figures for January showed a significant curtailing in soybean crush. According to NOPA, January soybean crushings were only 150.45 MB versus trade expectations of 155.26 MB and a December estimate of 157.71. Export sales this week were above expectations for corn, and within expectations for wheat and soybeans.

For wheat, traders continue to monitor the situation in Egypt. The country’s agricultural quarantine authority has rejected a shipment of Canadian wheat, saying it contained traces of the fungus ergot, a trade source said as well as official documents obtained by Reuters showed. The move by the quarantine authority is the latest in a series of rejections, which have caused serious concerns over Egypt’s tough new quality rules and disrupted the country’s massive wheat imports. Russian wheat export prices fell by $2 a MT last week, hit by concerns about future supply contracts to Egypt. US export business is mostly just routine deals with Japan and other typical buyers. US wheat prices continue to be mostly noncompetitive in global markets.

Morning Comments – February 19

Grains were slightly weaker overnight with limited trade activity. In outside markets, S&P futures and crude oil slid lower while the US dollar added to its string of recent gains.

Russian Deputy Prime Minister, Arkady Dvorkovich, said on Friday that the government has not yet made any decision on whether to change the wheat grain export duty, the TASS news agency reported.  Russia’s Agriculture Ministry said earlier this month it would like to keep the wheat export duty as a means of regulating the market but would like to see it close to zero or at zero, the Interfax news agency cited the ministry’s First Deputy Minister Yevgeny Gromyko as saying.

In South America, a significant thunderstorm complex overnight brought locally heavy rain to parts of central Cordoba, central/southern Santa Fe, Entre Rios, and northern Buenos Aires. A more limited rain pattern otherwise remains anticipated for the balance of the 15-day period to keep any concerns with excessive rainfall isolated. The moisture is otherwise very timely to support high corn/soy yield potential and will prevent any stress with a brief warming (low to mid 90s in the hottest areas) early next week.

In crude oil, a record build in U.S. crude inventories last week stoked concerns over persistent global oversupply. Crude stocks rose by 2.1 million barrels to a peak of 504.1 million, data from the U.S. government’s Energy Information Administration (EIA) showed on Thursday. Iraq’s oil minister Adel Abdul Mahdi said on Thursday talks would continue between OPEC and non-OPEC members to find ways to restore “normal” oil prices after a meeting in Tehran on Wednesday.

WEEKLY EXPORT SALES

ACTUAL EXPECTED
Corn 1,297.9 600-1,000
Soybeans 595.7 400-700
Wheat 307.9 200-400

 

Morning Comments – February 18

Grains started the day on a weaker tone following two days of solid gains. In outside markets, S&P futures moved closer to critical resistance at 1940 while crude oil and the US dollar index continued to trend higher.

Argentina has seen excellent rain coverage this week and soil conditions are still rated favorably for yield potential. Follow up rain in the next couple of weeks intermixed with warmer than usual temperatures and brief periods of drying will maintain a nearly ideal environment for high yielding crops.

Fertilizer company, CF Industries, said they expect US corn plantings to move higher in 2016 by 2.5 million acres with their projection for corn acres at 90.5 million.

Consultancy Strategie Grains on Thursday increased sharply its forecast for European Union soft wheat exports in 2016/17, underlining an expected recovery in exports that it sees bringing down EU stocks next season In a monthly report, Strategie Grains put EU soft wheat shipments in 2016/17 at 30.6 MMT, up 1.7 from its previous estimate and 2.3 above the 28.3 MMT of exports it forecast for this season. The firm cited expectations of lower supply next season in the Black Sea exporting region, as well as less competition expected from other exporting countries around the world except for the United States.

Crude inventories fell by 3.3 million barrels in the week to Feb. 12 to 499.1 million, compared with analysts’ expectations for an increase of 3.9 million barrels according to industry source API. Official government data from EIA will be released today with a poll of analysts suggesting a gain of 3.9 million barrels in crude oil stocks last week. In political news, an Iranian official earlier said the fourth largest producer in OPEC would continue increasing its output until it reached levels achieved before the 2012 trade sanctions. The pact to freeze output will make little difference to this year’s overall supply-demand balance in oil, according to some analysts.

Morning Comments – February 17

Grains drifted lower overnight following Tuesday’s rally in prices, while in outside markets S&P futures and crude posted positive gains.

On Tuesday, NOPA crush figures for January showed a significant curtailing in soybean crush. According to NOPA, January soybean crushings were only 150.45 MB versus trade expectations of 155.26 MB and a December estimate of 157.71. Although soybeans sold off on that news, they quickly recovered on the day to close higher. Short-term support comes from Brazil as export loadings of soybeans and corn were double that of a year ago as rains delayed shipments, particularly for Paranagua.

For wheat, traders continue to monitor the situation in Egypt. The country’s agricultural quarantine authority has rejected a shipment of Canadian wheat, saying it contained traces of the fungus ergot, a trade source said as well as official documents obtained by Reuters showed. The move by the quarantine authority is the latest in a series of rejections, which have caused serious concerns over Egypt’s tough new quality rules and disrupted the country’s massive wheat imports. Russian wheat export prices fell by $2 a MT last week, hit by concerns about future supply contracts to Egypt.

All eyes are on the oil market following yesterday’s announcement that Saudi Arabia, Russia, Venezuela and Qatar reached a deal to freeze crude output at January levels. They now go to Tehran to try and barter a deal with Iran. “Asking Iran to freeze its oil production level is illogical… when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices. How can they expect Iran to cooperate now and pay the price?” That’s Iran’s OPEC envoy Mehdi Asali, quoted in the Iranian newspaper Shargh. Iran has said it would keep pumping until it hits pre-sanction levels.

Morning Comments – February 16

Grains came back from the holiday weekend in a buying mood with 2 to 5 cent gains going into the morning break. In outside markets, S&P futures and crude oil were sharply higher early in the night session, but had pared gains going into the morning trade.

The current lineup of ships to load soy and corn at Brazilian ports has grown to twice the number seen a year ago as excessive rains delayed loading and the weak currency boosts export sales. There are currently 163 ships waiting to load soy and corn at Brazilian ports, according to data from shipping agency Williams compiled by Reuters, with total grains volume of an estimated 9.73 MMT. At this time last year there were 66 ships waiting to load 4.1 MMT.

South America weather continues be widely favorable for crop development. Brazil weather during the weekend and that expected over the next couple of weeks will be good for most crop areas, but not the northeast where net drying is expected. Argentina weather will remain very good for its summer grain and oilseed crops.

This morning, USDA reported a fresh sale of 190,000 MT of corn to Columbia. Today at 11 am CDT, the NOPA crush estimate will be released. Analysts expect 155.267 million bushels, vs. NOPA’s December figure of 157.711 million. In January 2015, NOPA processors crushed 162.675 million bushels.

Qatar, Saudi Arabia, Russia and Venezuela agreed to freeze their oil output at January levels providing other major producers follow suit, Qatar’s energy minister said on Tuesday after a meeting of those countries’ energy ministers. However, markets sold off on this news as there is growing skepticism that other countries will unilaterally follow suit.

Weekly Cash Comments

Cash Commentary-

Grain basis levels continued to hold relatively stable this week with soybeans unchanged while corn basis was off 1 cent a bushel.

Basis levels have been exceptionally stagnate for some time. Indeed, going back to Nov 1, spot corn basis versus March corn futures has only improved 11 cents a bushel, with the majority of that move occurring in November. Likewise, soybeans has seen only an 8-cent advance in basis since Nov 1 off the March futures.

This week saw some weakness at the Gulf with both spot corn and soybean basis off 3 cents a bushel. But, river terminals saw an increase in basis for soybeans by 0.5 cents a bushel, while corn basis at river terminals was off 2.5 cents a bushel.

For end users, ethanol plants were weaker by 0.7 cents a bushel, but soybean plants posted a 1-cent advance on average for the week.

Futures Commentary-

Grains came under pressure this week with wheat giving up 14 cents a bushel, corn off 8 cents and soybeans posting only a modest loss 1 cent a bushel.

USDA’s monthly supply and demand report released on Tuesday did little to stem the tide of lower prices. Government forecasters increased their expectations on old-crop supply carry-out. Corn and wheat stocks showed the biggest increase thanks to a drop in USDA’s projections for exports. Soybean crush numbers were lowered as well helping boost soybean inventories to 450 MB. The USDA also raised its forecast of 2015/16 world wheat ending stocks to 238.87 MMT, above trade estimates. The figure would be the largest in history if realized.

In South America, the week started with favorable rains in Argentina’s dry areas and ended with more rain expected in the coming weeks. Central and southern Argentina will see regular rounds of showers and thunderstorms and enough rain should fall to maintain favorable soil conditions. Northern Argentina will see less rain than areas to the south with northwestern Argentina driest overall. Subsoil moisture in northwestern Argentina is still adequate and should be supportive of crop development for a while longer, but greater rain will be needed soon.

In export news, USDA announced flash sales of US corn to Japan and an unknown destination this week, totaling nearly 300,000 MT. But, weekly sales reported by USDA for the week prior were disappointing with net sales for old- and new-crop combined totaling only 365,000 MT versus expectations of 1,000,000 MT going into the report.

Outside markets were on shaky ground this week as global weakness continues to weigh on equities. The US dollar has fallen sharply over the last two weeks off of its highs, and many analysts look for the long-standing bull market for the US dollar to end. This would be a welcome change for US ag markets as a strong dollar has eroded US export competitiveness in the past 6 months, especially for wheat and corn.

With all of the risk in global equity markets, the silver low of $14 is quickly turning into a silver buy. Prices have shot up over 12% in the past two weeks! And are likely to see a return to the $25-mark as the US dollar weakens.

 

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Morning Comments – February 12

Grains were mixed overnight with beans giving up some of yesterday’s impressive gains, while wheat held up in positive territory. Corn was fractionally lower. Outside markets were reversing yesterday’s sharp action with equities, crude and the US dollar shooting higher while bonds were sharply lower.

The Korea Feed Association (KFA) issued a tender overnight to purchase up to 130,000 MT of corn from optional origins. The tender sought arrival of the corn around July 20 in two consignments of up to 65,000 MT.

Egypt’s state buyer GASC received five sales offers in an international tender to purchase wheat on Friday as serious concern continued over tough new quality rules which have disrupted the country’s massive wheat imports, traders said. Participation in Friday’s tender by international grain trading houses was again low compared to tenders in past months following concern about with Egypt’s limits on imports of wheat containing the ergot fungus, traders said. The lowest offer was $185.25 a MT FOB for wheat sourced from France.

Stocks got a bit of a boost this morning as US retail sales for January were in line with analyst estimates of +0.2%. Retail Sales less autos and gas +0.4% vs. +0.3% expected, +0.1% prior. Oil was higher following yesterday’s news that OPEC countries “might” begin to discuss production cutbacks.