Morning Comments – March 31

Grains were mixed overnight as traders await the results of USDA’s planting and stocks reports at 11 am CDT today. In outside markets, stock futures and crude oil were mildly higher while the US dollar made fresh lows.

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Wheat fell hard on Friday thanks to an outlook for rains in the US Plains. The best chance for rain remains in the 11 to 15 day, and some GFS guidance remains more generous in the southwest Plains than some private weather analyst models. However, the precip still misses the southwest 1/3, although rain chances do still improve in late April for the region.

Traders look for USDA’s planting reports to show 90 million acres of corn versus a range of estimates from 89 to 91, while soybean acres are pegged at 83.1 million versus estimates ranging from 81.6-84.2. Wheat is expected to see a 3 million acre drop in plantings and to come in at 51.7 with estimates from 50.7-54.8.

WEEKLY EXPORT SALES

Actual OC Actual NC Expected OC Expected NC
Corn 790 70 800-1,000 0-100
Soybeans 271 90 300-600 75-300
Wheat 317 86 150-350 75-200

 

Morning Comments – March 30

Grains were lower overnight leading up to tomorrow’s USDA report as gains over the past two trade sessions were met with some selling pressure. In outside markets, crude oil reversed course posting a nearly $1 a barrel gain and stock futures are higher.

Grain traders worried on Tuesday about the risk for reduced demand from China after the government said it would scrap its corn stockpiling program at a time when global markets are awash with excess supplies. Traders said importers in China would likely reduce purchases of farm products used to feed livestock, including sorghum and the ethanol byproduct distiller’s dried grains (DDGs). They said the policy shift is expected to bring domestic corn prices in line with cheaper foreign supplies. Last year, China imported about 40 million tonnes of substitutes for corn, including sorghum, DDGs and barley, from the United States and other countries, said Fred Gale, a senior economist for the U.S. Department of Agriculture. At times, corn prices in China were double those of the import.

Thursday, USDA is expected to report higher corn acres for 2016 with expectations running at 90 million acres planted versus 88 million in 2015. For soybeans average estimates look for a 83.1 million acre planting, which is a modest 400,000 acre increase over last year. However, the variance in the estimates is quite large, ranging from 81.6 to 84.2. USDA will also release their quarterly stocks report next week.

In crude oil, prices found support late yesterday as API crude stocks estimates were only modestly higher than expected at 2.6 million barrels higher versus an expectation of a 2.0 million barrel build on the week. This was off sharply from last week’s build of 8.8 million barrels.  IA will release official government data later this morning at 9:30 CDT and traders look for a 3.3 million barrel increase in stocks compared to last week’s 9.3 million barrel increase.

Morning Comments – March 29

Grains were mixed in the overnight trade with corn slightly weaker and soybeans posting modest gains. Wheat managed to add to yesterday’s rally in the overnight session. In outside markets, crude oil sunk nearly $1 a barrel and stock futures were lower as well.

Crop condition reports released on Monday from key winter wheat states showed little change in the crop’s quality. Number 1 producing state Kansas slipped from 57% to 56% good-to-excellent while Oklahoma was unchanged on the week at 63%. Texas inched higher to 48% versus 47% last week. Colorado showed a bigger bump going from 43% last week to 51% this week.

In corn, prices are getting closer to short term highs of $3.73 ½ against May futures set back on Feb 22. Yesterday, Mexico hedge accounts were noted as active buyers of corn calls for July, suggesting there are looking to shore up price protection on purchases.

Crude oil came under sharp selling pressure as the two-month rally has left traders wondering if it is overdone. Crude stock numbers from API will be released at 3:35 PM CDT today. Last week’s estimate showed a huge weekly build of 8.8 million barrels with traders only expecting a 2.7 million barrel build.

Fed chair Yellen is giving a speech today which will be monitored by investors. Most experts expect Yellen to re-emphasize on Tuesday her previous insistence that all meetings were “live”, meaning that rate decisions could happen at any point in time, though markets place low odds on any action happening in April.

Morning Comments – March 28

Grains were mixed overnight as soybeans and corn drifted lower while wheat posted modest advances to start the week. Outside markets for crude oil and stock indices were higher while the US dollar fell modestly.

Thursday March 31 brings news inputs from USDA as they will release their quarterly grain stocks report and spring planting intentions report. The average estimate for March 1 corn stocks was 7.801 billion bushels, with a range of 7.700 to 7.975 billion. That average would represent the largest March 1 corn stocks since 1987, and the second-most in records dating to the 1920s. For soybeans, the average March 1 stocks estimate was 1.556 billion bushels, with a range of 1.425 to 1.615 billion. For wheat, the average was 1.356 billion, with a range of 1.325 to 1.460 billion. For U.S. planting intentions, the average estimate for corn was 89.972 million acres (range 89.0-91.0), up from 88.0 million in 2015. For soybeans the average was 83.057 million acres (range 81.6-84.2), up from 82.7 million in 2015. The average estimate of all-wheat plantings was 51.702 million acres (range 50.669-54.845), down from 54.6 million in 2015.

China, the world’s second-largest corn consumer, will let the market decide domestic corn prices and scrap its nine-year old stockpiling scheme, according to a regional television report over the weekend.  Instead of propping up prices by buying up corn, Beijing will directly subsidize farmers and stop stockpiling the grain from autumn this year, state-owned Inner Mongolia Television reported over the weekend.

In oil, Dennis Gartman, noted commodity analyst, called for the bear market to continue. He believes there is a lot of crude oil that has been capped and, on the rally, those caps are coming off that production. In terms of U.S. crude, Gartman sees the near-term high-range spot at $42 per barrel. At this range, he feels that consumers will be happy as gas would remain at $2 per gallon heading into the summer. In the long-term, he feels crude will trade at a maximum price of $47. “Those are reasonably good profitable levels” for producers, he noted.

Morning Comments – March 24

Grain prices drifted lower to start the day while crude oil again fell sharply lower and stock futures were weaker in overnight trade.

Russia is set to become the world’s second largest wheat exporter in the 2015/16 marketing year, eating into Canadian and the U.S. market share, owing to a weak rouble and a decline in supplies from its main rivals, the SovEcon consultancy said. Russian wheat exports are running at a historically record pace this season, which lasts until June 30, thanks to a large crop of 61 million tonnes in 2015 and the weaker rouble.

Yesterday, EIA crude oil inventories were shockingly higher for the week, gaining 9.1 million barrels versus trade estimates of only a 3.1 million barrel increase. That sent crude prices tumbling lower by $1.60 a barrel, and that selling continued into today with another $1 a barrel loss. The US dollar kept up its winning ways, seeing its advances hold up for 6 days in a row in weakness.

OC Actual OC Expected NC Actual NC Expected
Corn 803.2 900-1100 99.9 0-200
Soybeans 410.8 400-600 29.3 75-300
Wheat 368.9 150-350 118.8 75-250

Morning Comments – March 23

Grains were weaker overnight as soybeans took a dip below their highest prices since December. In outside markets, crude oil was lower while the US dollar continued to add to its winning streak, posting positive gains for the 5th day in a row.

Soybeans got a big boost on Tuesday as the rally moved up to the highs set back in early December.  Stimulus is coming from the strength in the Brazilian Real, making Brazil soybeans more expensive in global markets, and talk of lower soybean acres by US farmers this spring. The Brazilian Real is up 12% since March 1 and reached fresh highs yesterday, but is trading lower this morning. US farmers were active sellers of cash soybeans yesterday. Basis levels for spot delivery were off quite readily in many locations yesterday.

In weather, cool temps for this weekend in the Plains are not expected to be as severe as last weekend.  Also, rains are starting to appear in the forecast for OK & KS over the next few weeks which might give the wheat market a reason to turn lower.

Market attention is also turning towards the U.S. planted area forecasts and quarterly grain stocks estimates from the U.S. Department of Agriculture on March 31. The reports could inject volatility into markets generally burdened by record-large global grain stocks. Analyst forecasts are showing 1.5 to 2.5 million more acres of corn in 2016, while soybean forecasts are somewhere between slightly lower to slightly higher than 2015. As a result, soybean prices have strengthened relative to corn on this move higher.

Morning Comments – March 22

Grains were higher overnight, while outside markets turned lower on news of a terrorist attack in Belgium.

On Monday, state USDA agency’s gave an update on HRW wheat conditions, which showed a mixed bag with Kansas and Texas each having a modest 1% improvement in the crop rating for good-to-excellent (TX 47% TW vs 46% LW and KS 57% TW vs 56% LW). But Oklahoma dropped a significant 4% with the crop going from 67% last week to 63% this week. Colorado released their first ratings of the season, showing only 43% of the crop good-to-excellent, well below 55% this time last year.

In overnight news, Japan’s Ministry of Agriculture is seeking to buy a total of 126,190 MT of food quality wheat from the United States, Canada and Australia in a regular tender that will close late on Thursday. Lebanon’s public health ministry referred a case concerning contaminated Russian wheat imports to a branch of the public prosecutor’s office on Tuesday, the state news agency said, following a dispute with the economy ministry over test results showing unacceptable levels of a toxin. The Lebanese Public Health Minister has said that tests carried out by his ministry in February showed unacceptable levels of a carcinogenic substance, ochratoxin, in wheat imports from Russia.

Twin blasts hit Brussels airport early Tuesday. They were followed by an explosion in a subway station in the city. At least 26 people were killed, according to Belgian media, 15 at a subway station and at least 11 at the airport. France and Germany’s stock markets were down 1% on the news but pared losses going into the close. US equity futures followed in sympathy.

Morning Comments – March 21

Wheat found buying interest on Sunday as cold weather in the Plains put a premium on prices, while corn and soybeans drifted lower to start the week.  In outside markets crude was modestly lower while stock futures were up going into the morning session.

Weather in Oklahoma and Kansas was colder than expected over the weekend. Extreme low temperatures down into the range of 5 to 16 degrees Fahrenheit from eastern Colorado and far western Kansas to western Nebraska might have been cold enough for permanent crop damage if wheat had reached the more advanced joint stage. Similar conditions were suspected for crops from the northern Texas Panhandle through southwestern Kansas to west-central Kansas where low temperatures were in the teens. After warming up to the 80s this week in that area, another cold spell is expected going into next weekend and some modest precip is expected in Western KS, Eastern CO and Western NE.

CFTC report on Friday showed active hedge fund buying in the past week to cover record large shorts. They were net buyers of 37K contracts of corn and wheat, and 61K contracts soybeans. This has the potential to limit buying interest going into this week with some of the pressure off of the large short positions.

In overnight news, buyers from Israel and Taiwan were in the market for corn. Brazil dockworkers were going on a strike Monday morning, demanding wage hike adjustments for inflation as the country’s main commodity markets gear up for the export season. The strike will last for a full day but could extend the strike indefinitely, union President Rodnei Oliveira da Silva said.

Oil prices slid for a second day on Monday, under pressure from signs that some of the nimbler U.S. producers increased drilling last week and from uncertainty surrounding a meeting of the world’s major exporters next month to discuss freezing output. U.S. energy firms last week added one oil rig after 12 weeks of cuts, according to data from industry firm Baker Hughes. Oil rigs have fallen by two-thirds over the past year to their lowest since 2009, and this surprise addition suggested the drop-off in crude drilling may be stabilizing after the oil price’s 50-percent rally since February.

Weekly Cash Comments

Cash Commentary-

Grain basis levels were stagnant yet again this week with the average corn basis across the country unchanged, while soybeans slipped 1-cent a bushel.

Basis levels since harvest have remained incredibly flat. For corn, the overall change in US average basis in the past 3.5 months has been only about 2-cents a bushel. Generally speaking we get at least some modest left-to-right movement in basis during the post-harvest season. In the last 5 years, only 2013 saw a drop in basis levels from December into early spring.

This week the Gulf saw mixed movement in basis levels with corn slipping 2 cents a bushel, while soybeans advanced 3 cents a bushel. Ethanol plants were mostly steady this week although Western Cornbelt plants did see some uptick in basis, with a few plants boosting basis by 3 to 5 cents a bushel. Soy plants on the other hand were off 1-cent a bushel on average and Western Plants were more susceptible to weakness than the East.

Futures Commentary-

Grains were stronger to start the week but began to falter by the end of the week as wheat slid lower. By the end wheat was off 13, while corn and soybeans managed a 3 and 2-cent advance respectively.

The week started with CFTC showing a record large short position in the corn market, which helped push prices higher as some short-covering got the week off to a positive start. Weekly EIA ethanol production came in on the high side, reaching its highest point since January, while weekly export sales of corn topped analyst expectations coming in at 1.2 MMT versus trade expectations ranging from 0.7-1.1 MMT.

For soybeans, the slide in the US dollar is starting to have a noticeable impact on FOB grain price comparisons around the globe. Thursday, the US soybean FOB price dropped below Brazil’s price for the first time since the US harvest in October. For most of the US post-harvest season, the strong dollar has put US soybeans at a $0.40 a bushel premium to Brazil, but that quickly reversed in the last week thanks to the falling US dollar and strengthening Brazilian Real. The Brazilian Real has strengthened 8 percent in the last two weeks thanks to political upheaval that has the country calling for a new leadership.

For wheat, prices had rebounded sharply to start the week but sold off quickly on Thursday giving up half of the gains accumulated in the last two weeks. Dry weather in the Plains, and threats of a potential cold snap this coming weekend had helped lift wheat prices off of the lows established on March 2nd. But, this weekend’s weather seems to be bringing some moisture potential to Oklahoma and Kansas and the latest temperature outlook is not as cold as previously feared. Even so, the longer-term forecast seems to point to below normal moisture in April and May for the Southern Plains, which could spell problems during the key growing season.

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Morning Comments – March 18

Grains were subdued overnight as corn and wheat were mostly unchanged, while soybeans recovered to above $9 a bushel on front month May.  Crude oil added to its winning streak overnight trying to make a third-day in a row of gains, and up $11 a barrel since its low on Feb 11. The US dollar index also found some modest support after two days of an intense sell off.

The slide in the US dollar is starting to have a noticeable impact on FOB grain price comparisons around the globe. Yesterday, the US soybean FOB price dropped below Brazil’s price for the first time since the US harvest in October. For most of the US post-harvest season, the strong dollar has put US soybeans at a $0.40 a bushel premium to Brazil, but that quickly reversed in the last week thanks to the falling US dollar and strengthening Brazilian Real.

In wheat yesterday, markets sold off sharply in Kansas City with somewhat of an improved outlook this weekend’s weather. Forecasters see temperatures not as cold as originally expected in the Plains. Previous forecasts of a hard freeze in Kansas and Colorado had put a bit of a weather premium into wheat in recent days.

The corn market came close to overhead resistance early Thursday at $3.73 and quickly turned lower on wheat’s sharp retreat. However, there is still gap support at $3.65 which is the key to shifting this pattern back down. Right now, it looks like that will be our near term range.

In oil, anticipation has grown that major oil producers, including countries outside the Organization of the Petroleum Exporting Countries, will join a production freeze at January levels. A meeting is set in Qatar on April 17 to discuss an output freeze. Many analysts say the market needs to see more a definitive reduction in supply in order for crude to continue its rally. Some countries indicated that participation by Iran wasn’t required for a deal. Iran is set to ramp up output following the removal of international sanctions.