Morning Comments – February 28

Turnaround Tuesday was in check this morning with grains turning higher in early trade as beans lead the complex with an 8-cent advance. The US Dollar continued to weaken as did crude oil adding to yesterday’s losses.

Winter wheat ratings were out for select states after the close on Monday. HRW wheat states continue to see poor conditions especially in the Southern Plains relative to last year. The outlook for moisture in the next month is limited with temperatures expected to be above normal, helping push the crop out of dormancy.

Winter Wheat Crop Conditions (Good-to-Excellent Rating)

State

% G-E Feb

% G-E Jan

% G-E Last Year

CO

40

36

45

IL

72

74

58

KS

43

44

59

MT

51

70

53

NE

44

47

59

ND

81

82

55

OK

43

33

68

SD

57

62

69

TX

34

30

40

Egypt was in the market overnight for wheat with the lowest offer submitted being French wheat at $197; the results should be out later today. Iraq was also in the market for wheat while a South Korea feed buyer was shopping for soymeal.

China’s crush rate has been ticking up as hog profitability has improved slightly. Imports of soybeans into China are expected to be a strong 7 MMT when published at the end of March. Brazilian FOB bean prices continue to hold firm at a $2.5/MT premium to US FOB prices vs last year when Brazil was at a $12/MT discount. Slow farmer selling in Brazil continues to keep bean supplies to the world market somewhat limited.

Morning Comments – February 27

Grain markets continued to show little direction to start the week as soybeans were higher while wheat was lower. Corn spent most of the night session fractionally higher. In outside markets crude oil was higher.

On Friday, USDA’s cattle on feed numbers matched closely what analysts had been expecting. The February Cattle on Feed inventory was reported at 10 Million head, 101% of a year earlier while January placements were
111% of a year earlier.

Palm oil continued to sell-off overnight as did China’s soybeans. On Friday, January soybean imports into China were reported at 7.66 MMT That’s off from 9.0 last month but above the 5.6 imports of January 2016. Marketing year-to-date China’s soy imports are up 5.5% over the same 5-month period last year while USDA has penciled in a 3.3% advance for the year.

South America weather was yet again favorable over the weekend. Weekend rains favored north 1/2 Brazil corn/soy. Center-West Brazil rains are expected this week to support safrinha corn. The 6-15 day rains cause minor fieldwork interruptions farther south. In Argentina, weekend showers favored S. & far W. The 6-10 day shows a break in rain which should allow wet spots in NW Buenos Aires to ease.

The dollar edged up from a 2-1/2-week low on Monday but traders await guidance from U.S. President Trump on his economic agenda. Trump is set make his first major policy address to the U.S. Congress on Tuesday, and is expected to give some details on his planned infrastructure spending and tax reform.  Traders will look for action plans vs vague ideas in the speech after 3 months of banking on Trump’s economic stimulus trade.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)

 

Weekly Cash Comments

Cash Commentary-

Grain basis was mostly flat this week even with a sharp sell-off in futures prices.

In corn, there was some modest strength in Western Cornbelt processors. River terminals however saw more strength as basis levels improved 2 cents a bushel on average.

Conversely, soybean basis slipped by 1 cent a bushel while soybean plants were mostly unchanged for the week.

First notice day for grain is on Tuesday which will see grain buyers rolling out of March contracts.  With little need for extra pipeline supplies it seems likely that buyers may use the roll to reduce basis.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)

Futures Commentary-

Grain markets were off this week with soybeans giving up the most ground with a 32-cent loss while corn and wheat were off 8 and 10 cents, respectively.

South America continues to see nearly ideal growing conditions and soybean harvest in Brazil continues to speed along. This week, Agroconsult bumped their Brazil soybean crop forecast to 107.8 MMT, which is above the 104 number used by USDA. For corn, they estimate the Brazil crop at 93.0 vs USDA at 86.5 MMT.  In Argentina, the Ag Minister there projected the recently harvested wheat crop to be 18.3 MMT, also well above USDA’s forecast of 15.0 MMT.

On the demand side, weekly ethanol numbers continued to point to lower production and growing inventories. Weekly production was off for the 3rd week in a row hitting 1,034 million barrels per day but was up 4 percent from the same week last year. Export sales this week were disappointing for both corn and soybeans coming in below analyst expectations, while wheat posted better than expected sales.

At the end of the week, USDA’s Ag Outlook Forum released some first-look estimates of new-crop 2017 US grain. On the acreage side, USDA expected a 4.7 million increase in US soybean plantings over last year with acreage expected to eclipse 88 million. For corn, they expect acreage to fall by 4 million to 90 million and wheat acres to slide to 46 million from 50.2 million last year. In terms of ending stocks, USDA only sees a slim 105 MB drop in ending stocks to 2,215 MB from the current year forecast of 2,320. In soybeans USDA kept ending stocks the same year-on-year at 420 MB even with a 4.7 million acre increase as they expect soy yields to average 48 vs 52 last year. Wheat did see a sharp drop in carry-out which USDA pegs at 905 MB for next year versus 1,138 this year.

Morning Comments – February 24

Grains were mixed overnight with soybeans turning higher for the first time in 6 days while wheat and corn dipped lower. In outside markets, crude oil and the US dollar were lower in early trade.

USDA’s Ag Outlook Forum released carryout estimates for the 2017 US crops. Yesterday, USDA forecasted corn plantings at only 90 million acres, off 4 million from last year but this morning’s carryout projections show only a slim 105 MB drop in ending stocks to 2,215 MB from the current year forecast of 2,320. In soybeans USDA keep ending stocks the same year-on-year at 420 MB even with a 4.7 million acre increase as they expect soy yields to average 48 vs 52 last year. Wheat did see a sharp drop in carryout which USDA pegs at 905 MB for next year vs 1,138 this year.

In South America, rains favored central and southern Brazil yesterday benefiting drier corn/soy areas with harvest interruptions very limited. This weekend rains will shift to the drier NE. Central and west Brazil should have limited rains until mid next week aiding corn/soy harvest and safrinha seeding. Showers were isolated in Arg. corn/soy yesterday but late next week should see new moisture aiding corn/soy filling but raising risk of early harvest delays.

Export sales were disappointing for both corn and beans as old- and new-crop deals were below trade expectations.

Weekly Export Sales-

Actual

Expected

Wheat – OC

451

350-550

Wheat – NC

256

0-50

Corn – OC

743

800-1,100

Corn – NC

264

300-500

Soybeans-OC

413

550-850

Soybeans-NC

28

100-300

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)

 

Morning Comments – February 23

Grains dipped lower overnight as the prospect of a big South American harvest looms over the complex. In outside markets, crude oil rallied into the mid-$54 mark ahead of fresh data from EIA on crude stocks.

Yesterday after the market close Agroconsult pegged the Brazil soybean harvest at 107.8 MMT vs its previous forecast of 105.3 MMT and above the latest USDA figure of 104. Likewise, the boosted corn output to 93 MMT well above USDA at 86.5 MMT.

This morning USDA’s Ag Outlook Forum kicked off with USDA forecasting US corn plantings at 90 million acres in 2017 vs 94.0 planted last year. For soybeans, USDA penciled in a 4.6 million acre increase to 88 million while wheat acres are expected to fall to 46.0 vs 50.2 last year. These estimates are not based on surveys but instead on analyst forecasts.

Delays in corn shipments from the US appear to be giving China an opportunity to deal corn to Japan and South Korea. One deal is close and talks have begun on two more, sources said, with China benefiting from its close proximity to big Asian customers and bulging stockpiles left over from a now-abandoned farmer support scheme. Although the volumes are small, it still is a bearish development at a time of huge US stockpiles and strong export demand in the past 6 months from the US.

EIA crude stocks are expected to grow 3.5 million barrels according to an average of industry analysts. Last week’s inventory was up 9.5 million barrels and 6 weeks in a row stock levels have come in higher than industry expectations.

Over the last week US export competitiveness has generally improved. The ongoing strength in the Brazilian Real continues to help the US competitive position in corn and soybeans against Brazil.

WORLD EXPORT PRICE SPREADS RELATIVE TO US

Crop

Country

Today

Last Week

Last Year

CRN

BRZ

-$20.0

-$20.9

-$21.9

CRN

EUR

+$1.6

-$0.9

-$21.2

SBN

ARG

-$5.2

-$6.4

-$31.3

SBN

BRZ

+$2.5

+$1.3

-$22.1

WHT

EUR

-$11.9

-$20.8

-$45.9

Export spreads represent a foreign country price minus US price at export destinations, in USD per metric ton.  A higher spread indicates the foreign price has risen relative to US prices, making the foreign country less competitive and the US more competitive.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)

Morning Comments – February 22

US soybeans, wheat and corn rose on Wednesday as traders took positions ahead of a USDA forum this week which is expected to shed light on what crops US farmers are planting for this summer’s harvest. But, gains were limited by huge new soybean crops expected in South America.

US soybeans edged up for the first time in four sessions on Wednesday to move away from a three-week low, though ample global supply capped gains.

Traders are awaiting acreage forecasts from the USDA forum to gauge an expected drop in US wheat sowings and a shift from corn towards soybeans. There are very wide ranging ideas about what the changes in US sowings will be this season, with estimates of the switch from corn into soybeans from 2 million acres to as much as 5 to 6 million acres.

The US has crushed an unprecedented amount of soybeans since the harvest began last fall, but there have not been as many buyers as processors had hoped for, and this could end up burdensome on domestic soybean supply. Data released by the National Oilseed Processors Association showed that its members crushed 160.621 million bushels last month, which marked the third busiest January on record and edged analyst estimates of 159.141 million.

The government report Export Inspections of US wheat in the latest week at 558,252 tonnes, topping a range of trade expectations for 350,000 to 550,000 tonnes. Corn inspections were 1,152,233 and soybeans came in at 1,076,390.

A Libyan state grain buying agency has again delayed the offer deadline in an international tender to purchase 100,000 tonnes of milling wheat, 50,000 tonnes of durum wheat and 75,000 tonnes of yellow corn this time to February 28th European traders said on Wednesday. The deadline for the tender, which also seeks 75,000 tonnes of feed barley and 25,000 tonnes of soymeal was February 19.

Brazil rain favored Rio Grande do Sol & Mato Grosso yesterday, not excessive but persists through the week; rains increase in C-S Brazil through the weekend and early next week expanding minor harvest delays. Showers expand to ease dryness in NE Brazil; locally heavy rain fell in S Buenos Aires in Argentina yesterday but excessive wetness still very limited.

Global stocks hit record highs on Wednesday, topping 2016’s gains just two months into 2017, while the dollar rose before Federal Reserve; minutes that will be scoured for clues about the next US interest rate rise.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)

Morning Comments – February 21

Grains were mixed overnight with soybeans at one point up 10-cents a bushel before backing off to a 3-cent advance. Corn and wheat were in negative territory to start the week. In outside markets, the US dollar shot higher on weakness in the Euro while crude oil was up a $1 a barrel.

Exporters sell 138,650 metric tons of wheat for delivery to unknown destinations, of which 92,650 MT is for 2016/2017 delivery, 46,000 MT is for 2017/2018 delivery.

Exporters sell 111,200 metric tons of corn for delivery to unknown destinations during the 2016/2017 marketing year. Lastly, exporters sell 269,296 metric tons of corn for delivery to Japan; of which 104,704 MT is for 2016/2017 delivery, 164,592 MT is for 2017/2018 delivery–USDA

Rains in Argentina over the weekend were mostly beneficial to some areas in the south of the country’s main grains belt that had been dry, while more central regions received lighter rains that were also helpful. Rains will continue to be above normal levels throughout this week. In Brazil, soy harvest continue to speed along at 24.8% harvested, above the five-year average of 17.1% for this time of the year. Weather maps show conditions will remain mostly dry over the next days, allowing farmers in Mato Grosso do Sul, Goiás and Paraná to continue strong.

The Korea Feed Association (KFA) purchased about 62,000 tonnes of corn in a tender Tuesday which can be sourced from optional origins including east Europe. Mills in the Philippines bought two cargoes or about 54,000 tonnes of Australian wheat in recent deals for shipment in June and July while Indonesian buyers are in the market to book cargoes of May delivery.
Australian Standard Wheat (ASW) was traded into the Philippines at $205-$210 a tonne, including cost and freight.

Malaysian palm oil futures slid for a fourth consecutive session on Tuesday, hitting their lowest in 15 weeks as expectations of higher production and ample supplies of rival soybean oil weighed on the market. Benchmark palm oil futures for May delivery closed down 1.7%, the weakest since Nov. 8

Crude oil hit its highest mark since February 2nd as funds continue to plow into record-long positions. OPEC continues told firm to its November deal to reduce output by 1,8 million barrels per day, but crude stocks continue to balloon. U.S. crude oil and gasoline inventories soared to record highs last week as refineries cut output and gasoline demand softened.

 

Weekly Cash Comments

Cash Commentary-

Grain basis was mixed this week as corn basis came under some modest pressure giving up 0.5 a cent a bushel on average across the U.S. Soybeans posted a nearly 1-cent gain on the week.

This week, there was clear dichotomy between end users and river terminals. End corn users were clearly lower this week especially in the Western Cornbelt. Corn basis at ethanol plants across the US averaged a 2 cent slide. Losses of 4 to 6 cents were typical in the Western Cornbelt. Meanwhile, river terminals firmed as strong export demand and approaching First Notice Day for March futures pushes basis levels to converge at river markets. For the week, corn river terminals gained 3 cents a bushel.

For soybeans, similar forces were at play with river terminals up nearly 5 cents on average for the week, while crush plants as a group were unchanged. The Northern Plains and Upper Midwest continues to be plagued by weak basis levels as rail delays in the PNW regions put load-outs behind schedule and keep basis levels on the defensive.

Futures Commentary-

Grains were mixed this week as competing forces of strong demand and potential big supplies from South America continue to see-saw prices. For the week, corn and wheat were in positive territory posting 4-cent gains while soybeans gave up 6 cents.

In South America, Brazil continues to move quickly through soybean harvest in Mato Grasso although Parana has been behind pace. Farmer selling has been mostly light in the early stages of harvest but port supplies have been sufficient to meet ship loading schedules. Harvest is expected to increase in Brazil in the coming weeks with second season Safrina corn planting expected to improve. Trade expectations continue to point to a bigger soybean crop in Brazil of 105 to 106 MMT vs USDA at 104 MMT.

In wheat, world wheat growing conditions look mostly favorable with the only lingering issues being India where dryness is leading to some crop losses and is not expected to see much rain in the near term. In Europe and in the US Southern Plains, it has been dry but moisture is expected in both areas in the 6 to 10 day outlook.

On the demand side, ethanol production was off 15,000 barrels per day this past week, but still maintains a strong pace above last year. But, ethanol stocks continue to balloon as inventories approach all-time highs set last year. On the export front, corn exports have been seasonally strong and so far remain well above the pace needed to reach USDA’s annual forecast. But rumblings with Mexico are causing some potential concerns. Mexico’s ag minister will take a delegation to Brazil and Argentina to explore options for increasing corn exports as a way to mitigate potential political risk with the US. Right now, Mexico continues to be the number 1 buyer of US corn thanks to simple price economics, but policy makers could change that equation if tariffs or quotas become enacted to favor SA over the US.

Next week, USDA will hold its annual ag outlook forum where it will release its new crop supply and demand forecasts. These are not based on formal surveys, but so far analysts are looking for soybean acres to increase 4 to 6 million acres and corn acres to fall by 3 to 5. Formal surveys by USDA conducted on March 1 will be released at the end of March.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)

Morning Comments – February 17

Grains continued to slide heading into the last day of trade before the weekend.

USDA reported this morning exporters sell 119,112 metric tons of corn for delivery to Japan, of which 60,000 MT is for 2016/2017 delivery; 134,112 MT is for 2017/2018 delivery.

Palm Oil continues to sink hitting a fresh 3-month low overnight. Production levels continue to move higher as exports remain unclear with increased veg oil supplies from South America.

On Thursday, USDA released their baseline 10-year projections ahead of their outlook conference next week. USDA shows a 2.2 billion carry-out for next year’s crop, not hugely different from 2.3 billion for the current year. This is assumed from a 90 million acre crop next year with a 170 bu yield. For soybeans, they look for carry-out to shrink to under 400 MB but that is based on assumed 1.8 million acre increase in soybean plantings this spring to 85.5 million. Most analysts are looking for a soy acreage in the 87 to 89 range.

In export news, Egypt’s GASC is in the market for wheat again overnight. The lowest offer was from Russia at $195 a ton. US wheat was also offered up at $208 per ton. The results of the tender will be announced later today.

Morning Comments – February 16

Grains faltered in early trade after solid advances posted on Wednesday, although export sales ahead of the morning break added some buying strength to wheat and soybeans. Outside markets showed the US dollar correcting lower on steady gains in the last week while crude oil was in positive territory.

Corn has rallied to fresh highs on this move with March hitting $3.79 in yesterday’s trade, the highest market since July. Funds were buyers of 13,000 contracts on Wednesday and seemed to be the main culprit behind the bullish momentum with an estimated net long of 43,000 contracts.

Heavy rains are expected in Southern Argentina over the next 7-10 days with Buenos Aires, Entre Rios, Southern Santa Fe and Northern La Pampa getting the most moisture. In Brazil, weather looks to improve harvest targets as expected rainfall totals decrease from Parana to Bahia. In Mato Grosso however, the conditions are wet and looks to stay wet over the next few days, however rains should back off and give the area time to dry next week.

Consultancy Strategie Grains on Thursday raised its forecast for this year’s corn crop in the European Union but left its soft wheat crop forecast unchanged as it estimated that cold weather had caused no additional damage from last month. Strategie Grains pegged the 2017 soft wheat crop at 143.8 million tonnes, a forecast that would be 6 percent above estimated production of 135.7 million tonnes last year when output was curbed by a very poor harvest in top EU wheat grower France.

Weekly Export Sales-

Actual

Expected

Wheat – OC

569

300-500

Wheat – NC

20

0-50

Corn – OC

784

900-1,100

Corn – NC

285

0-150

Soybeans-OC

890

500-750

Soybeans-NC

207

50-150