Weekly Cash Comments

Cash Comments - 

Grain basis inched higher this week for both corn and soybeans with 1-cent advances on average across US buyers.

The backdrop of weakness in futures and looming uncertainty around the end-of-week USDA report kept most people holding tight. Farmers still seem to hold a lot of cash corn and a high percentage of it unpriced. In corn, ethanol plants had bit of upside this week gaining 1.7 cents on average across 142 plants. The Western Cornbelt has seen some decent gains in spot basis over the past few weeks. ADM Columbus has boosted its basis by 15 cents a bushel in the past two weeks and a limited number of other buyers in the WCB seem to be showing a similar appetite to attract more grain.

For soy crush plants, average basis across 47 plants was up 1.6 cents a bushel, slightly better than the US average change. A few plants in the ECB did boost basis by a dime, but the vast majority were flat and continue to have weak basis as compared to historical norms for this time of year.

River terminals for both corn and soybeans posted average gains of 1 cent on the week. However, considering a decline in Gulf basis of 5 and 3 cents for corn and soybean basis, respectively, it was fairly remarkable that interior basis was able to hold up along river markets

Futures Comments - 

Corn and wheat managed to hold steady this week heading into Friday’s USDA crop report, while soybeans felt pressure from South America and gave up 28 cents on the week.

Brazil continued to see good yield and production potential as harvest there reached the two-thirds complete mark. Brazilian analyst Agroconsult pegged the soy crop there at 113 MMT versus a previous forecast of 111 MMT and well above USDA which was at 108 MMT. Their latest forecast was based on a crop tour which suggested record yields in many growing regions. For corn, they kept their forecast at 95 MMT also above USDA at 91.5 MMT. In Argentina’ harvest is just getting under way and rains this week slowed the progress but the longer-term 11 to 15 day outlook looks dry which should keep harvest moving without serious interruptions.

In the US, rains swept across the Southern Plains mid-week helping bring relief to drought stricken areas of Kansas, Oklahoma and Missouri. More storms are expected this weekend and into early next week which will also fuel growth for winter wheat areas.

In corn, ethanol production was up sharply for the 2nd week in a row bucking the normal seasonal trend of heading lower. But, ethanol stocks ballooned on the week as gasoline usage continues to falter. Export business for corn was weak in the latest weekly report from USDA but still remains reasonably robust. There has been increased competition from Southern Hemisphere players like South Africa and South America has harvests there recovers and leads to more exportable supplies.

At week’s end, the USDA plantings report gave some surprises as corn acres were lower than expected and bean acres were higher than expected. USDA pegged corn plantings at 90.0 million acres, below trade estimates of 90.96, and off 4 million acres from 2016. Bean acres were at 89.5, higher than average estimates of 88.2. Meanwhile, wheat acres were mostly as expected at 46.1, off 4 million from last year. However, universally, Quarterly stocks as reported by USDA were all higher for corn, soybeans and wheat higher than expected. Overall, this report does little to stem the bearish slant to the market.

Morning Comments – March 31

Grains were showing modest gains going into today’s big crop report.

Yesterday after the close, Brazilian analyst Agroconsult pegged the soy crop there at 113 MMT versus a previous forecast of 111 MMT and well above USDA which was at 108 MMT. Their latest forecast was based on a crop tour which suggested record yields in many growing regions. For corn, they kept their forecast at 95 MMT also above USDA at 91.5 MMT.

Rains continue to look plentiful for the Southern Plains, benefitting the HRW crop. Heading into April, weather forecasts point to plentiful rains in the Midwest, with some cold temps possible in the 2nd week of the month. The most likely scenario seems to point to high rainfall throughout most of the region, with the main risk being excessive wetness that could slow the planting pace.

Today’s crop report will provide the first guidance on 2017 supplies as USDA releases its farmer-based survey on planting intentions. Traders expect 3 million fewer acres of corn, 5 million more acres of soybeans and 4 million less acres of wheat. Corn stocks will also be closely followed for indications on feed use for Q2.

Watch Thursday’s GrainTV for our perspective on the report Link to GTV

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 – March 30

One day to go until USDA’s crop reports that are expected to breath new life in the markets. In the meantime, grain prices continue to be in a stalemate with a modest downward bias.

USDA reported the sale of 165,000 MT of soybeans to China.

Overnight China’s corn futures fell for a 2nd day in a row fueled by talk that the state may release grain from its huge stockpiles earlier than planned and at a lower price.

Weekend rains in Argentina are expected to slow the corn and soy harvest there with some flooding in the Western areas. Lighter rains are expected there next week, but widespread issues to disrupt the harvest or cause yield losses are not expected. Brazil continues to see a dry spell helping move along soy harvest and timely rains are expected mid next week to aid the 2nd season safrinha crop.

Looking ahead to Friday’s Quarterly Stocks report, all eyes will be on corn stocks which are pegged to be 8.53 billion bushels with a wide range of estimates from 8.2-8.9. Implied corn feed use from this report will be widely watched and based on expectations for stocks, this would put feed use for Quarter 2 at 8% over the previous year’s mark. That would be a sharp jump from Q1 which was up 3.6% for the year. Keep in mind USDA has penciled in an 8.4% increase in feed use for the entire marketing year, so the bar is set high for the remainder of the year.

Weekly export sales reported by USDA this morning were strong for wheat and soybeans, but disappointing for corn.

Export Sales-

Actual

Estimated

Wheat – OC

464

250-450

Wheat – NC

164

50-200

Corn – OC

717

900-1,200

Corn – NC

125

100-300

Soybeans-OC

681

350-550

Soybeans-NC

316

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 – March 29

The recovery in ag grains entered Day 2 with little upside enthusiasm. In outside markets, US dollar crude oil and equities turning higher.

The weather forecasts proved true in the S Plains as 1.5 to 3.0 inches of rain rolled across the region yesterday and will finish up today. Another system is expected starting this weekend and extending into next week to bring more rains. Two additional slow-moving low systems are expected to come out of the southern Rockies and into the southern Plains and Midwest. These storm systems should have ample rainfall totals across core winter wheat and spring crop regions of the southern Plains & the Midwest into mid-April. Many of these areas are in need of precipitation, so this active pattern should benefit wheat as well as soils ahead of corn and soybean plantings.

The trade action in grains will likely be listless leading up to Friday’s crop report. polls are out on expectations for the March 31 planting report. On average, analysts look for corn acres of 90.9 million vs 94.0 last year and soy plantings of 88.2 as compared to 83.4 in 2016. All wheat acres in the US are expected to slip to 46.1 from 50.2 last year.

Oil World on Tuesday pegged Brazil’s soybean crop at 108.5 MMT of production and at least 61.4 MMT of soybean exports during 2017. These are slightly higher than USDA figures of 108.0 and 61.0, respectively.

Data on US crude oil inventories from government forecaster EIA will be widely watched this morning at 9:30 CDT. Analysts expect crude stocks to grow by 1.36 million barrels on the week. Last week, stocks ballooned 4.95 million barrels. API data from yesterday showed a 1.9 million barrel increase in stocks.

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 – March 28

Grains were posting a modest bounce higher heading into the morning session. In outside markets, the US Dollar was also trying to recover from Monday’s losses while equities had some minor losses to start the day.

Crop reports from various state agencies were reporting on winter wheat ratings. In KS & TX, the wheat crop was rated at 38% and 34% good-to-excellent, respectively for the two states, unchanged from last year.  In OK, the crop ratings dipped to 37% from 40% last week. In North Dakota crop ratings are 79%, Montana 62% and South Dakota at 62%.

Overnight, India announced a 10 percent import tax on wheat, reinstating the tariff after a gap of nearly four months that saw large overseas purchases. The government wants to curb imports when Indian farmers are starting to harvest their crops. India, the world’s second-biggest wheat producer, lowered the import tax wheat to 10% from 25% last September and scrapped the duty on December 8.

South Korea’s largest animal feed maker Nonghyup Feed Inc. (NOFI) purchased around 55,000 tonnes of soymeal in a tender for the same volume on Tuesday to be sourced from South America. Algerian agency ONAB purchased about 25,000 tonnes of optional-origin corn in a tender, also likely to come from South America.

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 – March 27

Grains were mostly weaker overnight with wheat and soybeans pushing to the downside while corn was trying to hold on to modest gains. In outside markets, the US dollar slid to fresh lows since November while equity futures were showing heavy losses going into the opening bell.

Palm oil hit a 5-month low and Chinese soybeans were down 27 cents a bushel in overnight trade weighing on the US bean complex this morning. The Korea Feed Association purchased around 55,000 MT of soymeal thought likely to be sourced from South America in a deal on Friday. Over the weekend, China lifted its ban on Brazil meat as did Egypt and Chile. The Brazilian government lobbied hard to get the ban removed citing the problems as isolated to a few bad plants.

Rains continued to be featured heavily in the Plains, Delta and Southern Midwest over the next 10 days which should help ease drought concerns. A rain system Tues-Thur of this week should hit much of OK/KS to help the winter wheat crop there.

Early polls are out on expectations for the March 31 planting report. On average, analysts look for corn acres of 90.9 million vs 94.0 last year and soy plantings of 88.2 as compared to 83.4 in 2016. All wheat acres in the US are expected to slip to 46.1 from 50.2 last year.

Financial markets were facing a wave of selling following Friday’s collapse of the healthcare reform bill. The failure by the new administration is causing a loss in confidence in other potential economic policy initiatives like tax reform and infrastructure spending to become enacted in the future.

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 continued to show little upside life this week even with the ongoing slide in futures prices. For the week, spot corn basis across the country managed a 1.3 cent advance while soybean basis was up 0.8 cents a bushel.

WEEKLY BASIS CHANGES

  CORN SOYBEANS
US AVG +1.3 C +0.8 C
PROCESSOR +1.6 C +1.8 C
RIVER TERMINALS -1.3 C +0.2 C

 

Corn basis found some strength thanks to some modest strength at ethanol plants, which rose 1.6 cents on the week. Ethanol production continues to hold firm and is outpacing last year’s tally by 5%. At river terminals this week, basis levels dipped lower although export pace continues to be good with sales on the week of 1.3 MMT topping market expectations.

In soybeans, basis levels showed more upside at processors as crush margins improved this week as bean oil bucked the trend of lower soy and meal prices. River terminal basis was mostly flat but there was some notable weakness at IL river terminals.

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-

Grains were under intense selling pressure this past week with double digit losses pushing grain prices to their lowest marks in nearly six months. For the week corn and soybeans were off 10 while wheat suffered a 15-cent slide.

In wheat, the prospects of rain in the drought-stricken southern Plains over the next two weeks has sent the wheat market sharply lower. However, the latest model guidance for the 15-day total shows moisture levels that are slightly lower in key states than was previously projected. The bulk of the rain is expected next Wed/Thu and then another system on the following Sat/Sun.

Private weather forecaster Planalytics gave their first forecast of Winter Wheat Yields based on satellite imagery data of the crop, which measures plant health based on greenness. They project 2017 US average Winter Wheat Yield at 48.2 bushels per acre, off from last year’s WW average of 55.3, and slightly below trend yield of 48.5. That’s a 13% drop in yield compared to last year. When combined with lower acres, that likely puts carryout levels for wheat into the 850 to 900 MB range for 2017 vs 1,129 MB currently for old-crop 2016.

On March 31, all eyes will be on the results of USDA’s first survey of farmers planting intentions for spring crops. Most traders look for about a 5 million acre increase in soybean plantings over last year and a 4 million acre drop in corn plantings. All wheat acres are expected to be off about 3.5 million from last year.

In international news, Brazil’s meatpacking industry was raided this week by government officials following a police investigation into corruption involving food-sanitation inspectors and accusations that rotten products were sold. Major buying countries like China and the EU were quick to suspend shipments and are likely to restrict Brazilian beef imports for the near-term. The prospect for weaker feed demand in the country seems very real which could force even more grains in SA to hit the world market.

Morning Comments – March 24

Grains were mixed overnight as wheat took a break from its recent slide and inched higher while soybeans continued to see mounting losses, reaching their lowest mark since October.

Overnight, the Taiwan Flour Millers’ Association purchased 98,200 MT of milling wheat to be sourced from the US in a tender which closed on Friday. Jordan was also in the market for 50,000 MT of hard red milling wheat. Grain industry lobby Coceral on Friday forecast that soft wheat production in the 28-country European Union would rise to 144.8 MMT this year from 135.1 in 2016.

The US weather forecast continues to show good chances of rain in the drought-stricken areas of the Southern Plains. However, the latest model guidance for the 15-day total shows moisture levels that are slightly lower in key states than was previously projected. The bulk of the rain is expected next Wed/Thu and then another system on the following Sat/Sun.

Brazil continues to have fallout from its meatpacking crisis. The EU has asked Brazil to voluntarily suspend all shipments of meat to its member countries to avoid imposing a ban that would take time to lift. Brazilian meat exports are in a tailspin following a police investigation into corruption involving food-sanitation inspectors and accusations that rotten products were sold. The prospect for weaker feed demand in the country seems very real which could force even more grains in SA to hit the world market.

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 – March 23

Grains continued to bleed lower overnight while in outside markets crude oil, equities and the US dollar were on the positive side of the ledger for this first time this week with limited gains.

Russia’s SovEcon agriculture consultancy said on Thursday it had downgraded its forecast for Russia’s 2017 grain crop to 109.5 MMT from a previous forecast of 112.5 MMT. SovEcon also sees the country’s wheat crop at 62.5 MMT in 2017 compared with 73.3 MMT in 2016.

Brazil soy yields are reported to be very good but farmer sales are said to be slow. Palm Oil continued to be weaker overnight adding to losses early in the week. China’s soybean imports in February were at 7.5 MMT, down 4% from the same month last year. Argentina corn harvest is said to be speeding along and port deliveries by truck are said to be record large.

Weekly export sales were supportive for old-crop corn and soybeans. Overnight, Japan bought 59,000 MT of US wheat in their normal tender purchase of 117,689 MT of food wheat. The remainder will be supplied by Canada and Australia.

Export Sales-

Actual

Estimated

Wheat – OC

418

250-450

Wheat – NC

149

50-250

Corn – OC

1,347

900-1,200

Corn – NC

127

100-300

Soybeans-OC

738

350-550

Soybeans-NC

80

100-300

Financial markets will closely watch the Thursday vote in the US House on the Republican led healthcare law. A failure to move this policy forward, would likely signal a bleak outlook on financial policy changes like taxes and infrastructure that market participants have been betting on.

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 – March 22

Grains inched lower overnight with KC wheat continue to take the leader position on the downside. In outside markets, crude oil was pushing into new lows, off 60-cents a barrel and the US dollar and equities were pointing slightly lower following yesterday’s sharp slide.

USDA reported a 120,-000 MT of HRW wheat was sold to Saudi Arabia and 120,000 MT of soybeans were sold to China.

Rains is still in the weather cards for the coming weeks over the Southern Plains. However, overnight model guidance shows less rainfall (vs. yesterday) through month’s end across the Texas and Oklahoma US wheat crop areas, but maintains near to above widespread 1.0 inch totals across much of Kansas.

In China, soy crush margins continue to come under pressure with crush margins dipping to their lowest level in 18 months. Rapid expansion of the soy crush margin in the Fall of 2016 helped push a buying spree of US soybeans, but with China’s margins under pressure and South America competition, it could be a dismal period of US export activity.

Yesterday, US equities and the dollar index came under selling pressure. In part, the dollar continued its lower trend on the Fed’s announcement they would take a less hawkish approach to future rate hikes than investors had thought. Furthermore, stocks are seeing pressure in auto- and consumer-sensitive areas suggesting the economy may not be as strong as expected. Also, investors will be watching the political theater around Thursday’s House vote to repeal Obamacare, as these battles are threatening to push out tax reform and more stimulus well into the end of 2017 or 2018. A defeat in Thursday’s vote would send a clear signal that the rest of Trump’s agenda — taxes, the budget, and infrastructure — could be on shaky ground.

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