Morning Comments – May 31

Grains were higher overnight trying to recover some of Tuesday’s steep sell-off.

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Yesterday after the market close, USDA’s crop progress data showed weaker than expected corn and soybean ratings. The US corn crop was rated as 65% good-to-excellent vs 68% expected while winter wheat ratings slipped 2% on the week to only 50% good-to-excellent. For spring wheat, the crop was rated at a sub-bar level of 62% good-to-excellent versus expectations of 71% going into the report. For planting, both corn and soy plantings were off the expected pace by only 1% with corn at 91% completed and soybeans at 67%.

Soy crushing margins in China are at 3-year lows, which is forcing some buyers to try and cancel shipments. Losses on the margin are around $43/MT. China was a heavy buyer from Brazil at the beginning of the year and lower prices following bumper harvests. But those profits have swung to the biggest losses in nearly three years after China’s edible oil markets were flooded with rapeseed oil auctioned from national reserves and by growing imports of other alternative vegetable oils.

Egypt’s GASC issued a tender to buy wheat. The last Egyptian tender saw US garner some business for the first time in two years after the GASC upped their protein requirements. A South Korea feed group was also tendering for 140,000 MT of corn.

In weather, longer-term forecasts for the US in June and into July see no major threats to crop growing regions. June is expected to remain slanted towards cool temps and active moisture patterns. The only regions expected to be on the dry side are the high Plains of Western ND/Eastern MT. Some heat and dryness could materialize in the Eastern Cornbelt, but with high soil moisture values right now in much of the grain belt, meteorologists suggest that should put a downward bias in temps over the next few months.

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Morning Comments – May 30

Grains came back from the long holiday weekend in a sour mood with wheat leading the complex lower in overnight trade.

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The French wheat crop improved slightly with 76% of the crop there rated good-to-excellent vs 75% last week. In Russia, cold and wet weather is leading to concerns about crop quality problems. In Argentina, farmers are expected to boost wheat production in 2017/18 to 17.5 MMT, up from 16.3 last year.

USDA reported a 130,000 MT sale of old-crop 2016 soybeans were sold to unknown destinations

On Friday, USDA’s Cattle on Feed report showed much higher than expected placements of 111% vs 106.8% expected. Overall cattle on feed numbers were 102% as compared to 100.8% which was projected by the trade.

Weather forecasts continue to point to rain and cool temps for much of the Grain Belt over the next week. The forecast into June is said to be a bit murky by meteorologists as indicators suggest some areas may warm up.  The areas that demonstrate the highest probability of experiencing a warm month include the Southeast, Northeast, and Western regions of North America. There is also some consensus in a cool pattern persisting from May into June over the U.S. Southern Plains to some extent. The June precipitation forecast shows continued rainfall from the Southern Plains through the eastern U.S. Corn Belt, including some areas that have been wet over the last several weeks. On the other hand, it also shows more of the dryness that began to develop during May across the Northern Plains and into Alberta.

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Weekly Cash Comments

Cash Commentary-

Basis levels continued to rise this week with corn and soy basis advancing about 2.5 cents across the US on average.

Active farmer planting and weaker futures prices have helped to support basis in the past two weeks. For corn, basis in Western Kansas continues to be an area of notable strength. This week we also saw some activity good movement by Corn plants in Southern Indiana, although basis improvements were relatively short-lived for only a couple of days. There are also some reports of a few isolated push opportunities by buyers that look to get short-term needs covered.

For soybeans a few soy crushing plants in the Western Cornbelt increased their basis this week, and plants in Northern Indiana and Ohio were trying to bid up basis as well with gains of 3 to 5 cents fairly typical in these regions.

On the river, market basis for corn was notably weaker this week with a 2.5 cent loss on average across buyers. The Gulf was off 1 cent, but some river markets were off 3 to 5 on the week.  For soybeans, basis levels at river terminals were up 1.5 cents on average, lagging the broader market gains of 2.5 cents.

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Futures Commentary-

Grains were mixed this week with corn and wheat posting 3 and 5-cent gains while soybeans hit fresh 11-month lows losing 5 cents.

Crop weather in the US continues to be a mixed bag, but the resiliency of US farmers has helped keep plantings on pace heading into the final stretch of crop seeding. USDA’s crop progress report showed another strong week for farmer planting. Corn planting hit 84% vs 71% last week while soybean planting moved to 53% planted vs 32% last week. Although there was no national crop ratings on corn, state ratings from IL improved to 51% good-to-excellent compared to 42% last week, and IA’s first rating came in at 75% good-to-excellent. Winter wheat conditions nudged higher to 52% good-to-excellent vs 51% last week.

Internationally, export deals are mostly favoring South America as of late as currency devaluation in Brazil and Argentina as well as fresh new-crop supplies from active farmer selling keep the pressure on US exporters. This week’s export sales report was in-line with expectations for old-crop corn and beans, but new-crop business continues to be notably quiet. So far, 2017 new-crop corn sales have totaled 2.4 MMT vs 3.5 MMT for the same time last year, while soybeans are only 2.8 MMT currently for new-crop vs 3.6 last year at this time. Keep in mind USDA expects soybean exports in 2017/18 to be record large at 2.15 billion bushels, up 5% from this year. With disappointing pre-sales so far & heated competition from South America, that may be a difficult mark to hit.

For wheat, the market has been underpinned by solid export business of late.  Along with a rare deal for Egyptian wheat, US wheat continues to garner the lion share of the Japanese market with Canada being shut-out in the latest two deals and Australia taking a deep 2nd chair position. Weather is not ideal for wheat with wet conditions leading to potential worries about protein and quality problems. There is some thought that some wheat acres may be teared up and replaced with beans.

Morning Comments – May 26

Grains continued to grind lower overnight with soybeans moving into fresh 11-month lows.

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In international news, Japan bought food quality wheat overnight in a usual tender bid. Of the 117,800 MT deal, the US garnered nearly 80,000 MT with the remainder going to Australia. Also, Philippine feed makers were in the market for 50,000 MT of South American soymeal. And, a South Korea feed group bought 65,000 MT of feed wheat, likely to come from the Black Sea region.

The International Grains Council raised its forecast for global grains consumption for 2017/18 on Thursday, signalling a bigger draw-down of world stocks than previously expected. The IGC, in its monthly report, revised its global grains consumption estimate for 2017/18 up by 7 MMT to 2.086 billion tonnes, just below the 2.087 billion forecast for 2016/17. The group attributed the increase to higher industrial consumption in maize-based ethanol in the United States and starch in China.

New-crop corn and bean sales for the US continue to be disappointing with USDA’s weekly report on Thursday showing no new deals. So far, 2017 new-crop corn sales have totaled 2.4 MMT vs 3.5 MMT for the same time last year, while soybeans are only 2.8 MMT currently for new-crop vs 3.6 last year at this time. Keep in mind USDA expects soybean exports in 2017/18 are expected to a record large 2.15 billion bushels, up 5% from this year. With disappointing pre-sales so far & heated competition from South America, that may be a difficult mark to hit.

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Morning Comments – May 25

Grains bounced higher overnight with soybeans leading the complex on a 4 cent advance.

USDA reports a 115,400 MT sale of US corn to unknown destinations for 2016/17 marketing year.

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Rains continued to be problematic for IN/OH with 3 to 5 inches of rain falling in the last 24 hours and more expected this weekend. Next week should bring more showers to MI, KS, MO & S. IL.

Yesterday, meeting minutes from the Fed revealed they would hold off on raising interest rates until they see evidence that a recent economic slowdown was transitory.   Nearly all policymakers at the May 2-3 meeting also said they favored starting the wind-down of the Fed’s massive holdings of Treasury debt and mortgage-backed securities this year.

This morning’s export sales report was dismal again for new-crop deliveries of corn and beans.

Export Sales-

Actual

Estimated

Wheat – OC

202

0-200

Wheat – NC

343

250-450

Corn – OC

457

600-900

Corn – NC

1

0-200

Soybeans-OC

472

200-400

Soybeans-NC

6

0-150

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Morning Comments – May 24

Chicago wheat futures slid for a third session with the US Hard Red Winter crop’s resilience to late spring snowstorms pulling the market lower while soybeans were virtually flat after recovering from early losses. Corn was down slightly, extending the previous day’s fall on concerns over planting delays in the US grain belt.

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The market awaits the USDA’s first corn condition ratings for the season, which the government expects to release in its next weekly crop progress report on May 30.

US farm groups on Tuesday pushed back against President Trump’s proposal to slash agriculture spending, viewing it as a fresh threat to a struggling farm economy. The White House on Monday proposed $46.54 billion in cuts to federal government funding for the ag sector over the next 10 years, including limits on federal subsidies for crop insurance premiums. Congress has the final say on the government’s budget and lawmakers said the president’s plan stands little chance of passing.

Oil prices steadied on Wednesday as investors waited for news from Vienna where ministers from OPEC and other exporting countries were discussing whether to extend production cuts into the first quarter of next year. Benchmark Brent Crude Oil was up 10 cents a barrel at $54.25 by 1210 GMT. US light crude oil was unchanged at $51.47.

Both crude benchmarks have gained more than 10 percent from their May lows below $50 a barrel, rebounding on a consensus that the Organization of the Petroleum Exporting Countries and other producers will maintain strict limits on oil production in an attempt to drain a global oversupply. OPEC has promised to cut supplies by 1.8 million barrels per day until June and is expected on Thursday to decide to prolong that cut by up to nine months.

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Morning Comments – May 23

Grains were weaker to start Tuesday giving up all of Monday’s gains.

EXPORTERS SELL 126,000 METRIC TONS OF SOYBEANS FOR DELIVERY TO UNKNOWN DESTINATIONS DURING THE 2016/2017 MARKETING YEAR- USDA

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USDA’s crop progress report showed another strong week for farmer planting. Corn planting hit 84% vs 71% last week while soybean planting moved to 53% planted vs 32% last week. Although there was no national crop ratings on corn, state ratings from IL improved to 51% good-to-excellent compared to 42% last week, and IA’s first rating came in at 75% good-to-excellent. Winter wheat conditions nudged higher to 52% good-to-excellent vs 51% last week.

In Brazil, the supreme court there will be weighing a decision to be announced on Wednesday about whether to let the corruption investigation of President Temer move forward. This will have important implications for the Brazilian markets and the Real. In Argentina, they have their own currency woes as the Argentinean Peso hit its lowest level ever against the US Dollar on spillover effects from the Brazil crisis.

Chinese soybean imports for April were record large and South America shipped its highest ever monthly amount to China to the tune of 6.2 MMT. In Ukraine, Lanworth is forecasting wheat yields are likely to fall to 3.72 tonnes per hectare this year from a record 4.21 tonnes last year. It said favorable weather could push the yield up to last year’s level, but poor conditions could cut it to around 3.40 tonnes.

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Morning Comments – May 22

Grains started the week in positive territory supported by cool wet weather and a continued slide in the US Dollar.

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Overall the weather pattern in the US continues to suggest cool and wet weather for much of the country. Wetness will continue for the next two weeks with much of the precip hitting the already soaked areas of MO/IL/IN/OH. Temperatures for the next 5 days should be well below normal in the Western Cornbelt but should return to normal for much of the country after that.

Corn planting is expected to be about 85% planted in USDA’s crop progress report released this afternoon. But wet weather and re-planting issues will likely be talked about in coming days. Crop condition ratings won’t be released until next week, but early states results in IL showed only 42% of the crop in good-to-excellent condition while MO was 49%.

Russian wheat export prices rose last week, supported by a state purchase by Egypt, the largest buyer of Russian wheat, and expectations that the rouble currency would rise further against the dollar, analysts said on Monday. Black Sea prices for Russian wheat with 12.5 percent protein content were at $185.50 a tonne FOB at the end of last week, up $1 from a week earlier, Russian agricultural consultancy SovEcon said.

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Weekly Cash Comments

Cash Commentary-

Grain basis found some upside this week with corn advancing 2.2 cents on average for the week while soybeans garnered a 2.5 cent move higher.

Corn found strength as farmers stay tied to their planters which limited pipeline supplies. Areas of Western Kansas continued to show some buoyancy as for the 2nd week in a row the region showed strong basis gains. Also, river terminals along the MS/IL river system were also generally higher with gains of 3 to 5 cents on the week being fairly typical, and on average river buyers were up 3.5 cents. Ethanol plants as a group managed only a 1.5 cent advance on the week although some facilities did record 5 to 8 cent gains.

For soybeans, basis levels were also generally higher albeit with soy crushing plants doing most of the higher bidding this week with a collective 3.2-cent gain for the week. There were a fair number of Western Cornbelt plants raising their basis by a dime. River terminals, on the other hand were bucking the overall trend as finished the week about 1-cent lower. The late week selloff in bean futures seemed to trigger a risk-off attitude as river buyers became wary of slowing exports in the face of Brazil’s sharp currency devaluation on Tuesday.

The corn competition landscape saw only modest changes this week as ADM Cedar Rapids won back its territory by bidding up basis a nickel on the week to -10N. ADM Columbus used a basis improvement on Thursday to -16N to improve its drawing area after slipping in size early in the week.

Soybean competition was mostly stable in IA/IL this week as plants here mostly kept basis unchanged. However, ADM Deerfield, MO bumped its basis by a dime to -10N, helping expand the plant’s drawing region into Eastern KS.

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Futures Commentary-

Grains were lower on the week led by a 21 cent slide in soybean prices while corn and wheat suffered a 3-cent and 8-cent setback.

On Thursday, news broke that Brazil’s president Temer gave his blessing to pay a potential witness to remain silent in the country’s biggest-ever graft probe. If accurate, this could pull Temer into a corruption scandal that has already entangled several of his closest allies and advisors. Leading lawmakers and a third of Temer’s cabinet have already been caught up in an investigation of systematic bribery in return for political favors and contracts with state-run enterprises. Investors dumped Brazilian assets in foreign markets after the news broke late in Brazil. The Brazilian Real plunged 7%, which immediately sent US soybean prices down nearly 3%. Brazilian farmers have been holding tight to their mammoth soy crop as the Real has climbed nearly 10% since the first of the year. The plunge led to a mass selling wave from Brazilian farmers. On Thursday, Brazil farmers were reported to have sold anywhere from 2 to 5 MMT of their crop. Even so, Brazilian soy farmers have sold only half of their record 2016/17 crop by Friday, compared to 67 percent sold at this time last year and a 5-year average of 65 percent of sales, independent consultancy Safras & Mercado said.

In the US, weather continues to be mostly favorable as corn planting raced forward in the past week hitting 71% planted vs 70% for the 5-year average. US weather through the end of May in the Cornbelt should be cooler than normal with daily averages coming in 10 to 15 degrees below normal. Rainfall is expected to be on the topside of normal with KS/MO expected to see totals of up to 4 inches through this weekend. While it is not yet a threat to yield potential, the cool and wet growing degrees will likely slow corn development and push the pollination window later in the season, making it more prone to summer heat stress. Early predictions on the summer weather forecast are pointing to a potential drought in the Eastern part of the grain belt. Private forecaster Lanworth put the odds of this season’s weather to be near normal to hot/dry. They suggest a strong ridge with a “ring of fire” setting up in the middle of the country. This would potentially set the stage for hot/dry to the East while areas to the upper West like IA/MN would see more moisture. The timing of the event is still unclear but the odds seem to favor June rains giving way to July heat and dry conditions which could potentially have a more pronounced impact on beans versus corn, or late-developing corn.

Monday saw weak soy crush data released by NOPA. According to NOPA, soy plants crushed 139 MB of soybeans in April, off from 147 for the same month last year and well below trade expectations of 145. Year-to-date crush data is up 0.8% from the same 8-month period last year, but USDA expects crush for the entire year to grow by 2.1%.

Morning Comments – May 19

Soybeans recovered overnight trying to pair back the 30-cent losses from Thursday. Corn and wheat were also firmly in positive territory to start the day.

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US weather in the Cornbelt through the end of May should be cooler than normal with daily averages coming in 10 to 15 degrees below normal. Rainfall is expected to be on the topside of normal with KS/MO expected to see totals of up to 4 inches through this weekend.

Brazilian farmer sales were said to be massive yesterday following the collapse of the Brazilian Real. Reports vary from 2 to 5 MMT were sold yesterday alone as farmers raced to cash in on the currency swing lifting their farm-gate prices. Even so, Brazilian soy farmers have sold only half of their record 2016/17 crop by Friday, compared to 67 percent sold at this time last year and a 5-year average of 65 percent of sales, independent consultancy Safras & Mercado said.

The condition of French soft wheat declined slightly last week, with 75 percent of crops rated good or excellent as of May 15, down from 76 percent a week earlier, farm office FranceAgriMer said on Friday. The ratings slip reversed a small improvement in the previous week, and may indicate that growing conditions in the European Union’s biggest cereal producer remain mixed despite rainfall and warmer temperatures this month that broke a dry, cold spell in April.