Morning Comments – July 31

In the overnight session the grains traded lower pressured by some weekend rains and a milder weather forecast.

USDA reported a sale of 150,000 metric tons of corn for delivery to Columbia for the 17/18 marketing year.

Corn traded down 5 1/4 cents, soybeans down 14 cents and wheat down 4 ½ cents. September corn is now approaching support around 3.64 ½ from the low which was back on June 23rd. This support marks the low side of the range that corn has traded since the beginning of June.

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The latest weather models show cooler temperatures across the mid-west  into the middle of this week. Precipitation is forecast to be normal this week with above average moisture expected in the Texas panhandle, Southern Kansas, Oklahoma and Missouri by the weekend. The Dakotas and Minnesota showed some slight improvement in the precipitation outlook.

The commitment of traders report released on Friday showed that for the week ending July 25th large speculators cut their net long positions in Corn by 1,434 contracts to 45,746. Wheat speculators also saw net selling by 9,951 contracts to reach a net short position of 31,337. Soybean speculators trimmed their net short position by 11,977 contracts to just 156.

The crop conditions report will be released after the market close and the trade is looking for a slight improvement in the good-to-excellent rating in corn, unchanged in soybeans and a decline in spring wheat.

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

 

Weekly Commentary

Futures Commentary-

The grain market tug of war continued to rage this week with the grain complex on the losing end of the price action. For the week, corn was off 16, soybeans were off 19 and Chicago wheat giving up 26.

The driving force in the schizophrenic movement has been the competing weather models. The European model has been throwing up projections with limited rains in the Plains and Western IA, while the GFS model has been showing widespread rains to help alleviate dryness. This week forecasted rains in W IA failed to materialize which provided a brief mid-week rally but failed to hold going into the weekend.

Satellite imagery-derived yield models continue to point to shrinking yield potential. This week private forecaster Planalytics pegged US average corn yield at 164.6, off from their previous forecast two weeks ago of 165.3, and well below USDA’s unwavering trend projection of 170.7. Meanwhile, for soybeans they show 46.5, off slightly from their 46.7 two weeks ago and USDA at 48.0. USDA’s first yield-based survey will be released in a few weeks in their August crop report. If these yields are reported by USDA, they would likely mean a drop in corn carry-out from 2.3 billion bushels to 2.0 billion bushels, and soybean carry-out would be cut from 460 mb to below 400 mb. While it won’t likely warrant a sharp recovery in pricing, it may lift prices higher from current levels.

In export business this week, corn posted a marketing year low for old-crop business of 92,000 MT well below expectations of 200-500,000 MT while new-crop sales of 486,000 MT beat expectations ranging from 200-400,000 MT.  Soybeans came in light for new-crop at 531,000 MT vs expectations of 300-1,000,000 MT while old-crop business was on the high end of expectation at 303,000 MT.

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Morning Comments – July 28

On Thursday, the International Grains Council cut its 2017-18 global production forecast for corn, wheat and barley. The revisions were made as a result of the dry weather in North America, Europe and Australia. The IGC revised its global corn production down to 1.02 billion metric tons. The revision was primarily due to cutting US production estimates by 5.6 million metric tons and EU production by .7 metric tons. The IGC increased the Brazil 2017-18 corn crop up by 1.5 million metric tons.

The IGC also lowered global wheat production estimates by 3 million metric tons to 732 due to a decline in expectations from US, Australia and the EU. The Russian wheat crop was revised three million metric tons higher in their projections to 71 million metric tons.

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The Wheat Quality Council estimated their official Spring wheat yield on Thursday after traveling North Dakota, South Dakota and Minnesota for three days. Spring wheat yields were estimated at 38.1 bushels per acre, down 2.2 bpa from the July 12th USDA estimates of 40.3 bpa. The wheat tour does not estimate total production because it is still early to estimate harvested acres. Abandonment will be a real wild card especially in the western part of the spring wheat region. Crop yields looked good to the east and steadily got worse as the tour moved west. In western North Dakota tour scouts noted that some wheat had already been baled for hay. The Spring wheat tour did not enter Montana which has been in significant drought much of the growing season.

The Ministry of France announced on Thursday that tariffs will be raised on beef imports into Japan, a key U.S trading partner. The tariff will increase from 38.5 percent to 50 percent and was automatically triggered after

Beef imports from all nations and from countries who do not have an economic partnership agreements increase more than 17 percent from the year earlier. Australia which provides a large amount of Japan’s imported beef will be exempt from this tariff because of their existing economic partnership agreement. This is the first time since 2003 that this automatic tariff has been triggered.

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Morning Comments – July 27

In the overnight session the grains traded higher with uncertainty still surrounding the impact of the hot and dry weather. December corn up 3 1/4, November Soybeans up 8 and Chicago Wheat up 5.

The EIA ethanol numbers released on Wednesday showed a drop in week over week production by 14 thousand barrels per day to 1.012 million BPD. Weekly ethanol stocks also fell by 608,000 barrels to 21.529 million BPD. To meet the UDSA’s corn used for ethanol projections we will need to see ethanol production pace pick back up and run 3-5% above last year’s levels for the remainder of the marketing year.

The dollar also felt pressure yesterday after the FOMC statement suggested that both overall and core inflation had declined and that the fed will start unwinding the balance sheet “relatively soon”. The language seemed to give traders the impression that there is no increased risk for a rate hike between now and December which will put pressure on the USD.

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Day 2 – Wheat Crop Tour

Spring wheat crops in central northwestern North Dakota were showing the effects of hot and dry conditions and yield prospects were down sharply from a year ago, scouts on the annual crop tour said Wednesday.

The early-planted stuff looks the toughest, said Dave Green, executive vice president of the Wheat Quality Council, which runs the tour. Prospects were slightly better for later-planted wheat and crops in northern areas could still benefit from moisture with harvest still a few weeks away.

Scouts in west-central ND scouted five spring wheat fields and calculated an average yield of 21.3 bushels per acre. A year ago, scouts on the same route calculated average yields of 61.8 and 52.7 bpa.

Scouts on another route in central ND scouted six spring wheat fields and calculated an average yield of 35.8 bpa; last year the average yield calculation was 52.1 to 41.5 bpa. Northwest ND spring wheat fields (three) were scouted and calculated an average yield of 27 bpa; the average durum yield at 45.4 and 52.7 bpa.

Weekly Export Sales-

Actual

Estimated

Wheat – NC

498

Corn – OC

92

200-500

Corn – NC

486

200-400

Soybeans – OC

303

100-300

Soybeans – NC

531

300-1,000

Export sales were weaker with new crop wheat down 26 percent, old crop corn down 80 percent and old crop soybeans down 26 percent week over week. Old crop corn sales notched a marketing year low for this week, recording only 92,000 metric tons.

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Morning Comments – July 26

Corn and beans continued to inch lower overnight while wheat was holding on to slim gains going into the morning break.

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Russia’s Agriculture Ministry hopes to receive government permission to export some of its grain stockpile in September. The ministry has been considering exporting 500,000 tonnes of grain from its 4 million tonne stockpile to free up storage space and to lessen federal budget spending on servicing the stock.

Day 1 of the US Wheat Quality Tour found average spring wheat yields of 37.9 bu/acre down from 43.1 in 2016 and the 5-year average of 45.7. The area covered was in Eastern & Central North Dakota. Day 2 of the tour will head in NW ND.

The latest weather models continue to diverge on moisture forecasts, but tend to agree on temps. Persistent heat in the Northern Plains and Canadian Prairies will persist for the next 10 days. The EC forecast through 10 days features dryness in all major North American crop regions with either little rainfall or modest totals that will come in near normal or about an inch below normal. The GFS shows a much more substantial weather system moving across the portions of the Plains and Corn Belt states as August begins that pushes 10-day rainfall from Nebraska through Iowa/Minnesota and into Wisconsin/Illinois up to 2 inches above normal.

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Morning Comments – July 25

Grains were mixed overnight with soybeans posting gains while wheat and corn were lower.

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After the close Monday, USDA showed further deterioration in the grain crops. Soybeans plummeted to 57% good-to-excellent versus 61% last week and 60% expected by the trade. For corn, the condition ratings also came in lower than expected, off 2% from last week to 62%.

The latest weather model shows increasing rainfall across South Dakota and southern Minnesota into Iowa. This should bring important moisture to the drier-biased portions of the western Corn Belt from much of Iowa into northern Illinois late Wednesday into early Thursday. Some meaningful rain will also fall in southeastern South Dakota late Tuesday into Wednesday. More rain will be needed over time to increase the short subsoil moisture.

Egypt was in the market for wheat overnight. Although no official deal has been announced, the lowest offers accounting for freight were Russia and Romania.

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Morning Comments – July 24

Grains bolted lower to start the new week as rains fell over the weekend in key growing areas.

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Rainfall over the last 3 days were in the 1 to 3 inch range from Eastern IA thru the Eastern Cornbelt. Also, Eastern SD/ND into MN got 0.50 to 1 inch of precip over this time period. Weekend temps were well into the 100s for all of KS and parts on NE. Looking ahead, a storm system should bring about an inch of rain over much of Iowa by mid-week into Thursday.

On Friday after the close, USDA’s Cattle on Feed report showed solid growth again with July 1 cattle on feed up 104% from last year versus a trade estimate of 102.9. Placements in June were a whopping 116% high versus last June, which was well above the analyst expectation of 106.1%.

Overnight there was modest export interest in wheat from Bangladesh and Algeria. Russian wheat export prices were mixed last week after nine straight weeks of growth due to concerns over a lack of high quality wheat and strengthening competition with France for wheat supplies to Egypt.

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

Weekly Commentary

Corn and beans posted solid gains on the week with beans rallying 38 cents while corn was up 21. Wheat divested itself from the rally, losing 6 cents on the week.

US weather continues to be the driver in grains as heat and dryness in the central Plains, stretching into parts of Western IA/MO keep the trade leery about potential yield losses. For the 6 to 10 day forecast, the weather models diverge quite widely in their outlook. The GFS model shows more cooling in the cards, but the European models, which some meteorologists are favoring right now, points to extensive heat in the WCB. The 11 to 15 day forecast indicates warmth returning or maintaining into early August, posing risk to yield and production. The focus at that point will be shifting towards soybeans, where lack of precipitation and additional heat could continue depleting soil moisture in some areas, and risk the crop during the pod fill stage.

Weekly soybean export sales came in better than expected at 1.9 MMT for old- and new-crop delivery combined although this report included the 1.3 MMT new crop frame sale to China that inflated the total. Corn sales were robust for old-crop delivery but relatively weak on the new-crop side of the ledger.

Looking ahead to the August crop report, this will be the first formal survey on yields this season. USDA currently stands at 170.7 for corn, a number they have been wed to since the first report in May, even though corn crop conditions have continually eroded from a high of 68% to a most recent value of 64% good-to-excellent. Furthermore, the 5-year average is around 71% suggesting we are currently in the sub-par trend line yield reading. If you look at recent history on crop conditions, this year is similar to what was witnessed in 2013 when crop conditions hovered in the mid-60s for July & August before falling lower into the 50s by fall. In that year corn yields came in at 158.8. On the other hand, 2015 is not far from today’s reality. The corn conditions in that year stabilized in the high 60s for the late summer and fall helping keep yields at 168.4. So, with USDA setting at 170, it seems likely we come down from there with 165 a reasonable mid-ground estimate. The 165 mark is also supported by private analyst Planalytics which shows 165.3 as their latest yield forecast based on satellite imagery modeling. If realized, this would be a likely catalyst for more upside in corn, helping push the board to the $4.25 area.

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Morning Comments – July 21

Grains were lower overnight with Dec corn drifting back to $4 in overnight trade.

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Yesterday after the close, Argentina’s ag ministry revised their 2016 crop forecasts, pegging the corn crop there at 49.5 MMT up from 47.5 MMT and well above USDA’s forecast of 41. For soybeans, the Argentine crop is estimated at 55 MMT down from 57 previously and USDA at 57.8.

Looking at weather shows heat across the central and southern Midwest thru the weekend. Rains of 1 to 2 inches over the next few days will hit S MN, WI and N. IL. But areas to the West remain dry. For the 6 to 10 day forecast, the weather models diverge quite widely in their outlook. The GFS model shows more cooling in the cards, but the European models, which some meteorologists are favoring right now, points to extensive heat in the WCB. The 11 to 15 day forecast indicates warmth returning or maintaining into early August, posing risk to yield and production. The focus at that point will be shifting towards soybeans, where lack of precipitation and additional heat could continue depleting soil moisture in some areas, and risk the crop during the pod fill stage.

French farmers had harvested 63 percent of this year’s soft wheat crop by July 17, up from 29 percent a week earlier, data from farm office FranceAgriMer showed on Friday. Crop conditions were stable with 66 percent of soft wheat was rated good/excellent.

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Morning Comments – July 20

Corn and beans were modestly higher overnight with wheat trying pare losses going into the morning break.

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The weather continues to point to areas of stress in the coming weeks. Although dry parts of SD and E IA are a concern, there is a modest rain event the remainder of this week, but it will not likely be enough to seriously bolster soil moisture in the driest areas. For next week, there is a brief period of cooling expected in the Plains and WCB before heat returns as the major theme in the forecast thru the first week in August.

In Brazil, two consecutive days of frost in Paraná have damaged wheat crops in the western area of the Brazilian state, the government’s rural economics agency Deral said on Wednesday.

Export sales for the week were all on the high side of expectations with soybeans showing solid new-crop business on a big purchase by China.

Weekly Export Sales-

Actual

Estimated

Wheat – NC

669

250-450

Corn – OC

466

150-350

Corn – NC

212

200-400

Soybeans – OC

410

100-300

Soybeans – NC

1,522

1300-1800

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