Weekly Commentary – May 25

Cash Commentary-

Soybean basis garnered more upside as export trade winds turned favorable helping bolster US average soy basis by 2.3 cents on average, while corn was fractionally higher on average with a 0.5 cent improvement.

In corn, some of the recent gains due to planting were erased as farmers returned to market grain, which pushed some basis lower at key end users in NE/IA/IL/IN. But in the Upper Midwest where planting is still in full force corn plants were slightly higher to try and meet needs. In the week corn plants were unchanged.

Around the river markets, barge rates have mostly stabilized in recent weeks. Gulf basis for corn was off a penny which kept corn river markets mostly flat to lower, while soy basis at the Gulf was up 7 cents which put upstream river markets higher by a nickel. Soy crush plants continue to hold firm advancing 2.3 cents on the week as May crush margins were the highest for this time of year.

Futures Commentary-

Grains got bullish this week thanks to dry weather in key wheat growing regions and the US-China trade issues normalizing. On the week, beans were up 40, wheat was up 33 and corn tagged along for the ride with a 9-cent advance.

Last weekend US and China agreed to deescalate the trade war and forgo tariffs for the near term while the two countries agreed to work out a broader trade agreement. Both countries said they would keep taking measures that would allow China to import more energy and agricultural commodities from the US. By mid-week there was one cargo of new-crop soybeans sold to a Chinese trade house. But on Friday we had 312,000 MT of new-crop sales to China and another 165,000 of optional origin soybeans sold to China.

For wheat, dry hot weather continues to plague the US SW Plains, but now concerns are mounting across the global bread basket as well. Some degree of drought is prevalent in major growing regions of Russia, Australia, Canada and China. Russian grain consultancy, IKAR, downgraded the Russian crop to 69.5-77.5 MMT vs a previous forecast of 73 to 90 MMT while SovEcon consultants dropped their forecast by 1.2 MMT to 77 MMT. USDA has factored in a 12 MMT drop in Russia’s crop year-on-year with their 2018 forecast at 72 MMT.

In South America, crop reports there continue to take down the production numbers. Brazil’s AgroConsult pegged the 2nd season corn crop at 57 MMT, down from their previous estimate of 60 MMT based on their ongoing crop tour. If realized it would be a 10 MMT shortfall relative to last year. They also estimate the country will only export 24 MMT of corn, a far cry from USDA’s estimate of 30 MMT. In Argentina, the Ag Ministry lowered their latest old-crop soybean production estimate to 36.6 from 37.2 MMT and off from USDA at 39.0.

For the US, weather looks mostly favorable although as the calendar flips to June meteorologist are pointing to potential heat for the WCB and Southern Plains. The forecast shows little hope for Winter Wheat to get so much needed rains in early June during kernel fill. For corn and soybeans weather should be mostly ideal, but there is enough uncertainty about the extent of the heat to warrant caution.  It is possible that June heat could be more excessive than forecasted and that could set the stage for problems in Jul/Aug. Therefore, if the 2018 corn/soybean crop is to head downhill in a significant manner, it will likely be evident in June. If on the other hand the forecast verifies with favorable weather over at least the eastern Corn Belt, it spells good news for total crop prospects as last season demonstrated.

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 – May 18

Cash Commentary-

Corn basis was fractionally higher on the week while soybeans put on an impressive 3-cent advance on the week.

For corn, it was a mixed week with ethanol plants generally higher while river terminals were broadly weaker. Gulf basis was off 5 cents on the week but the PNW export market was 6 higher. Barge freight appears to be tightening on the Mid-Miss River and higher but lower stretches of the MS River and OH rivers seem to have ample barge capacity.

Soybeans saw a bit more strength at river terminals which posted an average gain of 3.5 cents while soy plants were up 2.5 cents on the week. Nonetheless, some soy plants were up 5 to 12 in the Upper Midwest as farmers are actively trying to catch up on planting there.

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-

Another poor showing in the grain complex, this time led by soybeans which lost 26 cents a bushel while corn and wheat were down 6 and 9 respectively.

Friday morning brought some positive news on the US-China trade front. China’s Commerce Ministry ended its anti-dumping claim on US sorghum. The Commerce Minister said in a statement that the penalties imposed would hurt China’s consumers causing meat prices to rise.  Although the trade took that as a positive sign in the early morning on Friday pushing beans up 12, by the day session those gains were paired to only 4.  USDA announced that there were large cancellations for beans totaling 949,000 MT to unknown destinations with 829,000 MT for old-crop 2017. When you consider the huge amount of outstanding sales left to be shipped (10 MMT this year versus 3 MMT last year), and 6 MMT of those deals are either China or unknown destinations (likely a lot to China), it means there is still considerable risk for further cancellations or at best kicking it into 2018 crop year.

USDA’s planting progress showed US corn at 62%, another nice boost from last week’s 39% and above trade estimates at 59%. The problem areas of MN/ND gained grown this week moving to 40% and 35% planted. SD still struggles at only 21% planted. For soybeans planting pace hit 35% that was up from 15% from last week and above trade estimates of 30%.

The NOPA Crush report showed that the amount of soybeans crushed in April met analyst estimates. April soybean crush was reported at 161.016 MB, compared to analyst estimates of 160.966 MB. Last year April soybean crush totaled to just 139.134 MB. April Soyoil stocks were reported at 2.092 billion pounds, up from 1.946 billion pounds at the end of March. Soyoil stocks were above the average analyst guess of 1.98 billion pounds and are at a five year high.

The price of Brazilian soybeans for export has dropped below U.S. export prices as Chinese buying has cooled. Brazilian soybeans were quoted at $389.10 a MT compared to U.S. cargoes being offered at $405.50. With pork margins compressed, Chinese buyers have slowed purchases of soymeal in recent weeks. Some traders expect soybean exports to be slow for the next month as Chinese crush facilities have ample supplies of soymeal and there are indications that near-term demand for the feed ingredient is weaker than expected.

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 – May 4th

Futures Commentary-

Wheat catapulted higher this week gaining 48 cents a bushel, while corn and beans both managed double-digit gains advancing 12 and 13 cents respectively.

The Kansas Wheat Quality Council crop tour pegged the crop there at 37 bushels per acre and state-wide production of 243 MB vs last year’s crop of 334 MB. If realized, that would be the lowest production since 1989. In Oklahoma, a similar crop tour produced an estimated yield of 25.6 with a 63.3 MB crop vs last year’s 98.6 MB crop. While the crop is certainly suffering from drought conditions, it is behind in terms of development so rains could prove beneficial. The latest GFS model has some rain potential in key growing areas in KS on May 12 with an inch or more of rain projected.

In terms of the rest of the US, parts of IA/MN/WI saw 1 to 2 inches of rain in the last day likely slowing planting. After this storm blows through, IA should see 4 days of no rain into mid next week and temps in the 70s this weekend. Temps in ND/SD/MN should be trending warmer than normal in the next 5 days helping kick start planting where no planting had taken place as of USDA’s latest report on Monday. US corn planting was at 17% planting below 24% normally for this time of year.

GrainHedge ad

Corn continued to find support this week from dry weather in key growing areas of Brazil for the 2nd season corn crop. Rains in March and early April stalled soybean harvest which meant some of the corn was planted late. Hardly any rains have fallen since early April. This week FC Stone lowered their Brazil corn crop estimate to 83.9 MMT from their previous forecast of 86.5 MMT. That is well below USDA’s estimates at 92.0 MMT. Cumulative precipitation in key growing areas has been well below normal with virtually no rain since mid-April. The 14-day forecast only shows a modest hint of precipitation for Parana on May 13 & 18, but the reliability of that forecast seems questionable as Brazil enters their historically dry season. Total precipitation from April thru May 18 is 65% below normal in Mato Grasso do Sul and Parana, key production areas for the 2nd season corn crop.

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-

Solid gains in cash basis found their way thru much of the Midwest as corn and soy basis levels were up a robust 2 cents a bushel on the week.

Corn got a shot in the arm thanks to falling barge freight and a spike on quick ship premiums out of the Gulf. Upstream river terminals moved the needle higher by 6 cents on basis this week as a result. Corn processors were also higher, although as a group more muted with only a 2-cent advance on the week. Gains of 5 to 10 cents on basis were fairly widespread especially in the WCB and Upper Plains this week.

For beans the Gulf market was mostly unchanged this week and river terminals inched up bids on weaker barge freight, posting a 2-cent advance. Soy plants were up as well by 2 cents. Exceptionally strong crush margins should continue to keep an incentive for plants to keep inching basis up to keep pipeline supplies full.

Active farmer planting should keep basis levels holding firm into mid-May. And with corn shipments expected to be strong to handle the backlog of forward sales, this should keep end users active on basis.

 

Futures Commentary-

It was a mixed week on the board; corn and wheat had modest gains of 4 cents each while beans shed 9 cents on the week.

While Spring planting got off to a cold start slowing planting pace to a 10-year low, the weather in the Midwest has turned decidedly warmer helping fuel planting pace this week. Traders will likely expect the needle on planting pace to reach 20% to 25% planted in next Monday’s report following a dismal 5% pace from last week’s USDA report. The forecast also looks mostly favorable as temperatures hover slightly above normal. However, the first days of May should bring ample rainfall to the Midwest as the 6 to 10-day forecast advertises 1 to 2 inches of rain in key WCB growing areas but then dries out again in the 11 to 15-day time frame. The SW Plains of KS/OK are targeted in the 11 to 15-day model for a 1 to 2-inch moisture event which would aid winter wheat.

Heading into the weekend, limited rains are expected for the next 2 weeks in areas of the Brazil 2nd season corn crop. In the Southern region of Brazil, temps should trend warmer than normal with a chance of limited moisture (0.25 inch) on Wed. If the model verifies, then precipitation since April 1 will be only 1.5 inches vs normal of 7.5 inches during this time period.

On the demand front there was little for traders to get excited about this week. Ethanol production was off sharply at 985,000 barrels per day, off 24,000 from last week and the lowest weekly tally since corn harvest. On the export front it was a disappointing week for corn and bean deals while wheat showed unexpected strength. Corn old-crop sales were 27.4 MB, off from 43.0 MB last week and below the 32-47 MB range expected by the trade. Also concerning was a 3 MB net cancellation for new-crop corn.  For beans both old and new-crop sales were below expectations and yet China was not present in the list of buyers. While this time of year is traditionally slow as China does most of its deals with South America, there is reason for concern as outstanding commitments are at a staggering 20% of the full year’s export forecast. Historically that number is around 9% at this time of year.

Stat’s Canada on Friday pegged all wheat acreage intentions at 23.7 million acres. Last year was 22.4 and expectations were around 23.0. Like the US, most of the increase came in spring wheat acreage intentions which came in at 18.2 vs 15.8 last year. One positive number was the canola plantings which came in at 21.4 million acres vs trade expectations of 23.7.

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-

Cash markets saw modest advances of 1-cent a bushel on the week for both corn and beans. River terminals were the big winner thanks to declining barge freight. On the week corn buyers along rivers were up 6 cents while soy markets were up 4 cents. However, barge rates fell much more sharply than the cash market improved with barge rates falling about 20 cents a bushel, but lower Gulf bids kept upstream river terminals less aggressive at bidding up basis.

As for end users, soy crush plants were up 1.6 cents on the week, but ethanol facilities were up 1.8 cents on the week. Soy crush facilities should continue to bid aggressively in coming months with spot crush margins trading at all time highs for this time of year. Basis levels should also be supported as weather begins to turn more favorable in early May which should limit farmer selling.

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 lower on the week with soybeans leading the complex lower giving up 23 cents while corn and wheat followed with 6 and 4-cent losses respectively.

Cold weather has been hampering planting so far in April. USDA’s corn planting number was at 3% last week vs 5% normal for this time of year. However, weather is expected to shift to more warmth in the next few weeks which could aid planting. In the near term, the overall pattern will remain near or slightly colder than normal during the 6-10 day time frame. Despite some chances for rainfall, the broader pattern does appear slightly drier than normal, leaning favorable for additional corn plantings in the Deep South and southern Midwest in between periods of wet weather. Recent model guidance indicates a pattern change could be underway as the calendar flips to May. Current projections are for widespread high pressure enabling warmer than normal temperatures during the 11-15 day time frame. This will most notably warm ground temperatures, eliminate any remaining snow cover at the time across the Upper Midwest and Great Lakes, and potentially promote spring plantings. Iowa temps are expected to reach into the 70s and 80s. Furthermore, much of the broader corn and soybean belt should see warming into the first week of May which should aid planting if the forecasts hold up.

It was a respectable week for both corn and soybean exports as weekly deals for old-crop both topped 1 MMT. In the case of beans, there was also another 1 MMT sold for new-crop 2018 with Argentina again being a featured buyer. Year-to-date deals are topping the pace to reach USDA’s annual export projections with corn coveting a 6% lead while soybeans pushed up to a 3% margin to cover the USDA annual forecast.

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-

Basis levels firmed by 1.9 cents a bushel on beans across the US this week while corn was up marginally on a 0.3 cent improvement.

High water along the rivers continues to escalate barge rates. This week saw barge rates take another step higher, with rates trading at 40 cents a bushel more than normal at this time of year and near the harvest-time peaks we normally see in the fall. Both corn and soy basis was off about 5 cents a bushel at river terminals this week, in spite of strong Gulf gains of 10 and 20 cents a bushel for corn and beans, respectively.

For soybeans, they got some relief as crush facilities were higher on the week, bolstering their basis by 3.2 cents a bushel on average. 40% of the plants had a nickel to dime improvement on the week. Strong crush margins should be the norm for the next 6 months which should keep soy plants bidding aggressively for beans. As for corn plants, they improved by 0.8 cents a bushel. Gains by NE ethanol plants were 2 cents a bushel but ECB states of IN/OH saw more limited gains of only 1-cent a bushel.

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 finished mixed on the week as soybeans and wheat shot higher by 30 cents and 16 cents while corn was fractionally lower.

USDA in their monthly S&D update on Tuesday showed a smaller than expected Argentina soy crop at 40 MMT while the trade had expected a 42.6 MMT harvest. This is a far cry from last year’s nearly 58 MMT. Indeed, the world’s largest soymeal exporter is facing such a crippling crop shortfall that it purchased 4 cargos or 240,000 MT of new-crop US beans to help feed its pipelines. USDA also bumped up old-crop corn carry-out thanks to lower feed usage numbers. However, the US export tally was left unchanged even though current exports are about 6% ahead of the normal seasonal pace to reach the annual projection.

On Monday, USDA released their first national corn planting estimate, which was pegged at 2% vs normal of 3% for this time of the year. Looking ahead, farmers will likely face a lot of obstacles in the month of April with cold and wet weather to dominate. Over the next 5 days, snows are expected to hit Upper Midwest (Dakotas & Minnesota), while rounds of rain and thunderstorms are targeted for the Midwest/Delta. Planting progress is unlikely to proceed through next week as a result.

Weekly US export sales were strong for soybeans coming in at 1.5 MMT. While China was a noted buyer, other countries are also lining up to buy US soybeans thanks to the price hike at Brazil. With the threat of China’s tariff on US beans, Brazil’s prices have popped as farmers there will benefit from being the premier supplier to the world’s number one customer of soybeans. In the last two weeks Brazil’s prices have surged to a $0.60 per bushel premium over the US. Normally at this time of year when Brazil’s crop is harvested, Brazil’s prices generally trade at a $0.25 to $0.75 cent a bushel discount.

Corn sales on the week were light at 840,000 MT compared to recent weeks. But, business since the start of 2018 has helped fuel prices and push inventories down. With fewer planted acres in 2018 expected, new-crop 2018 US corn carry-out should be penciled in at less than 2 billion bushels in USDA’s first report in May.  If so, it would be the first time in 3 years that we will see carryout below the psychological 2-billion-bushel mark.

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 – March 23

Cash Commentary-

Cash markets continue to feel the sting of higher barge freight with river terminals weakening basis by 4 cents on average for corn and soybeans by 2 cents. River water levels continued to rise this week and look to continue higher in the coming week which should add more pressure to barge rates.

Conversely, end users showed more strength this week. Corn ethanol plants were up 1 cent on average while bean crush facilities bolstered their basis by 2 cents.

Futures Commentary-

Grains were lower on the week with corn and beans off 11 while wheat slumped by 23 cents.

The trade war heated up this week with the US taking direct aim at China by announcing new tariffs on $60 billion of Chinese goods sold into the US. China immediately responded by announcing its own round of tariffs on US goods with pork being the biggest ag export on the list; while top contender soybeans was not on the list. Chinese soy buyers are said to be drawing up contingency plans if US soybeans do get caught up in the trade spat.

In Argentina, the Buenos Aires exchange slashed their soy forecast to 39.5 MMT from 42 previously and USDA’s estimate of 47 MMT. For corn, they pegged it at 32 MMT, off from their prior estimate of 34 and USDA at 36 MMT. Light rains are expected this weekend across Argentina except far Northern stretches of the country. But beyond that out to day 10 of the forecast it looks dry. Steady rains are expected in Brazil, aiding their 2nd season corn crop.

On the demand front, ethanol production was up this week to 1.049 million barrels a day vs 1.025 last week. Year-to-date ethanol numbers are on par with normal seasonal pace line (in green) to hit USDA’s annual forecasted corn use of 5,575 MB. Export sales for corn and beans were good but on the low side of expectations. On the week, corn sales were 1.4 MMT still above the normal pace of 900,000 MT to reach USDA’s target on the year. Meanwhile soy sales of 747,000 MT were light compared to expectations but continue to be seasonally strong. Current YTD sales are only 1% off the normal pace to reach USDA’s annual forecast.

Next week, March 29th, will bring the first insight on new-crop supplies as USDA releases its Planting Intentions reports. No polls are available yet but are expected to show a slight uptick in soy plantings and a modest cut in corn intentions. Also, to be released are Quarterly Stocks with corn closely watched for an indication on feed use.

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

Cash Commentary-

US average corn and soybean basis was mostly unchanged this week, but there were big differences across the country depending on proximity to the rivers.

For corn, the river markets were hit hard with 8-cent losses on average tied to a dime discount at the Gulf export market.  Barge rates did manage to move lower this week as flooding concerns waned and barge movement started to improve. For beans the draw-down in basis was less noticeable with river terminals down 4 cents on average and the Gulf down 8 cents.

End users of grain were mostly steady this week. However, there were modest improvements in the Central and Northern Plains. Corn Plants in SD improved basis on average by 2 cents a bushel.

With corn futures backing down this week we would expected to see basis levels start to firm. End buyer demand across livestock, exports and processing is rock solid so with spring fieldwork around the corner the next few weeks could be important to keep pipelines full.

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 corrected this week taking some of the steam out of the two-month rally with corn down 7, soybeans off 23 and wheat down 20.

Some hints of modest rains in Argentina were enough to give the bean market a reason to trade lower this week. Weather forecasts of modest rain are likely too little, too late but just their advertisement is enough for bulls to take profits for the time being. This week the Rosario Grain Exchange lowered its corn and bean estimates to 32 and 40 MMT, respectively. This compares to their previous forecast of 35 and 46.5 MMT.

On the demand side, US soy crushers ran at a record pace in February in the face of elevated crush margins. NOPA crush figures released on Thursday showed monthly crush at 153.7 MB with analysts’ average estimate at 149.4 MB. Soy export demand was also rock-solid at 1.3 MMT on the week, above analyst expectations ranging from 0.8 to 1.2. While year-to-date export sales for beans continue to lag behind pace by a large margin to reach USDA’s annual export forecast, the likely surge in US business brought on by the Argentina drought should help close the gap.

For corn, not only are exports exceeding the pace to reach USDA, but they are having one of the best 3-month sales streaks on record. There also seems to be no short-term let up with this week seeing a marketing year high of 2.5 MMT sold on old-crop.   At the beginning of the marketing year USDA penciled in only 1,875 MB in exports, but now their forecast sits at 2,225 MB with another 100-200 MB of upside. This kind of export comeback is not unheard of. In 2007/08, US corn exports had a record year hitting 2,436 MB. But like this year, the 2007 early-season USDA projections were uninspiring at only 1,975 MB. We don’t believe the market has fully come to terms with the massive paradigm change in the export picture.

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 stagnant again this week as strength on the board keeps grain moving into supply channels, while flooding along river-ways has pushed barge rates sharply higher. On the week, US average corn basis was up 0.5 cents and soybeans were unchanged.

Export bids out of the PNW and Gulf were higher this week as export demand surges and rivers swell slowing barge traffic. On the week the PNW corn market improved 4 cents while the Gulf shot up a dime. Soybeans saw similar relative strength as the Gulf gains of 8 cents outpaced the PNW which added 6 cents. River terminals upstream from the Gulf had little ability to bid higher as higher barge freight ate away all the incentive. On the week corn river markets gave up 1 cent a bushel while soy river markets were off 5 cents.

For end users it was a week of not really needing to work too hard for corn supplies. On average corn basis at ethanol facilities was off 0.5 cents a bushel with much of the weakness occurring in Iowa. Plants in South Dakota had some modest gains. For soy crushing facilities they were also off by 0.5 cents on the week, but there were a few plants in the Southeast, and Eastern Corn Belt pushing basis a dime higher.

Futures Commentary-

Corn hit its stride this week gaining 7 cents on bullish data from USDA while soybeans backed off 4 cents. Wheat gave up 16 cents.

The story-line in Argentina continues as the worst drought in 38 years is expected to take its toll on crops there. On Thursday USDA came out with a 47 MMT soy crop and a corn crop of 36. But after the report, the Buenos Aires Exchange pegged the crops at 42 of soy and 34 for corn. But, by the end of the week rains were starting to appear more consistently in various weather models. While it will do little to reverse the impacts at this late stage, if rains materialize by mid-March it may help stabilize late season soybeans.

On the demand side, USDA got aggressive on its US demand forecasts, bolstering ethanol by 50 MB and ramping up US exports by 175 MB. These moves slashed carry-out to 2,127 MB from 2,352. Just last harvest we were staring at 2,500 MB in projected carry-out. Weekly export sales hit an 8th week of greater than 1 MMT of sales with 1.8 MMT booked. Even with USDA’s much higher export projection, year-to-date sales are on par with meeting that forecast. For beans, weekly sales totaled 2.5 MMT, the best week since September.  However, USDA had to ratchet down their annual soy export forecast to 2,065 MB from 2,100 MB previously because of the dismal performance year-to-date.

At the end of the week, soybeans took a turn lower as a Chinese trade war seemed imminent around US tariffs on steel. According to Reuters the American Soybean Association says it has “heard directly from the Chinese that U.S. soybeans are prime targets for retaliation” as a countermeasure to US steel/aluminum tariff. If the Chinese level any sort of tariff on US soybeans this could lead to a huge price disadvantage as compared to South America and create significant downside potential for US soybeans.

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

Another stellar week for grains as the bull rally picked up steam with wheat futures catapulting 50 cents, soy futures up 21 and corn rallying 12 cents.

Weather continues to be in the cross-hairs for the market. Wheat in the SW Plains continues to be deteriorating with March weather expected to be a repeat of the last 3 months. This week’s drought monitor showed worsening conditions in W TX/ Ok and Central KS. US weather is expected to be status quo into mid-March and even late March shows only modest chances of precip in the drought-stricken areas. Meanwhile Delta and Eastern Corn-belt areas are being hit with a deluge of storm systems. The last 30 days has brought rainfall totals that are 400% more than normal from IL to OH. The next 7 days should be more favorable although only limited rains are expected in IL/IN/OH with heavier precip expected in the Delta region. It may be too early to worry about planting delays in the ECB, but longer-term models point to a continued wet pattern into April.

In Argentina expectations continue to fall on crop size. This week, the Buenos Aires grain exchange slashed their soy crop estimate to 44 MMT from 47 MMT last week. USDA was at 54 MMT in their Feb estimate. They did keep their corn estimate unchanged from last week at 37 MMT.  In the near term, rain will continue to avoid Argentina as the latest models extended the dry pattern through the first week of March. There is a chance for some showers in about nine days, but the crops are starting to run out of time for disaster-averting rainfall.

This week also brought some policy issues to the forefront. On Thursday Trump announced plans to set tariffs on steel and aluminum imports, which raises the threat level on a trade war with China, EU and Canada. This could have important ripple effects for US Ag, especially soybeans where China accounted for 60% of US exports last year. Meanwhile, the White House held multiple meetings this week between ethanol and big oil execs to try and line out mutually beneficial policies going forward with the outcome being a compromise solution that would advance E-15 blends ‘somehow’ and cap RIN prices. Raising the blend to E-15 but capping the RINs is a difficult policy perspective to comprehend. You can’t seem to enforce blend behavior by refiners if you create a price limit on RINs, so as it stands the policy announcement has the trade confused. Trump wants policy initiatives to be formalized by next week. So, stay tuned, but on the surface more blend potential is bullish corn.

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