Morning Comments – March 04

In the overnight session the grains moved lower with corn down 1 ½ cents, soybeans down 8 ¼ cents and wheat down 5 ½ cents. Minneapolis wheat is down 4 ½ this morning after a 15 cent gain in yesterday’s session. The cash market is firming for spring wheat in Portland which saw basis rise 20 cents yesterday. Spot basis is now at +293 off the May contract which is well above the three year average basis of +201.

The U.S. Dollar index is pushing higher this morning, closing in on the 95.85 level it traded at back on January 26th. If it closes above that level it is likely that the dollar will resume its upward trend and start another leg higher. Strength in the U.S. dollar is a main reason why U.S. wheat exports have been noncompetitive on the global market.

The Brazilian trucker strike has calmed substantially from last week when over 100 roadblocks were scattered throughout the country.  However, the situation has not resolved itself completely. On Tuesday there were 18 roadblocks that remained and although a key highway to Mato Grosso has been opened up, roadblocks still remain for grain headed for the port of Paranagua.

Yesterday, Argentina grain farmers announced they will suspend grain sales for three days in protest of government policies such as export quotas. Traders see this as a political move to help bring agriculture to the front of attention during this year’s elections. There are no concerns yet that exports will be interrupted, but it will be important to pay attention to any further developments of this strike.

 

 

Morning Comments – March 03

The grains are mixed this morning with corn up 1 ¼ cents, soybeans down 3 ¾ cents and wheat in Chicago down 2 ½ cents. Traders should keep an eye on the Informa Economics latest crop estimates scheduled for release at 10:30 AM this morning. Also on the horizon is the USDA Supply and Demand report to be released on the 10th and the NOPA crush figures on the 16th.

Yesterday, export inspections showed that corn beat analyst expectations by recording 1.2 million metric tons inspected for export compared to expectations which ranged from 750,000 and 900,000 MT. Wheat reported 450,093 metric tons inspected for export which was on the high side of analyst expectations and soybeans recorded 635,164 MT which disappointed analysts who were expecting between 750,000 and 950,000 MT.

A recent crop condition report on Monday showed that the western HRW regions of Oklahoma, Nebraska, Texas and Colorado have improved their crop conditions ratings due to less than expected winterkill during February. However, Kansas wheat conditions have slipped due to harsh conditions and freezing temperatures throughout February.

 

Morning Comments – March 02

In the overnight session the grains traded mixed with corn down 1 cent, soybeans up 2 ¼ cents and wheat up 2 cents going into the morning pause in trade. The Chicago wheat market seems to have held support off $4.96 last Thursday which was the previous low back on February 2nd.

Over the weekend the Brazil police enforced the fines announced by the justice minister on Friday. The Police arrested protesters and broke up road blocks bringing the total number of road blockages down from 88 on Thursday to 12 partial roadblocks nationwide. Protest leaders stated that the government has still not addressed the striker’s issues. The Brazilian government will increase the police presence on the highways to ensure freight lanes are kept open.

The Midwest is expecting to receive more wintery weather this week with below zero temperatures expected by the end of the week and between two to eight inches of snow is expected in the northern Delta. Due to the accumulated snow cover, there is a low concern for winterkill freezing areas.

Weekly Cash Comments

Cash Commentary-

Corn basis saw modest growth this week advancing 2 cents a bushel on average across the country, but bean basis was unchanged thanks to higher futures and better farmer selling.

In corn, basis levels were up largely driven by strength at ethanol plants in the Western Cornbelt. On average, ethanol plants posted a 3-cent gains but in the Western Cornbelt plants were up 5 to 10 cents a bushel in some cases. This week’s ethanol production was off 17,000 barrels per day from the previous week, but year-to-date production is still well ahead of last year’s pace. At the Gulf, export basis gained 2 cents a bushel but river terminals on average were up slightly less than that. Southern stretches of the Mississippi river and the Ohio River saw corn basis strength this week.

For beans, average basis levels were flat across the country, but soy crushing plants as a group were off 2 cents a bushel. Deliveries appeared to pick up this week with soybean futures shooting higher early in the week thanks to the threat of a Brazilian trucker strike. Also, bad weather in the US eastern Cornbelt kept plants in Indiana and Ohio bidding higher for beans as farm movement slowed, while river terminals along the Ohio River encouraged farmers to deliver beans over corn to their facilities. On average, river terminal basis levels were unchanged for the week in spite of a 4-cent advance at the Gulf.

Futures Commentary-

Corn and wheat prices fell this week down 9 ¾ cents and 24 ½ cents respectively, while soybean prices rallied 16 ¾ cents on news of Brazil trucking disruptions. Truckers in Brazil are protesting higher diesel prices by using road blocks and parking their rigs on the shoulders of Highway BR 163 to interrupt harvest grain flow throughout the country. The protest began on Wednesday in two small towns with a group of transportation companies and independent truckers but quickly spread to surrounding towns. Truckers are looking for the state government to reduce the diesel tax. The strike has slowed fuel delivery throughout the country cutting off the supply of fuel for many farmers during harvest. The strike has also disrupted the flow of grain to the ports making traders nervous that delays could push soybean sales onto the U.S. books.

The trucker strike continues in Brazil even after the Government offered truckers a year of free financing for vehicles from the state development bank, an offer to keep diesel prices unchanged for six months and to help truckers work out a framework for setting freight rates. This offer by the government resulted in some truckers quitting the strike and clearing off the roadside, but many roads throughout Brazil are still blocked. On Thursday, in an attempt to break the trucker strike, Brazil’s Justice Minister said that the government would impose fines of about $1,700-$3,400 per hour on trucks who have blocked roadways. Despite the threat of fines truckers continue to block traffic throughout Brazil.

Following a cancellation of the Egypt wheat tender last Wednesday due to “exaggerated U.S. wheat prices”, Egypt’s GASC bought 120,000 metric tons of U.S. HRW wheat announced on Wednesday. Egypt was looking to make use of a 100 million dollar line of credit provided by the U.S. Government to be used for the purchase of U.S. wheat. Although this should not be expected as the norm, the sale shows that prices are close to being competitive on the global market. Wheat prices seem to have found support during Thursdays trading session after holding a major support level of $4.92 ¼ which was the low back on February 2nd.

Exports sales for corn were weaker than expected, while wheat and soybeans reported sales on the low side of analyst expectations. For the week ending February 19th corn export sales totaled to 715,800 MT which was down 23 percent from last week. Analysts were expecting to see corn sales between 900,000 and 1,100,000 metric tons. Despite the weaker than expected export sales this week, cumulative corn sales running well ahead of the pace needed to meet USDA expectations with 34.8 million metric tons sold this year.

Soybean export sales were on the low side of expectations booking 459,200 MT. However, soybeans have booked 47.12 MMT already this year, well ahead of the pace needed to meet USDA expectations. Last year during this week only 43.4 MMT of soybeans were booked. Wheat sales were reported 328,300 metric tons of sales, within the analyst expectations and up 23 percent from the previous week.

Weather forecasts in Brazil continue to show moisture in the forecast which has been interrupting the safrinha corn planting pace. More rain is expected in the northern part of Brazil for the rest of the week and throughout the 6-15 day outlook. There are some slight concerns that the delays in planting could lead to additional acreage and yield loss throughout Moto Grosso.

Morning Comments – February 27

In the overnight the grains traded higher with corn up ¼ of a cent, soybeans up 3 ½ cents and wheat up 6 ¾ cents going into this morning’s pause. Wheat seems to be bouncing higher this morning after holding a major support level of $4.92 ¼ which was the low back on February 2nd. Today is first notice day for March grain contracts.

The trucker strike continues in Brazil even after the Government offered truckers a year of free financing for vehicles from the state development bank, an offer to keep diesel prices unchanged for six months and to help truckers work out a framework for setting freight rates. This offer by the government resulted in some truckers ending their strike and clearing off the roadside, but many roads throughout Brazil are still blocked. Yesterday, in an attempt to break the trucker strike, the state Justice Minister said that the government would impose fines of about $1,700-$3,400 per hour on trucks who have blocked roadways. Despite the threat of fines truckers continue to block traffic throughout Brazil.

Weather forecasts in Brazil continue to show moisture in the forecast which has been interrupting the Safrinha corn planting pace. More rain is expected in the northern part of Brazil for the rest of the week and throughout the 6-15 day outlook. There are some slight concerns that the delays in planting could lead to additional acreage and yield loss throughout Moto Grosso.

Yesterday Brazil’s Agro consultant released their latest forecast of 14/15 Brazilian soybean production pegging the crop at 94.7 million metric tons compared the USDA’s forecast in February of 94.5 MMT.

Morning Comments – February 26

In the overnight session the grains traded mixed with corn and soybeans up 2 ¼ each and wheat trading 1 ¼ cent higher going into the morning pause in trade. Today is the last day to get out of any March grain contracts with first notice day Friday the 27th.

Yesterday at 11 AM CST trucker strike representatives met with the Brazil government to seek a resolution to the multi week long strike that has clogged roadways in Brazil. Following the meeting, Brazil minister says that the Government is not open to altering fuel tax to appease the striking truckers. However, the government followed that announcement by stating that the truckers are showing flexibility and that they expect a resolution will be reached soon.

Exports sales for corn were weaker than expected, while wheat and soybeans reported sales on the low side of analyst expectations. For the week ending February 19th corn export sales totaled to 715,800 MT which was down 23 percent from last week. Analysts were expecting to see corn sales between 900,000 and 1,100,000 metric tons. Soybean export sales were on the low side of expectations booking 459,200 MT compared to expectations between 450,000-650,000 metric tons. Soybean sales are still well ahead of the pace needed to meet USDA expectations. Wheat sales were reported 328,300 metric tons of sales, within the analyst expectations and up 23 percent from the previous week.

Expected Actual
Corn 900,000-1,100,000 715,800
Soybeans 450,000-650,000 459,000
Wheat 200,000-400,000 328,300

This morning the International Grains Council forecast the world wheat crop to increase 2 million metric tons to 719 MMT for the 14/15 marketing year. The IGC forecast a decline for the 15/16 marketing year to 705 MMT.

Morning Comments – February 25

The grains are moving lower this morning with corn down a penny, soybeans down 4 cents and wheat in Chicago down 3 ½ cents. Yesterday’s rally in Soybeans sparked some farmer selling after prices rose sharply to an intraday high of $10.29. Keep a close watch on corn today as it trades next to a support level of 3.76 cents which was a previous low on in November, December and the middle of January. This morning a reportable sale of 120,000 metric tons of HRW wheat to Egypt was announced.

The Brazil trucker strike and blockade continues this morning although a main road to the Port of Santos was cleared early Wednesday. Even though the striking trucks were dispersed along that stretch, congestion remains an issue with a large amount of trucks looking to use the road soon. The Attorney General stated that they will begin levying significant fines if the strike continues to grow. Despite the threat of large fines, the strike continues throughout many of the countryside roads as truckers protest the increase in diesel prices. Traders are still concerned that the flow of grain to ports and the flow of diesel to small towns which fuel combines will cause slowdowns and delays in weeks to come.

Also in Brazil, scattered showers will continue Thursday through Sunday and continue to disrupt corn planting. Corn planting is about a week behind normal and the 6-15 day forecast showing very few windows of opportunity for corn planting between precipitation events.

Morning Comments – February 24

This morning the grains are trading higher with corn up 1 ½ cents, soybeans up 9 cents and wheat up 1 cent. Soybeans are trading higher on concerns about supply disruptions out of Brazil due to the truckers who are protesting higher fuel prices by blocking main roads across Brazil. Traders are concerned that the lack of transportation will leave small towns without fuel to power combines during the harvest, and generally delay the movement of grain to ports.

Yesterday export inspections were better than expected for both corn and wheat. Corn recorded 900,965 metric tons of grain leaving the country which was higher than market expectations which ranged from 700,000-850,000 MT. Wheat export inspections were recorded at 501,458 metric tons which were around 100,000 above the high side of expectations. Soybean showed 961,749 metric tons were inspected for export which was down from 1.3 million metric tons inspected last week and on the low side of analyst expectations.

Egypt’s GASC announced yesterday that they are seeking 55,000-60,000 metric tons of U.S origin wheat after prices declined late last week. Egypt canceled a tender for U.S. wheat last Wednesday citing that prices were exaggerated. Since the close of Wednesday’s session, wheat prices have fallen 22 cents.

The weekly Texas crop conditions report showed that the percentage of wheat crop rated good-to-excellent was 44 percent, unchanged since last week. Poor-to-very poor was also unchanged at 14 percent.

Morning Comments – February 23

The grains are trading mixed this morning with corn down ¾ of a penny, soybeans up 4 ¼ cents and wheat down 1 ½ a cent. This Friday the 27th is the First Notice day for March corn, soybeans, wheat, KC wheat and MN wheat. Hedgers that are not looking to take delivery should exit their March positions or roll into May contracts.

Truckers in Brazil are protesting higher diesel prices by using road blocks and parking rigs on the shoulders of Highway BR 163 to interrupt harvest grain flow throughout the country. The protest began on Wednesday in two small towns with a group of transportation companies and independent truckers but quickly spread to surrounding towns. Truckers are looking for the state government to reduce the diesel tax.

A few tenders have been offered this morning including an optional origin tender by Jordan’s state grain buyer to purchase 100,000 metric tons of hard milling wheat and another Israeli private tender to purchase up to 90,000 metric tons of corn and 25,000 metric tons of feed wheat.

The CFTC commitment of traders report showed that large speculators which includes hedge funds, cut their long corn positions for the week ending February 17th and lessened their short wheat and short soybean position.

Weekly Cash Comments

Cash Commentary-

Grain futures posted positive gains this week with beans up 23 and corn up 6, but in the cash market overall trends in the basis were mostly flat. Corn managed a 1-cent improvement on the week, while soybeans were unchanged on average across the country.

For corn, export demand and ethanol use continue to be strong demand stimuli. Friday’s export sales report showed over 900,000 MT of old-crop sales, surpassing analyst expectations of 650-900,000 MT. Physical exports of only 696,000 MT meant that outstanding sales, or the amount of grain left to be shipped, continuing to grow to 17.4 MMT. River terminals appear to be bidding more aggressively for March delivery versus spot, with March premiums fetching 7 to 9 cents over most spot deliveries. This likely will help improve basis in the coming weeks. For ethanol, weekly production grew by 3,000 barrels per day and continues to eclipse last year’s pace. Year-to-date production is up 5.7 percent from the same period last year, while USDA is only looking for a 2.3 percent increase in corn use for ethanol.

In soybeans, monthly crush numbers for January came in at 162.675 million bushels, up from last year’s January figure of 156.943 million bushels and just over expectations of 162.673 million bushels. For the week, soybean plants were lower by a penny per bushel on basis with losses most apparent in SD, MN & IA. On the export front, river terminals were up half a penny per bushel on average although there was a mix of buyers that were up and others that were down on the week. Export business continues to be stronger than expected as weekly sales of 505,600 MT were at the high end of analyst expectations on the week.

Futures Commentary-

This week the USDA Ag Outlook Forum provided a boost for soybean prices on Thursday after the USDA announced that soybean acres are projected to be 83.5 million acres in 2015, down from 83.7 million acres planted in 2014. This was a surprise to the market which expected acreage to increase year over year for soybeans. Currently Informa’s latest soybean acreage forecast for 2015 is 88.03 million acres. Although this is not a survey based outlook the market still viewed this as positive news for soybean prices.  The USDA forecast corn at 89 million acres planted in 2015, down from 90.6 million acres planted last year and saw wheat seeding’s losing 1.3 million acres year over year.

Soybeans have been propped up by strong demand in over the last two weeks. On Tuesday the 17th the National Oilseed Processing Association announced a record amount of soybeans were crushed in the month of January. NOPA stated that 162.675 million bushels of soybeans were crushed in January; up from last year’s January figure of 156.943 million bushels and just over expectations of 162.673 million bushels. Soyoil stocks were larger than expected at 1.228 billion pounds compared to expectations of 1.170 billion pounds.

The wheat market struggled to hold onto gains from earlier on in the week after Egypt canceled a tender to buy an unspecified amount of U.S. origin wheat for April delivery. The Egyptian state grain buyer GASC, had been expected to purchase U.S. wheat over recent weeks in order to take advantage of a 100 million dollar credit line provided by the United States. However, despite the credit line GASC canceled the U.S. tender explaining that prices were exaggerated and that it will now seek wheat from other origins with better prices. GASC then issued a tender for 55,000-60,000 metric tons and opened the tender global suppliers.

Another cold front entered the Midwest this week with lows around 0 to-5 degrees Fahrenheit. Although most of the winter wheat belt has sufficient snow cover, around 10-15% of the region is exposed to the harsh wintery temperatures. From central Illinois, Indiana, Ohio and down into Northern Missouri low temperatures could lead to some levels of crop damage.

Northern Brazil weather has once again been very divergent from Southern Brazil. The dryness in northern Brazil has allowed harvest activities to progress normally while Southern Brazil has run into delays due to continued precipitation. The precipitation has been a double edged sword as it provides good moisture for late developing crops, but slowing harvest pace for mature fields. Significant precipitation is expected to continue into next weekend.