Morning Comments – December 02

Grains were higher in overnight trade trying to recover from two days of steep losses. In outside markets, crude oil reversed direction drifting back to the $50 mark and the US dollar dipped lower as well.

Wheat has been hammered this week as Southern Hemisphere production comes online. Australia is thought to have a bumper crop it’s harvesting with expectations north of 30 MMT versus USDA at 24 MMT. Argentina is offering new-crop wheat prices at 12.5% protein for export at $10 a MT less than US Fob prices for 11.5% protein.

Argentine growers have planted 46% of the 19.6 million hectares (48.4 million acres) expected to be sown with soybeans in the 2016-17 season with the country’s central farm belt enjoying good growing conditions, the Buenos Aires Grains Exchange said on Thursday.

Yesterday, USDA’s soy crush was reported to be at 175.9 MB a record large for October and for the first two months of the marketing year crush is up 3% over last year versus a USDA annual forecast of a 2.3% jump.

U.S. employers boosted hiring in November and the unemployment rate dropped to a more than nine-year low of 4.6%, making it almost certain that the Federal Reserve will raise interest rates later this month. Non-farm payrolls increased by 178,000 jobs last month. The solid gains in employment likely reflect rising confidence in the economy.

 

Morning Comments – December 01

Soybeans gained ground overnight, but turned sharply down on export sales news this morning. Wheat and corn continue to grind lower. Crude oil continued its climb advancing into the $50 range for the first time since October, while the US dollar was off in early trade.

Palm oil was up overnight hitting a 4-year high, while China soybeans posted modest gains but continues to be the highest it’s been in a year. China is reported to be doing most of its buying out of Brazil and only doing modest shopping with the US.

The forecast for the next week in South America will feature drier conditions in most crop areas as a strong high pressure system drives the weather pattern for at least five days. This high pressure system will bring a brief pulse of moderately warm temperatures through Argentina and Brazil, but the strongest influence will be the suppressed rainfall as Argentina, Southern Brazil, and the eastern half of Center-West Brazil receive 0.4-1.2 inches below normal precipitation through the next 10 days.

Japan’s Ministry of Agriculture bought a total of 158,514 tonnes of food quality wheat from the United States and Canada in a regular tender that will close late on Thursday. The global wheat market may came under pressure as Argentina and Australia’s wheat crop seems robust as harvest hits there. Argentina farmers are said to be eager sellers at harvest with big yields and no export taxes as in the past.

WEEKLY EXPORT SALES

Actual

Expected

Corn

761.6

900-1,200

Soybeans

1,399

1,000-1,400

Wheat

483.5

300-500

OPEC reached a deal to cut 1.2 million barrels per day in production. The cut of 1.2 was at the upper end of expectations (0.7-1.2 million bpd). An additional cut of 0.6 million bpd from non-OPEC countries could significantly add to what has been announced by OPEC.

 

Morning Comments – November 30

Grains swung back into positive territory overnight following Tuesday’s sharp selloff. Crude oil catapulted higher overnight gaining $3 a barrel on news OPEC would cut production.

USDA announces a sale of 123,000 MT of soybeans to China.

Palm oil was up sharply overnight but China soybeans and soymeal were off following the US lower from Tuesday. Crush margins and hog margins in China, but there is signs that they are starting to move to South America for supplies.

In the long-term China’s grain production will fall by 15 MMT, or about 2.5 percent, in the five years to 2020, as the government withdraws severely polluted or degraded farmland for rehabilitation, a state planner official said on Wednesday. Under the proposal, some five million hectares of land – about four percent of the country’s total arable land – will be taken out of production and either rehabilitated or turned over to forest or grasslands,

On Tuesday, USDA released their long-term forecasts for agriculture. Looking at their 2017 acreage numbers, call for a big drop of 4.5 million acres in corn and soy acres up only 1.8. Traders expect a much bigger swing high in beans and a less dramatic drop in corn. Yesterday was FND-eve, sending longs exiting heavily in Dec corn and wheat which contributed to widening of spreads to March and a sharp plunge in flat price.

Crude oil got a jolt as top oil producer Saudi Arabia said a deal was close despite some loose ends. Iran, which is considered crucial to a breakthrough because its output has been rising after western sanctions were lifted, said it was also “optimistic”.

 

Morning Comments – November 28

Soybeans started strong on the week holding on to double-digit gains overnight, but corn and wheat continued to sag. Outside markets saw crude oil trade both sides of unchanged but was heading into the day session in positive territory while the US dollar and equities were slightly lower.

Asian markets continued to show good strength as palm oil hits its highest market since 2012. China soybean futures were also up strong overnight posting a 26-cent advance. Meanwhile, in South America weather continues to be favorable with Argentina getting better than expected rains over the weekend as one third of the bean crop has been planted there.

In Brazil, rains hit 45% of the crop area there over the weekend and the 5-day calls for 50% coverage.  The longer-term forecast of 16-30 day forecast shows wet over northern Brazil and normal to below normal across southern Brazil and Argentina.

In global markets, Saudi Arabia has said they won’t attend meetings today & tomorrow ahead of the oil summit on Nov 30. There is some conjecture this may be signs of dissent in an oil output cut deal.

 

Morning Comments – November 25

Grains were closed overnight but will reopen for trade at 8:30 am CDT. In outside markets, the USD drifted lower while crude oil was off in early trade and equities were higher.

Lower output of palm oil into early next year and tight supplies of rival soybean oil are likely to bolster prices for the tropical product in the short term after they hit a four-year high this week. Higher mandates for biodiesel production in the United States and Indonesia will further squeeze inventories of palm oil, used in products ranging from candy to cosmetics and cooking oil. Palm oil futures rallied 1% overnight and is up 5.7% on the week.

Russia’s food safety watchdog said on Thursday it would have to introduce a quarantine that could hit agricultural exports if there were more outbreaks of African Swine Fever (ASF) at pork breeding facilities in the southern Krasnodar region. The watchdog said on its website a quarantine could affect, for example, grain exports. Analysts said this would be due to concerns ASF – a highly contagious hemorrhagic fever among pigs – could be transmitted via animal feed.

The dollar retreated against its major currency peers on Friday, a pullback in U.S. bond yields spurring some profit-taking as it headed for its best run in almost two years. Expectations of rises in U.S. inflation and interest rates have driven the greenback to a more than 6 percent gain over October and November, its strongest showing over a similar period since early 2015.

WEEKLY EXPORT SALES

Actual

Expected

Corn

1,668

900-1,200

Soybeans

1,898

1,200-1,500

Wheat

712

350-550

Morning Comments – November 23

Soybeans took a break from their two-day rally, giving up a dime in overnight trade. This drug down wheat and corn as well. In outside markets, the USD shot higher, making new highs on the move and reaching its highest point in 14 years; crude oil slipped in early trade.

The USD got a boost from US durable goods orders this morning.

Overnight a South Korea feed buyer bought 55,000 MT of optional origin corn but it is thought to be sourced from the US. Indonesia hopes to stop importing corn in 2017, an agriculture ministry official said on Wednesday, referring to a national program aimed at achieving self sufficiency in basic foods. “We’re making a nationwide corn development program, with the hope that from 2017 we no longer import corn,” Nasrullah, director of animal feed at the ministry, told Reuters.

In soybeans, spec funds are said to be extending their length in this rally, all the while spot basis levels continue to erode. US Gulf export basis is off about 5 cents in the past few days, and is trading 30 cents a bushel below the same time last year.

The USD got a boost from the US Durable Goods report which showed a pickup in spending by 4.8% as expectations had been for only a 1.5% boost.

In export competitiveness, US corn values were higher in against Europe, the Black Sea, and Brazil over the past week. In wheat, the US gained some competitive ground against Argentina and Europe, but fell against the Black Sea. US soybeans managed to improve on the week against Brazil and Argentina.

 

Morning Comments – November 22

Grains were mildly lower overnight although prices in China continued to surge. The two-day gain for Chinese soy prices is +38 cents and soymeal up $14. In outside markets, bonds, equities and the US dollar were in positive territory while crude oil gave back some of the $2 a barrel gains from Monday.

USDA reported 30,000 MT of soybean oil to China.

Strong US exports and a robust demand from China sent soybean prices sharply higher on Monday. China’s October crush surged 24% year-on-year as the country continues to have a vigorous appetite for soybeans. China is said to be shopping for US beans to reduce shipping time from the US Gulf.

South African farmers are expected to bolster corn plantings by 35% over last year. South Africa’s Crop Estimates Committee (CEC) is expected to forecast the planted area at 2.62 million hectares, 35% higher than 1.947 million hectares planted last year, according to an average estimate of five trading houses polled by Reuters. The CEC will announce the data on Thursday.

OPEC experts discussing how to implement a plan to cut oil output are likely to reach agreement later on Tuesday, a Nigerian delegate said, a possible sign of progress in finalizing the group’s first supply-limiting deal since 2008. The key issue before the committee is how to implement a September agreement by the OPEC Countries to reduce production to between 32.5 million and 33 million barrels per day in an effort to prop up prices.

Morning Comments – November 21

Grains started the week in positive territory with soybeans leading the complex with double-digit gains while wheat and corn advances were more anemic. In outside markets, crude oil jumped $1.30 a barrel and equity futures were pointing to a higher open to start the week.

Overnight, a Taiwan flour miller was tendering for 85,000 MT of US wheat. Russian wheat export prices have risen for the ninth consecutive week, reflecting stronger global markets. Black Sea prices for Russian wheat with 12.5 percent protein content for November supply were at $183 a tonne on a free-on-board (FOB) basis at the end of last week, up $2 from a week earlier.

In South America, no major weather threats have emerged to crop development. Brazil is expected to see favorable moisture over the next two weeks, while Argentina is expected to net drying in portions of the south and timely rain in the north late this week and into the weekend that will maintain favorable crop development conditions.

Crude oil got a boost to start the week on discussions by OPEC members with Iran to reach an output cut. Both sides discussed the prospects of upholding a production ceiling proposed in September in Algeria and, if it’s formalized, Iran’s oil minister said crude oil prices could rally up to 25 percent.

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 – November 18

Grains were modestly weaker overnight as the US dollar continued its ascend to fresh 14-year highs. Crude oil and equity futures were mostly unchanged.

USDA reported a 165,000 MT of soybeans were sold to China.

In international news, Ukraine’s ag minister said the country’s 2016 grain harvest will be record-large of 64 MMT up from a previous forecast of 63 MMT.

Rain is expected in northern half of Brazil the rest of the month and is expected to hit the southern one-third of Brazil late in the 6-10 day forecast. Central Brazil continues to remain dry with the best rain chance in central in the 11-15 day, which will be needed to ease dryness.

The US dollar climbed to its highest level in almost 14 years against a basket of currencies on Friday, while U.S. bond yields were set for their biggest rise in 13 years on bets U.S. inflation and interest rates are headed higher.   A growing perception that the economic policies of U.S. President-elect Donald Trump will push up consumer prices helped put the dollar on track for its biggest two-week rise against Japan’s yen in almost 30 years.

 

Morning Comments – November 17

Grains were in positive territory overnight as they continue to seesaw back and forth around long-term prices of the past 3 months. In outside markets, the US dollar was finally weaker after hitting a 13-year high yesterday and crude oil was up in morning trade.

USDA reported a 106,200 MT of corn were sold to unknown destinations.

EU farmers are expected to sow 24.3 million hectares of soft wheat for next year’s harvest, little changed from 24.2 million in 2016, consultancy Strategie Grains said on Thursday. For the 2016 crop, they shaved the corn estimate from 59.8 MMT to 59.6, and the wheat crop estimate from 135.9 to 135.7.

South Korea’s largest animal feed maker Nonghyup Feed Inc. (NOFI) purchased 68,000 tonnes of yellow corn to be sourced from optional origins. Japan bought 136,000 MT of which 101,000 MT was sourced from US origins and the rest from Canada.

WEEKLY EXPORT SALES-

Actual

Expected

Corn

1,661

900-1,200

Soybeans

1,418

1,200-1,500

Wheat

598

400-600

Weekly USDA export sales were above expectations for corn and at the high end of expectations for soybeans and wheat.