Morning Comments – March 23

Grains continued to bleed lower overnight while in outside markets crude oil, equities and the US dollar were on the positive side of the ledger for this first time this week with limited gains.

Russia’s SovEcon agriculture consultancy said on Thursday it had downgraded its forecast for Russia’s 2017 grain crop to 109.5 MMT from a previous forecast of 112.5 MMT. SovEcon also sees the country’s wheat crop at 62.5 MMT in 2017 compared with 73.3 MMT in 2016.

Brazil soy yields are reported to be very good but farmer sales are said to be slow. Palm Oil continued to be weaker overnight adding to losses early in the week. China’s soybean imports in February were at 7.5 MMT, down 4% from the same month last year. Argentina corn harvest is said to be speeding along and port deliveries by truck are said to be record large.

Weekly export sales were supportive for old-crop corn and soybeans. Overnight, Japan bought 59,000 MT of US wheat in their normal tender purchase of 117,689 MT of food wheat. The remainder will be supplied by Canada and Australia.

Export Sales-

Actual

Estimated

Wheat – OC

418

250-450

Wheat – NC

149

50-250

Corn – OC

1,347

900-1,200

Corn – NC

127

100-300

Soybeans-OC

738

350-550

Soybeans-NC

80

100-300

Financial markets will closely watch the Thursday vote in the US House on the Republican led healthcare law. A failure to move this policy forward, would likely signal a bleak outlook on financial policy changes like taxes and infrastructure that market participants have been betting on.

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 – March 22

Grains inched lower overnight with KC wheat continue to take the leader position on the downside. In outside markets, crude oil was pushing into new lows, off 60-cents a barrel and the US dollar and equities were pointing slightly lower following yesterday’s sharp slide.

USDA reported a 120,-000 MT of HRW wheat was sold to Saudi Arabia and 120,000 MT of soybeans were sold to China.

Rains is still in the weather cards for the coming weeks over the Southern Plains. However, overnight model guidance shows less rainfall (vs. yesterday) through month’s end across the Texas and Oklahoma US wheat crop areas, but maintains near to above widespread 1.0 inch totals across much of Kansas.

In China, soy crush margins continue to come under pressure with crush margins dipping to their lowest level in 18 months. Rapid expansion of the soy crush margin in the Fall of 2016 helped push a buying spree of US soybeans, but with China’s margins under pressure and South America competition, it could be a dismal period of US export activity.

Yesterday, US equities and the dollar index came under selling pressure. In part, the dollar continued its lower trend on the Fed’s announcement they would take a less hawkish approach to future rate hikes than investors had thought. Furthermore, stocks are seeing pressure in auto- and consumer-sensitive areas suggesting the economy may not be as strong as expected. Also, investors will be watching the political theater around Thursday’s House vote to repeal Obamacare, as these battles are threatening to push out tax reform and more stimulus well into the end of 2017 or 2018. A defeat in Thursday’s vote would send a clear signal that the rest of Trump’s agenda — taxes, the budget, and infrastructure — could be on shaky ground.

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 – March 21

Grains continued to sink lower following Monday’s sharp sell-off in wheat. In outside markets, the US Dollar index fell below 100 for the first time since early February while crude oil was trying to find stability in the $49 a barrel territory.

After the market closed on Monday, USDA state offices in OK/KS/TX released their winter wheat crop condition scores which showed a mostly deteriorating crop. Kansas slipped from 42% good-to-excellent last week to 40% this week, while OK saw a similar deterioration from 40% to 38% over the past week. TX slipped from 35% last week to 34% this week. While these ratings are substantially below last year’s ratings at this time of year (47% to 63%), they are only slightly off of the long-term averages for the 3-state region, generally around 40%.

Japan’s Ministry of Agriculture is seeking to buy a total of 117,689 tonnes of food quality wheat from the United States, Canada and Australia in a regular tender that will close late on Thursday.

Yesterday, Agroconsult a private analyst pegged Brazil’s soybean crop at 111 MMT up from their previous forecast of 107.8 MMT and above USDA’s estimate of 108.

 

Morning Comments – March 20

Grains started with a good bounce on Sunday night but by early Monday gains were starting to erode.

USDA reported a 132,000 MT of corn was sold to South Korea.

Friday’s CFTC report on managed money showed funds had sold more positions than originally thought in the past week. The soybean long was off, the wheat short was larger than expected and corn went from net long to net short.

The US HRW wheat belt is expected to see some beneficial rains in the coming two weeks with about 75% of the crop expected to see beneficial moisture. In international news, Turkey denied reports that it has banned imports of certain products from Russia, after traders warned shipments of Russian wheat to its second-biggest export market face disruption. But, Turkish buyers are said to be on hold for purchasing Russian ag products.

In South America, Brazil is about 62% harvested on beans vs 56% average. In Argentina, port workers at Rosario are said to be taking a one-day strike on March 30 to demand better wages. About 80% of Argentina’s exports go thru Rosario.

The Taiwan Flour Millers’ Association has issued an international tender to purchase 98,200 tonnes of grade 1 milling wheat to be sourced from the United States.

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 – March 17

Grains drifted listlessly in overnight trade with no firm direction heading into the weekend.

The Buenos Aires Grains Exchange said that Argentina’s corn and bean crop is benefitting from optimal soil moisture. If the positive trend in yield expectations is strengthened over the weeks ahead, volumes at the end of the season could be higher than our current estimate,” the report said. Argentine soy planting starts in mid-October, with harvesting ending mid-year. Corn goes into the ground in September through December. Harvesting is usually from March through July. The report said 10 percent of the 2016/17 corn area has been brought in so far. Although harvesting machines have gotten bogged down in the wettest areas, the fields that are being harvested are showing better-than-expected yields, it added. The exchange kept its 2016/17 corn crop estimate unchanged at 37 MMT.

The latest outlook from the U.S. government predicts warmer-than-average weather that could have a game-changing impact when the U.S. corn and soybean planting campaign gets underway in a few weeks. The U.S. Climate Prediction Center on Thursday said the warm trend will start in April and strengthen through June, except in the Dakotas and Minnesota.

In the US Midwest, the SRW wheat crop should benefit from milder/wetter pattern, allowing regrowth after freeze event. Plains wheat warm/dry over next week, depleting moisture; at least SW 1/3 of belt misses relief late next week.

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 – March 16

Grains moved higher overnight led by soybeans as they moved above $10 a bushel on front month May. Outside markets saw crude oil and equities higher while the US dollar hit their lowest mark since early February.

USDA said exporters sold 120,000 MT of Hard Red Winter wheat to Algeria and 120,000 MT of soybeans to unknown destinations.

Traders are keenly watching the weather outlook in the dry Southern Plains. Warm temperatures Thursday through Sunday will increase some of the need for moisture as the crop develops further. The latest weather models show a rain system for Mar. 22-24 in this region but it will likely miss where the Texas and Oklahoma Panhandles miss out A second system is expected in western Hard Red Winter Wheat areas Mar. 26-28 but again the SW Plains are expected to miss out.

USDA weekly exports showed a good week for corn with both old- and new-crop sales beating the high end of expectations. Meanwhile wheat was at the low end of expectations for both old- and new-crop while soybean old-crop sales were at the low end of expectations but new-crop exceeded expectations.

Export Sales-

Actual

Estimated

Wheat – OC

264

250-450

Wheat – NC

74

25-200

Corn – OC

1,255

700-1,000

Corn – NC

218

0-200

Soybeans-OC

471

400-600

Soybeans-NC

225

0-200

On Wednesday, the US Federal Reserve raised interest rates as expected and signaled that they expect a total of 3 rate hikes in 2017 and 3 more hikes in 2018 based on the strong economic signals.

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 – March 15

Grains were in recovery mode on Wednesday after two weeks of sliding lower. In outside markets, crude oil was trying to bounce off its worst prices in 3.5 months while the US dollar was weaker to start the day ahead of the Fed announcement.

Overnight, there was some interest in wheat deals with Egypt tendering for an unspecified amount of wheat. In addition, Jordan and Indonesia were also shopping for milling wheat.

February NOPA crush will be out at 11 am CDT today. The trade expects a soft month thanks to weakening crush margins. Only 146.1 MB are expected to have been crushed in February, slightly off from 146.2 in the same month last year.

In the US, cold temperatures along the Eastern Cornbelt of IN/OH/KY are thought to have caused some winter kill damage to the wheat crop there. In the Plains, there are expected to be rains in the 11-15 day outlook although it will be confined mostly to the Eastern Plains, with the SW parts of KS/OK/TX not expected to see much moisture.

The Federal Reserve is expected to raise interest rates in their policy statement at 1 PM CDT. If realized, this would be the second time in three months. The rate-hike is widely expected, so the real news will be if the U.S. central bank will signal an even faster pace of monetary tightening this year than the current three rate hikes that it projected at its December meeting.

US export competitiveness improved this week with US prices falling more than foreign country FOB grain prices. The exception was Argentina’s wheat which moved $2/MT lower relative to US prices over the past week.

 WORLD EXPORT PRICE SPREADS RELATIVE TO US

Crop

Country

Today

Last Week

Last Year

CRN

ARG

+$2.3

-$1.8

+$1.3

CRN

BRZ

-$15.2

-$21.0

-$19.9

CRN

EUR

+$5.1

+$2.1

-$15.6

SBN

ARG

-$5.9

-$8.1

-$10.1

SBN

BRZ

+$4.0

-$1.0

-$2.7

WHT

ARG

-$2.0

+$0.3

-$4.6

WHT

EUR

-$13.0

-$16.8

-$52.5

Export spreads represent a foreign country price minus US price at export destinations, in USD per metric ton.  A higher spread indicates the foreign price has risen relative to US prices, making the foreign country less competitive and the US more competitive.

 

Morning Comments – March 14

Corn fell on high corn plantings while wheat prices edged lower on welcome rain forecasts.

Exporters sell 120,000 metric tons of corn for delivery to Mexico during the 2017/2018 marketing year. -USDA

US soybean prices dropped below $10 a bushel to hit a two-month low on Tuesday, dragged down by expectations of record South American production in a global market that is already amply supplied. Increased SA production comes as US farmers are expected to plant more soybeans next season, adding to global inventories. Private analytics firm Informa Economics raised its 2017 US soybean plantings forecast to 88.7 million acres, from 88.647 million in January.

The US Department of Agriculture believes South America is on the verge of harvesting a monster corn crop, but the agency’s past prediction tendencies suggest that the record targets it has set could still be too low.

Last Thursday, USDA revised its forecast for 2016/17 Brazil corn output to 91.5 million tonnes, some 6 percent greater than last month’s figure. The US agency also increased the Argentine crop to 37.5 million tonnes, a 3 percent rise from February.  This may not be the best news for corn bulls, as Chicago prices have been feeling pressure in the face of the likely record world corn supply this year. The world will look to Brazil and Argentina to supply 37 percent of world corn trade this year.

The dollar rose before the start on Tuesday of a Federal Reserve policy meeting expected to raise US interest rates.  The Dollar Index which measures the dollar against six other major currencies, rose 0.3 percent. A Fed rate rise on Wednesday is seen as all but certain and investors will focus on new economic forecasts and any clues to how many rate hikes can be expected this year. While higher rates would raise companies’ costs, they are also seen as evidence of economic recovery.

 

Morning Comments – March 13

US soybean prices on Monday inched away from two-month lows touched in the previous session, though gains were checked by forecasts of ample South American supply. Corn prices were flat after hitting a three-week low the session before, while wheat was largely unchanged.

Exporters sell 120,000 MT of soybeans for delivery to unknown destinations during the 2017/2018 marketing year.

China’s wheat imports are expected to rise to 4.5 million tonnes in the year to June 2017 from 3.48 million tonnes previously as lower production and the poor quality of the domestic crop boost demand. Wheat production in China, the world’s top consumer of the grain, is estimated to decline to 129 million tonnes during the year from 130.19 million in the prior period. The USDA has estimated China’s wheat imports during the year at 4 million tonnes.

Weekend rain in Brazil favored C Mato Grosso. Localized wetness concerns for RGDS soy/rice harvest areas, but dry the next 10 days except for showers on Thursday. Weekend rains limited to N & SE fringes of Argentina northern ¼ of corn/soy the next 10 days; favorable early harvest. Return of Arg. rains in the 11-15 & 16-30 day outlook (mainly west) will slow fieldwork at times, but no signs of severe wetness.

An event-packed week for global markets got underway on Monday with stocks steady and the dollar recovering from a three-day fall as investors braced for a potential interest hike in the US, a Dutch election and the first G20 finance ministers’ meeting of the Trump era.

The world’s most powerful finance ministers and central bankers convene in the German town of Baden-Baden on March 17-18, their first meeting since Donald Trump’s US election victory in November where his protectionist stance on international trade is likely to be a key issue.

 

Morning Comments – March 10

Grains continued to sell-off over night with soybeans again leading the complex down. In outside markets, a positive US jobs report this morning helped push equity futures higher higher.

After holding pat on Brazil’s production forecasts for the past several months, USDA finally bumped their production forecasts higher in yesterday’s report and in the case of corn, USDA came in well above expectations with a crop of 91.5 MMT vs 87.7 expected. For soybeans, they came in at 108.0 vs 105.9 expected.

The market seems to be reaching a critical mass as fundamentals are getting more bearish while the technical chart picture is turning decidedly negative. Dec Corn breaking below $3.90 gives a new target of $3.76 from the double-top formation on the charts established from the $4.04 highs. Likewise, Nov beans have a triple top of the $10.33 highs with a close below $10 signalling a move to the $9.70 area.

This morning’s US jobs report showed more bullish news for the economy as 227,000 jobs were added in February. That was well above expectations of 193,000 jobs.