Weekly Cash Comments

Cash Comments-

The futures market slide 12 ¼ cents for soybeans and 8 ½ cents for corn but despite the sharp slide in prices, basis remained for the most part steady increasing only a penny for soybeans and 1 ½ cents for corn.

Basis along the river declined more than the rest of the U.S. declining an average of 2 cents despite barge rates declining across all five major river regions. Basis along the gulf slipped 4 cents over the last week helping explain the relative weakness along the river. Soybean basis along the river held steady in the face of declining futures prices, improving 1 ¼ cents this week. Soybeans moved by barge over the past week was down 35 percent below the same week in 2014. Year to date barge movement of soybeans is 174,000 tons behind where we were at this time last year, while corn moved by barge is ahead of last year’s pace by 143,000 tons.

Ethanol basis was in line with the national average increasing 1 ¾ cents on average across the U.S., while soybean plant basis only improved ¾ of a cent over the past week. Ethanol production continues to maintain above forecasted production up 5.6 percent over the year compared to a USDA forecasted increase of only .8 percent. Strong DDG prices have helped support crush margins as ethanol values have declined over the last month.

Futures Comments-

The grains fell this week with wheat leading the grains lower in a 26 cent decline. Corn prices shed 12 ¼ cents and soybean prices slipped by 8 ½ cents. Open interest declined for all grains as well with corn open interest falling 31,576 contracts from 580,177 on the 22nd. Export inspections for corn and soybeans beat analyst expectations with 886,825 metric tons, and 1.5 million metric tons inspected respectively.  Wheat inspections were weak again with only 263,035 inspected to leave the country. On Thursday, the export sales report showed that the price declines over the last few weeks have helped improve sales. Wheat sales picked up 19 percent from last week booking 544,400 metric tons and beating analyst expectations of between 250,000-450,000 metric tons. Although the last few weeks have showed improvement still larger export sales will be needed to halt the slide in prices.

Corn export sales were booked at 1,068,200 metric tons which was on the high side of analyst expectations but only half of last week’s sales which came in at a marketing year high. Despite the week over week decline in sales, corn has now booked 70.6 percent of expected export sales and is ahead of the seasonally adjusted pace expected to be able to meet the current USDA expectations by nearly 2.8 million metric tons. Soybean sales booked 888,200 metric tons up from the mere 14,000 metric tons booked last week and well above analyst expectations which ranged between 200,000-400,000 metric tons. This week 93.5% of export sales expected by the USDA have already been booked this year. The market will be sensitive to any announcement of cancellations as South American harvest begins to pick up pace.

Wednesday marked the first day newly harvested Brazilian soybeans arrived into crushing plants and northern ports and began loading the first vessel at the port of Paranagua. As harvest pace picks up analysts will keep a close watch on logistics and any congestion that develops as producers move the crop to export facilities. This year the delays in planting due to dry weather in the fall could mean the crop comes out of the field at the same time and put increased pressure on the transportation system. On Tuesday it was announced that the Tiete River, a key waterway in Brazil will be closed for the start of the season due to the low draft caused by a much drier than average January. Closure of this waterway may have more of a local effect than a national one as it was already partially closed last year and grain can also be moved down the Maritituba which is expected to move 4 million metric tons this year.

On Wednesday the EIA ethanol report showed that weekly production declined 1,000 barrels per day to 978,000 bpd keeping ethanol production running 5.6 percent ahead of last year’s pace. Ethanol production continues to show strength as DDG prices have rallied sharply since China approved the GMO grain variety MIR-162. Currently, the USDA has accounted for only a .8 percent increase in ethanol production which could leave room for them to make further revisions higher in coming reports. Ethanol stocks have also lifted to a 5 year high for this time of the year, improving 244,000 barrels last week to 20.63 million barrels of ethanol.

January 30 – Morning Comments

In the overnight session corn is trading ¾ of a penny lower with soybeans unchanged and a 2 cent increase in wheat. Wheat prices found support yesterday after touching $5.00 ¾ briefly during the session. Wheat seems oversold at these levels after falling sharply from the $6.77 high on December 28th. Keep an eye out for a bounce in wheat prices during the day session.

In the US, showers are expected throughout the plains through this weekend which should improve the soil moisture profile for ¾ of the Plains wheat acreage. The precipitation should be followed by snowfall of between 4-8 inches which will help protect the crop from the below zero temperatures that are forecasted for next week.

Yesterday, it was announced that the USDA’s attaché in Canberra Australia pegged the countries 14/15 wheat production at 23.2 million metric tons which is .8 million metric tons below the existing USDA forecast. The forecast was cut due to dryness in late 2014 which especially affected Queensland, New South Wales and Victoria. Due to the dry weather the USDA is expecting a 16% decline in yields compared to last year and a 14% decline in wheat production compared to last year’s total of 27.01 million metric tons.

Central Brazil continues to benefit from precipitation which is expected to expand north beginning next week. The northern part of Brazil’s growing region has received 61% below normal precipitation over the last 30 days which will negatively impact crop yields in this growing region. Southern parts of Brazil are currently experiencing more showers and are expected to receive more precipitation in the 11-15 day forecast. A grains analyst out of Brazil, Safras & Mercado, lowered their Brazil soybean production forecast to 95 million metric tons from 95.9 previously expected in December. They also lowered their Brazil corn forecast to 74.7 million metric tons from their previous forecast of 75.5 million metric tons.

January 29 – Morning Comments

In the overnight session corn is trading down 2 ¼ cents, soybeans are trading 3 ¾ cents higher and wheat is down 2 ¼ cents. This morning a reportable sale of 116,000 metric tons of sorghum was announced to unknown destinations with 58,000 metric tons for delivery in 14/15 marketing year and the other 58,000 delivered for new crop.

This week’s export sales were mostly positive for the grains and should help support the price of soybeans in this morning’s session. Wheat sales picked up 19 percent from last week booking 544,400 metric tons and beating analyst expectations of between 250,000-450,000 metric tons. Although the last few weeks have showed improvement still larger export sales will be needed to halt the slide in prices. Corn export sales were booked at 1,068,200 metric tons which was on the high side of analyst expectations but only half of last week’s sales which came in at a marketing year high. Expectations for corn sales ranged between 850,000 and 1,200,000 metric tons. Soybean sales booked 888,200 metric tons up from the mere 14,000 metric tons booked last week and well above analyst expectations which ranged between 200,000-400,000 metric tons.

Yesterday ethanol production declined 1,000 barrels per day to 978,000 barrels per day keeping ethanol production running 5.6 percent ahead of last year’s pace. Ethanol production continues to show strength as DDG prices have rallied sharply since China approved the GMO grain variety MIR-162. Currently, the USDA has accounted for only a .8 percent increase in ethanol production which could leave room for them to make further revisions higher in coming reports. Ethanol stocks have also lifted to a 5 year high for this time of the year, improving 244,000 barrels last week to 20.63 million barrels of ethanol.

There were a few tenders offered this morning including one that we will want to monitor in the coming days. Saudi Arabia’s state grain buyer issued a tender for 660,000 metric tons of hard wheat, while Tunisia’s state grains agency issued a tender for 117,000 metric tons of soft milling wheat and 50,000 metric tons of barley.  Considering the sharp selloff we have seen in wheat over the last few days we will want to keep a close watch on the results of the tenders.

January 28 – Morning Comments

The grains are all trading lower this morning with corn down 2, soybeans down 4 cents and wheat down 4 cents. Yesterday, mixed export news hit the market early with a 120,000 metric ton cancellation of soybeans to China followed by an announcement of a new sale that included 111,000 metric tons of soybeans to unknown destinations. This is the third major cancellations in the last 2 ½ weeks which signals China is switching it buying to South America.

Yesterday was the first day newly harvested Brazil soybeans arrived into crushing plants and northern ports and market the start of the first vessel being loaded at the port of Paranagua. However, news out of South America is not all positive after an announcement yesterday that the Tiete River, a key waterway in Brazil will be closed for the start of the season due to the low draft caused by a much drier than average January. Although this may not immediately affect the U.S. grain prices, the fact that Brazil delayed much of its planting due to dry weather in the fall could mean the crop comes out of the field at the same time. If this were to happen it would put increased strain on the transportation of crops to export facilities. If ports get congested and significant delays begin to occur, the U.S may see further export sales announcements that would have otherwise gone to South America.

Weather could reach subzero temperatures next week throughout the Midwest leaving some of the winter wheat crop exposed to the harsh temperatures after the warm conditions reduced snow cover over the last few weeks. However, winter storm Juno should provide some snow cover throughout the Midwest late this weekend. Wheat continues to trend lower, pressured by the higher dollar and a lack of interest in U.S. wheat by foreign buyers.

January 27 – Morning Comments

In the overnight session corn soybeans and wheat were mostly unchanged to slightly higher. Yesterday’s export inspections were positive for corn and soybeans which both beat analyst expectations. Soybeans recorded 1.5 million metric tons inspected for export which beat the high side of analyst expectations by nearly 50,000 metric tons. Corn beat expectations by an even higher margin, recording 886,825 metric tons compared to expectations which ranged between 600,000-750,000 metric tons. Wheat expectations were weak again with only 263,035 inspected to leave the country well on the low side of the average analyst guess.

Yesterday, the USDA attaché report adjusted wheat production to 12.5 million metric tons and 14/15 corn production to 22.5 million metric tons. Both estimates for corn and wheat are 500,000 metric tons over the USDA official estimate in the January Supply and Demand report.

Wheat continues to experience selling pressure as the market looks for some signs of life in the export sector. Since the sharp run-up in wheat prices which peaked on December 26th, the market has been searching for a pickup in wheat sales that would have otherwise gone to Russia.  However, U.S. wheat has struggled to gain competitiveness in the global market with the sharp decline in the Euro and the U.S. Dollar continuing to gains strength.

In Brazil, showers are expanding in the central regions this week with the North East parts of the growing region expecting to receive precipitation by next week. Northern Brazil has experienced significant precipitation deficits over the last 30 days, with actual precipitation 61% below the average precipitation for that time period. The lack of precipitation over the month of January has led AgRural to announce last Friday it expects to cut Brazil soybean production forecasts in their February report. Soybeans bounced over 11 cents yesterday and could possibly trade higher today. Overhead resistance is around the 9.91 level.

January 26 – Morning Comments

In the overnight corn is trading 2 3/4 pennies lower, soybeans is down 2 3/4 cents and wheat is up 1/2 a penny after closing last week near one month lows. This weekend the Korea Feed association purchased 110,000 metric tons of corn from optional origin. Last week U.S. export sales were very strong for corn booking 2.1 million metric tons, twice the amount analysts were expecting.

AgRural said in a report issued on Friday that they plan on cutting their forecast for Brazil’s soybean production in their February report due to the dry weather which has damaged soybean development in the northern part of the country. Over the last 30 days northern Brazil has received 60% less precipitation than its average during the same period in time.

Soybeans looks to trend lower this week after falling through $9.91 which held as support since late October. After falling through $9.91 support, soybeans paused its decline but failed to trade back above that level. The price area of $9.91 which acted as support is now a firm resistance level. Considering the bearish surprise in ending stocks in the January Supply and Demand report, the disappointing NOPA crush numbers in December and the significant dip in export sales last week, soybeans may continue to feel selling pressure going forward.

Weekly Cash Comments

Cash Commentary-

Soybean futures continued to erode this week giving up 14 cents a bushel while corn found modest strength in a 3 cent advance. In the cash market, basis movements were fairly muted this week with US average corn basis gaining 1 cent a bushel while soybeans added 2 cents to the US average spot basis.

In the corn market, ethanol plants as a group were fairly quiet this week, although more strength was apparent in the Eastern Cornbelt of Indiana and Ohio where several plants boosted their spot basis by a nickel. At the Gulf, export premiums were mostly unchanged for the week and a modest drop in barge rates did little to change the overall trend of basis levels at river terminals.

For soybeans, gains were noted at river terminal on Wednesday with some key markets up 5 to 8 cents on the day, but by Thursday those premiums were gone and basis levels ended the week only up 2 cents on average. Gulf basis was up 4 cents on the week. At soybean plants, there has been little movement in recent weeks especially at Western Cornbelt plants were most basis levels have been flat for the past 6 weeks. In Ohio, a few key plants were up 5 to 10 cents a bushel this week.

Futures Commentary-

Soybeans showed relative weakness this week declining 14 ¼ cents for the week ending Thursday, January 22nd. Corn increased 3 ¾ cents and wheat finally found some traction closing out the week with a 1 cent gain. Following the WASDE and NOPA reports last week significant damage was done to the soybean chart after prices broke through $9.91 which was the bottom of the range soybeans has been trading in since late October. Prices paused briefly in the middle of the week after falling through the key level but were unable to recover through $9.91 which acted as strong resistance.

Friday’s export sales report was very supportive for corn, neutral for wheat and bearish for soybeans which missed analyst expectations by a significant margin. Adding to a list of bearish news over the last week, soybean sales reported only 14,100 metric tons booked this week which was a marketing year low and well below analyst expectations of 400,000-700,000.

Wheat sales beat analyst expectations by a small margin, booking 458,400 metric tons which is up 61 percent from last week’s export sales total. Despite beating the analyst expectations which ranged from between 200,000-400,000 metric tons, traders will need to see a much larger pick-up in sales if prices are to be supported. Corn export sales were reported at a marketing year high, booking 2,185,400 metric tons, doubling the trade expectations which ranged between 800,000-1,000,000 metric tons.

Thursday the EIA ethanol production report showed output increased by 1000 barrels per day to 979,000 barrels per day this week. This brings ethanol production to a year over year increase of 5.4% compared to the USDA’s forecast in the January WASDE report which expects corn used for ethanol to increase only .8% year over year. Ethanol stocks also inched higher by 158,000 barrels this week to a total of 20.39 million barrels in this week’s report. Compared to last month ethanol prices have fallen from $2.20 to $1.27 per gallon. Despite the marked decline in the Iowa crush margins ethanol production continues to run well ahead of expectations.

Brazil’s crop analyst Celeres increased production estimates for Brazil’s soybean crop to 94.2 million metric tons up 2.8 million metric tons from its August forecast. Growing conditions have been positive in Brazil except for the north-eastern growing region which has experienced a moisture deficit for most of the growing season. Despite the dryness in parts of the country the main growing regions have experienced adequate to surplus moisture which has more than offset the negative impacts on yield caused by dryness in parts of the country. More showers over the next two weeks should continue to aid crop development. The current USDA production estimate for Brazil is 95.5 million metric tons which increased 1.5 million metric tons from the December Supply and Demand report.

Paraguay is about 10% complete with harvest and reports so far have shown disappointing yields. Harvest so far has only really accounted for shorter duration soybean varieties which were negatively affected by dry conditions throughout October. Yields are expected to be more favorable as harvest picks up pace in February.

The Agricultural ministry in Argentina announced an increase in their wheat production estimates after harvest has wrapped up. Argentina is expected to have harvested 13.9 million metric tons of wheat in the 2014/15 season up from its previous estimate of 13.2 million metric tons. The ministry also lowered its planted acreage for corn and soybean’s by .1 million hectares and .2 million hectares respectively.

On Thursday, the International Grains Council increased its 2014/15 global corn production to 992 million metric tons up from 982 million metric tons in their previous forecast. This revision takes into account the USDA revision lower in the U.S corn crop, but that production loss is was more than offsets with larger production from Ukraine, Argentina, Brazil and Europe.

January 23 – Morning Comments

In the overnight, soybeans and wheat traded lower slipping 5 ¾ and 5 ¾ cents respectively, while corn stayed mostly unchanged increasing by ¼ cent. The export sales report was very supportive for corn, neutral for wheat and bearish for soybeans which missed analyst expectations by a significant margin.

Wheat sales beat analyst expectations by a small margin, booking 458,400 metric tons which is up 61 percent from last week’s export sales total. Despite beating the analyst expectations which ranged from between 200,000-400,000 metric tons, traders will need to see a much larger pick-up in sales if prices are to be supported. Corn export sales were reported at a marketing year high booking 2,185,400 metric tons which was well above the 800,000-1,000,000 metric ton trader’s expected out of this week’s report. Old crop soybean sales were reported at 14,100 metric tons well below analyst expectations of 400,000-700,000. Soybean sales recorded a marketing year low this week.

Export Sales:

  Expected Actual
Corn 800,000-1,000,000 2,185,400
Soybeans 400,000-700,000 14,100
Wheat 200,000-400,000 458,400

Yesterday, the EIA ethanol production report showed output increased by 1000 barrels per day to 979,000 barrels per day this week. This brings ethanol production to a year over year increase of 5.4% compared to the USDA’s forecast in the January WASDE report which expects corn used for ethanol to increase only .8% year over year. Ethanol stocks also inched higher by 158,000 barrels this week to a total of 20.39 million barrels in this week’s report. Compared to last month ethanol prices have fallen from $2.20 to $1.27 per gallon.

The Agricultural ministry in Argentina announced an increase in their wheat production estimates after harvest has wrapped up. Argentina is expected to have harvested 13.9 million metric tons of wheat in the 2014/15 season up from its previous estimate of 13.2 million metric tons. The ministry also lowered its planted acreage for corn and soybean’s by .1 million hectares and .2 million hectares respectively.

Yesterday the International Grains Council increased its 2014/15 global corn production to 992 million metric tons up from 982 million metric tons in their previous forecast. This revision takes into account the USDA revision lower in the U.S corn crop, but that production loss is was more than offsets with larger production from Ukraine, Argentina, Brazil and Europe.

January 22 – Morning Comments

In the overnight session the grains traded slightly higher with corn up 3/4 of a cent, soybeans up 3 1/4 cents and wheat up 3 ¾ cents. Soybeans are trading at $9.87 ½ just below $9.91 which is the low side of the sideways range it traded in since late October. The low side of the range which acted as support multiple times since late October will likely act as resistance since prices broke below $9.91 on January 20th.

Ethanol production and stocks will be released today due to the Martin Luther King Jr. holiday on Monday. Ethanol production increased sharply in last week’s report following two holiday shortened weeks of declining production. As of last week 14/15 ethanol production was running 5.3% ahead of last year. Ethanol production this year is significantly higher than the .8% increase the USDA has factored in. Seasonally, production begins to slow during this time of the year and with depressed crush margins throughout the Midwest there is a strong possibility this week’s ethanol production will be lower than last week. On a more positive note, Brazil’s agricultural minister stated this morning that the government will raise its ethanol blend requirement in gasoline in the first week of February.

Ukraine Farm Ministry announced that they have an agreement with traders to limit the amount of milling wheat exports to 1.2 million metric tons between January and June of this year and have a preliminary agreement that overall wheat exports will be limited to 12.8 million metric tons in the 2014/15 marketing year which is 1.8 million metric tons higher than the USDA currently forecasts. So far Ukraine has exported 8.5 million metric tons this marketing year.

The European central bank held its policy meeting on Thursday and announced it will buy up to 60 billion euros worth of sovereign bonds from March until September 2016. This is a more aggressive quantitative easing policy than the ECB has undertaken in the past. The move was widely expected by the market and has been a contributing factor to the price slide in the Euro recently.

January 21 – Morning Comments

Grains are mixed in the overnight session with corn down ¾ of a cent, soybeans up 1 ½ cents and wheat up 7 cents after a sharp sell off over the last 20 days helped U.S. wheat gain some competitiveness on the global market. Also helping wheat is the accusations out of Kiev that Ukrainian soldiers have come under attack from Russian forces in north eastern Ukraine. Russia continues to deny that it has sent soldiers to eastern Ukraine. This morning a reportable sale of 176,000 metric tons of soybeans was sold to China.

Brazil’s crop analyst Celeres increased production estimates for Brazil’s soybean crop to 94.2 million metric tons up 2.8 million metric tons from its August forecast. Growing conditions have been positive in Brazil except for the north-eastern growing region which has experienced a moisture deficit for most of the growing season. Despite the dryness in parts of the country the main growing regions have experienced adequate to surplus moisture which has more than offset the negative impacts on yield caused by dryness in parts of the country. More rains over the next two weeks should continue to aid crop development.  The current USDA production estimate for Brazil is 95.5 million metric tons which increased 1.5 million metric tons from the December Supply and Demand report.

Yesterday, corn and soybean export inspections were both reported on the high side of analyst expectations with corn reporting 747,634 metric tons inspected and soybeans reporting 1,517,985 metric tons. Wheat export inspections fell within analyst expectations with 310,307 metric tons inspected for export.