Information about grain markets and info to help producers to market crops. See how various grain marketing strategies can effect ones average price. We will be posting various potential trade and option strategies along with marketing decisions made on our mock farms.
Outside Markets: Dollar Index
down 0.015 at 81.589; NYMEX-WTI down $0.08 at $92.68; Brent Crude up $0.42 at
$112.29; Heating Oil up $0.0095 at $2.9974; Livestock markets are weaker; Softs
are mixed; Gold down $4.40 at $1591.30; Copper up $0.0070 at $3.5740; Silver up
$0.070 at $29.060; S&P’s are up 0.75 at 1516.50, Dow futures are up 2.00 at
14,062.00 and Treasuries are firmer.
Sharp rallies in Asia following the
US led rally yesterday, and Europe is unchanged to better as tensions ease
following the Italian elections. Equity markets in the US yesterday rallied
to within 100 points of the all-time record on the Dow Jones Industrial
Average, seemingly paying little attention to tomorrow’s looming
“sequestration.” Strength by the New Zealand Dollar is a feature this
morning after weakness the last several days. Lots of important economic
data today including Q4-GDP revisions (+0.5% vs. -0.1% prior), personal
consumption (2.3%), jobless claims (360,000), Chicago PMI (54.0 vs. 55.6 prior)
and KC Fed (-1 vs. -2 prior). Obama will meet with Congressional leaders
today. Groupon and JC Penny’s missed earnings estimated badly and are
Dry in the central and southern
plains, while the central and eastern corn belt picked up another 0.01-0.10” in
moisture by way of snow the last 24 hours. Scattered snows in the East
this morning. Next chance at some moisture in the Midwest comes Sun-Tue
when an area from Billings to Nashville could see 0.10-0.30”. Otherwise,
next chances for moisture come for ND/SD/T/MN from March 5th-9th,
with more moisture in the 8-14 for the rest of the corn belt. Above
normal precip seen for all, while temps should be below normal and most of the
moisture falling as snow. Dry weather in almost all of South America
yesterday, with the next system coming through Friday-Sat with 0.50-1.50” on
85-90% of Argentine growing areas. On and off showers in Brazil.
Weather is pretty good.
Quite a bit better futures markets overnight led by wheat,
and most especially KC wheat. In fact, with May KC wheat up 1.45% this
morning, it is the strongest of any commodity. This appears in
anticipation of improved export sales later this morning. Estimates on
wheat export sales are estimated at 350-900,000MT, but I’ve seen more
than one wheat analyst suggest the total could be over 1MMT. If
that proves true, we have likely seen the bottom in wheat prices and will
attempt to add more premium. Having said that, we have enough wheat to
put out any fire which pops up, but we are probably due for a bit of a rally to
ease the rallying basis. Soybeans are also firmer this morning on the
same ideas, and lack of improvement in Brazilian logistics.
Overnight, South Korea’s Flour Mills bought 21,800MT of
Canadian wheat at $336.50/MT FOB from Mitsui for May 1-15. Bangladesh
bought 50,000MT of optional-origin wheat at $328.16/MT C&F. The
Russian Ag Minister said overnight that the country won’t restrict grain
exports no matter what the size of the next crop. The crop estimate at
current is 95MMT, up 34% y/y. Grain exports are seen at 15MMT. Several
media outlets have commented on the shambles Egypt’s finances are in, and how
this is probably affecting their ability to source grain. Egypt’s ability
to provide food and fuel is central to preventing social unrest. The
Egyptian Pound has depreciated 5.6% this year, making it one of the 10
worst-performing currencies. Export house Toepfer said bean vessels at
the Brazilian port of Santos may wait up to 6-weeks for loading.
Grain.gov.cn said Chinese crushers may need to continue buying high-prices US
beans due to disruptions from Brazil. Brazil loaded 1.5-1.8MMT of
soybeans for China in February, down from 2.0-2.5MMT last year. There
are also many analysts making note of the almost unrealistic slowing to the
pace of crush in the US which needs to happen in order to prevent the carryout
from dropping below 100mbu. The SN/SX should continue rallying.
There were 119 Chicago wheat deliveries overnight, 0 KC
wheat, 296 Minneapolis wheat, 0 corn, 0 beans, 0 meal and 2,932 soy oil.
The Minneapolis deliveries were a bit surprising, but the bulk of the
deliveries came from Term, which looks like the certs Louis Dreyfus stopped
against the December and are simply re-delivering so as to not pay to get their
certificates upgraded with the new Vomi specs. The biggest stopped was a
Newedge account which is most likely Gavilon. It certainly makes
sense to stop spring wheat and load it out against to-arrive bids at
+120K. No surprise on corn or soybeans. Basis at the Gulf, and at
the processor, firmed yesterday, keeping Illinois River basis on both well
above delivery equivalence. Talk of Mexico in for corn business last
night so watch 8:00am.
Open interest changes yesterday included wheat down 6,270
contracts, corn down 18,930, beans up 3,280, meal down 3,340 contracts, soy oil
up 1,480. March corn saw an open interest drop of 41,100 contracts.
Chinese markets were mixed overnight with beans down 0.25c, meal up
$2.20, soyoil down 4c, corn up 0.75c, palm down 31c and wheat up 0.25c.
Dalian soybean oil fell to the lowest level overnight since September
2010. Malaysian Palm Oil was also weak, down 13 ringgit at 2,397, or
0.54%. In the last 7-sessions, Palm is down 7.2% on slower exports and
heavier stocks. Paris Milling Wheat is up 0.51%, Rapeseed down 0.21%, UK
feed wheat up 0.44%, Paris corn up 0.22% and Canola is up 0.26%.
Call things better with an eye on export sales at
7:30am. Looking at estimates, it looks like we have a decent chance to
beat expectations based on what’s been reported by the daily reporting system
as well as what’s been rumored to have been sold the last week. Farm gate
movement hasn’t been strong enough to quench basis thirst, so a futures rally
seems likely. Wheat basis has the potential to get sloppy if wheat moves,
however, as there is plenty left in the northern plains.
This shows that we have had a small bounce the last couple
days. Yesterday actually leaving a
bullish reversal; as we traded to the lowest level since June and closed
higher. We also have had a very oversold
market as noted by the STOCH; one that looks like it is trying to turn positive. If we could get another 20-30 cents we would
then see some that recently shorted wheat be in the red and that might spill
over to a little short covering. Overall the market has been one of those “catch
a falling knife” type of markets; but at least today yesterday’s low provide us
a possible support area.
When things closed out today we seen corn close unchanged on
the May futures, up 4-5 on the March futures, and Down 2-3 on the Dec
futures. Soybeans closed up 8-10 cents,
KC wheat was up 2, MPLS wheat was down 2, CBOT wheat was up a penny, the stock
markets had a strong bounce with the DOW up 175 points, and the US dollar was
down about 300 at 81.53 on the cash index.
Overall not a bad day for the grain markets; but wheat is
still failing to show any real strong signs that it is going to bounce. Charts look a little better as noted above;
but we are not getting ran over with demand and that old saying the trend is
the friend sticks out in wheat. The
trend is down and has been down for some time; we really need a catalyst for
that to change. The last major catalyst
that we had was snow in the Kansas and some of the other HRW growing areas and
moisture that helps out the prospects for a crop is not a catalyst for higher
On the positive side we have seen wheat basis continue to
firm; but part of that is due to slow moving rail roads and the balance is
simply due to a lack of producer selling.
The strong basis we are seeing has little demand behind it; at least not
export demand. Which is really were we
need to see some demand at. We export
too big of percentage of our wheat to have a bullish wheat market without solid
export demand. Some of the headlines
recently indicate we are getting some exports sold and I expect good export
numbers tomorrow; but we really are not getting the swing hard red winter wheat
export business that we need to be. We
have recently got some feed wheat export business but as I have said for months
we need to get HRW export business before we can get bulled up. Doesn’t matter if we are these levels, a buck
higher, or a buck lower; we need export business or we will simply have too
much wheat no matter how ugly or small our wheat crop ends up being. Plus we have to remember that many areas have
seen the prospects for the wheat crop stabilize. Much of the market is trading like the crop
still has a chance to be an average crop; which I don’t think is the case. But if the funds want to trade weather patterns
or rain then how much the rain or snow will actually help our poor condition
crop won’t matter in the short run.
Ethanol production numbers were out this a.m. and they saw a
bounce of 1.9 percent from last week which puts us right about at the level needed
on a per week basis to meet current USDA projections. More positive I thought was the fact that we
only lagged last year by 8-10 percent; which is the first time in several
months that we have only behind 10% less than a year ago. Keep in mind that the USDA has been
forecasting a 10% drop from 5 billion bushels to 4.5 billion bushels and for
months we have been between 12-18% less than last year at this time.
Corn basis also continues to be firm; but we are also
finding some markets that have coverage.
I know of three different ethanol plants that a covered past April. The strong interest is really for the deferred
slots; but those are also the slots were the margins are a little more unknown.
We did sell some sunflowers to the crush yesterday. Typically this time of the year sunflowers
don’t go to the crush; but these did. We
sold them with no oil premium or discount and at par to a 75 cent premium over
some of the lower birdseed bids that are out there. I view that as a good sign; I prefer to see
much more go to the crush before I get bullish.
But if the crush can take some product out of the pipeline right now;
perhaps that means that later on when producers get busy that the birdseed
industry has to pay a little more of a premium.
Right now as things sit today we simply have way more supply then we do
Don’t forget we are still offering free delayed price for
corn, winter wheat, spring wheat, and sunflowers. But also keep in mind that we do have rather
strong basis levels. I think we see lots
of wheat move on any bounce at all especially from the farmer down south that
got some snow in Kansas. So perhaps one
might want to be looking at locking in basis; after all we are on the historically
high side of things; and more than likely a basis contract will work great if
we see the board decide to rally. I
would have similar thoughts on corn; but keep in mind that corn has much more
of a marketing left then wheat does.
Please give us a call if there is anything we can do for
Outside Markets as of 2:00: Dollar Index down 0.256 at
81.607; NYMEX-WTI up $0.16 at $92.79; Brent Crude down $0.81 at $111.90;
Heating Oil down $0.0388 at $2.9929; Livestock markets are mixed with cattle up
and hogs down; Softs are firmer led by Cotton which is up 3.35%; Gold down
$22.60 at $1592.90; Copper down $0.0085 at $3.5745; Silver down $0.445 at
$28.875; S&P’s are up 24.75 at 1516.75, Dow futures are up 200.00 at
14,060.00 and Treasuries are weaker.
Taught classes this morning, and in meetings this afternoon,
so just a few comments on cash and spreads with some articles below worth a
Markets continuing their rallies today on lack of farm gate
movement, still firm cash markets, export business, rebounding ethanol
production and most likely some light profit taking in the wheat pits.
The close wasn’t incredibly strong, and May corn failed to close above the
vaunted $7.00 level. $7.01 kick starts technical buying. Ethanol
production continues to see a rebound in weekly production, poking back above
800,000bbls/day for the first time in seven weeks. Stocks declined
slightly, but remain rather large. The improvement in margins has gotten
plants back open, and the basis reflects their desire to get corn bought.
Still lots of ethanol plants in IL/IA paying +50K or more for trains, but the
demand seems to be for AMJJ. Truck corn might be a bit weaker at
some. Wheat’s discount to corn is starting to perk up the interest of a
lot of feed lots both in the US and abroad. Japan was in for SRW as feed
wheat, the first time in quite a while. KS/CO feed lots interested in
HRW. SRW working into southeast markets. Isn’t whacking corn basis
severely yet, but likely isn’t far off.
PNW spring wheat basis firming up with cash guys calling it
up 20c vs. two weeks ago. Doesn’t appear to be the guys who sold the
Chinese business two weeks ago, so hard to tell if it is covering business
already on the books, or if this is fresh demand. To-arrive bids over
Chicago not showing much life this afternoon, so would assume we have plenty of
wheat to put out any fire. A basis selling opportunity seems to be right
around the corner on wheat. Lots of wheat left on farm. MWH/MWK
rallied late, closing up 0.75c to -9.00c, but traded all the way into -7.50c as
guys bought the spread instead of pumping up basis any further.
Dr. Michael Cordonnier said he expects Brazilian yields to
fall as harvest progresses, not rise. Deutsche Bank was in the news
putting the Brazilian soy crop at 79-80MMT, by far the lowest in print and well
under the USDA’s 83.5MMT. Two cargoes to China for 12/13 and two cargoes
to unknown for 13/14. Fits with the business bantered about late last week.
The export pace we’re on is unsustainable. Brazilian basis levels
continue to fall, but this seems to be tied to importers refusing to pay up
because they won’t get beans no matter what they pay, so why bid it?
Lineups on soy grow every day as you can see below. Total soy and
products lineup is 9.467MMT vs. 8.643MMT last week. Corn lineup is
1.194MMT vs. 1.464MMT last week.
Shouldn’t be any deliveries against March corn or soybeans,
but there are 1,882 March Chicago Wheat delivery certificates on the street,
and these could see deliveries potentially. Wouldn’t think there would be
any spring or winter deliveries considering the basis is firm enough and works
by 15-20c to load wheat out.
Bank Says Brazil Soybean Crop May Be 79-80 Million Tons
2013-02-27 07:23:31.183 GMT
By Claudia Carpenter
Feb. 27 (Bloomberg) -- Brazil’s
soybean crop for 2012-13
may be 79 million to 80 million metric tons and corn 70
to 71 million tons, below the U.S. Department of
estimates, Deutsche Bank AG said.
Competition for soybeans to
export in Brazil is “fierce”
as crushers and hog and chicken industries also want
Christina McGlone, an analyst at the bank in New York,
said in a
report dated yesterday. The USDA’s estimates are 72.5
for corn and 83.5 million tons for soybeans.
Supply is limited at ports
because of delayed plantings,
late harvesting due to wet weather, new trucking
unrest with port workers and vessel line-ups, she said.
spur demand for U.S. supplies for now, she said.
Buys U.S. Corn as Mold to Hit Local Supply, Yigu Says (1)
(Updates price in fifth
By Bloomberg News
Feb. 27 (Bloomberg) -- Feed
mills in China, the second-
biggest corn consumer, will probably order more U.S.
concern that domestic supply won’t meet demand before the
harvest, researcher Yigu Information Consulting Ltd.
Snow and rain in northern China
have increased moisture in
farmers’ unsold grain, making it more vulnerable to mold
less suitable as animal feed, said Feng Lichen, the
manager of Yigu, which runs China’s biggest corn
portal. Some mills are securing shipments from the U.S.,
biggest exporter, for deliveries later this year using
issued import permits from the government, as the cost of
corn has dropped, he said.
China’s purchases may help stem
an 18 percent decline in
Chicago prices from a record in August. The U.S. crop
will be an
all-time high following the worst drought in seven
U.S. Department of Agriculture said on Feb. 22. Chinese
bought at least 120,000 metric tons from the U.S. last
first purchases this year, two executives with direct
of the matter said on Feb. 22. U.S. corn exporters sold
tons to unknown buyers last week, the USDA said.
“China’s corn shortage this year
may widen to 5 million
tons from a previous projection of 2 million tons,” Feng
by phone on Feb. 25 from Dalian in northeastern China,
city in the country’s biggest corn-growing region. “The
are just too wet, so as soon as the weather warms up next
mold will grow,” he said.
The most-active contract on the
Chicago Board of Trade has
lost 6.9 percent this month and was at $6.93 a bushel at
p.m. in Beijing.
Traders are quoting prices between 2,220 yuan ($356) and
yuan a ton for September shipments of U.S. corn, including
costs, Zhang said. Futures for September delivery closed
2,433 yuan a ton on the Dalian Commodity Exchange.
The USDA had said on Feb. 9 that
China’s harvest in the
marketing season from Oct. 1 rose to a record 208 million
cutting possible imports to 2.5 million tons from last
5.23 million tons.
Purchases by feed mills may have
totaled more than 200,000
tons since last week, Cherry Zhang, an analyst at
Intelligence Co., said Feb. 25. Buyers will proceed
on concern that U.S. prices may drop more, she said.
Gets $4.8 Billion Funding to Expand China Grain Processing
By Bloomberg News
Feb. 27 (Bloomberg) -- COFCO
Corp., China’s largest grains
trader, said it will receive 30 billion yuan ($4.8
financing from China Development Bank Corp. to boost
and shipping of grains and oilseeds.
The state-owned company will
receive the money over the
next five years and use it to ensure the supply and
grain and cooking oil, and for rural financing ventures
promote development in farming areas, the Beijing-based
said in an emailed statement today.
COFCO is the parent of Hong
Kong-listed China Agri-
Industries Holdings Ltd., the country’s second-biggest
processor, and China Foods Ltd., the second-largest
Wheat Stockpiles Will Satisfy 123 Days of Consumption
By Abdel Latif Wahba
Feb. 27 (Bloomberg) -- Egypt has
3 million metric tons of
domestic and imported wheat in stockpiles, enough to meet
consumption for 123 days, the cabinet said.
Inventories of domestic and
imported sugar are about
290,000 tons, sufficient to satisfy 71 days of local
cabinet said today in an e-mailed statement. The
142,000 tons of domestic and imported food oil on hand,
to meet consumption through the middle of May, it said.
Grain Stockpiles to Fall to Record Low by July 1: SovEco
By Marina Sysoyeva
Feb. 27 (Bloomberg) -- Russian
state grain stockpiles may
fall to 600,000-700,000t by July 1, SovEcon General
Andrey Sizov says at Grain Producers’ Union in Moscow.
* Russian winter crop losses seen at 12%, Sizov
* Russian grain, legumes exports reach 14.3mt so
far in season
from July 1, Sizov say
* Russian grain, legumes exports seen at 500,000
tons in Feb.
* NOTE: 6.5% of winter crops failed to sprout or
were weak at
the end of February 2011; harvest was
94.2mt that yr, Sizov
Soybean Inventory May Decline to 4m Tons, Grain.Gov Says
By Bloomberg News
Feb. 27 (Bloomberg) -- China’s
inventory of soybeans may
fall to 4m metric tons by end-March from 5.2m tons as of
week, Grain.gov.cn said in an e-mailed report.
* Arrival shipments may be about 7m tons in
than 8.66m tons a year ago, it says
Shipments may rise starting from April as supplies from
South America increase, it says.
Corn Export Sales Seen Declining in Week Ended Feb. 21
By Jeff Wilson
Feb. 27 (Bloomberg) -- U.S.
export sales of corn probably
fell in the week ended Feb. 21 from a year earlier, while
soybean-meal and soybean-oil sales rose, based on a
five analysts by Bloomberg News. Estimates for sales of
and soybeans ranged from below to above a year earlier.
The U.S. Department of
Agriculture is scheduled to release
its sales report at 8:30 a.m. tomorrow in Washington.
U.S. Export Sales
Estimate Range Feb. 14, 2013
Feb. 23, 2012
Exporters Sell Soybeans to China, Unknown Destinations
By Patrick McKiernan
Feb. 27 (Bloomberg) -- The sale
of 120,000 metric tons to
China is for delivery in the 12 months starting Sept. 1,
sale of 120,000 tons to unknown destinations is for
before Aug. 31, the U.S. Department of Agriculture said
Spread Surges on Tight Pre-Harvest Supply: Chart of the Day
By Jeff Wilson
Feb. 27 (Bloomberg) --
Tightening U.S. corn inventories
will triple the spread between May and July futures in
as buyers scramble for pre-harvest supplies, according to
Street Solutions Inc., a researcher and farm-marketing
The CHART OF THE DAY shows futures for May delivery on
Board of Trade will surge to a premium of 45 cents a
over the July contract, compared with 15.75 cents
based on a forecast by Arlan Suderman, the senior
analyst at Peoria, Illinois-based Water Street Solutions.
The spread would match the peak between the contracts
when the worst drought since the 1930s sent prices to a
While the government said Feb.
22 that U.S. farmers will
boost output by 35 percent this year as yields return to
that grain won’t reach buyers for another six months.
Inventories before the harvest will be the lowest
demand since 1974, U.S. Department of Agriculture data
“U.S. corn supplies are forecast
tighter than they were a
year ago,” Suderman said in a telephone interview
from Wichita, Kansas. “It’s all about rationing the
supply from last year.”
Demand for corn used as
livestock feed and to make ethanol
has probably accelerated after prices tumbled to a
low of $6.8075 on Feb. 25, Suderman said. The USDA said
week that domestic pork and poultry output in 2013 will
percent. A government mandate calls for refiners to use
billion gallons of ethanol this year, up from 13.2
year. Corn prices have tumbled 18 percent since reaching
record $8.49 on Aug. 10 as output rose in South America
prospects improved for a rebound in U.S. production this
“There is a real concern among
consumers that the U.S.
won’t have many bushels left before the harvest,”
said. “The spread will widen now to slow demand and
adequate inventories before the harvest.”
Daily Soy Shipments From Major Ports: Summary (Table)
By Dominic Carey
Feb. 27 (Bloomberg) -- Following
is a table detailing scheduled soybean
shipments for vessels berthed, arrived or expected at
major ports in Brazil,
Outside Markets: Dollar Index
down 0.246 at 81.624; NYMEX-WTI up $0.07 at $92.71; Brent Crude up $0.19 at
$112.90; Heating Oil up $0.0113 at $3.0430; Livestock markets are mixed; Softs
are mixed/better; Gold is down $9.00 at $1606.30; Copper down $0.0085 at
$3.5580; Silver down $0.220 at $29.040; S&P’s are up 3.50 at 1496.25, Dow
futures are up 30.00 at 13,889.00 and Treasuries are firmer.
After the Italian flush yesterday
tied to the hung elections, a sense of normalcy is taking over this
morning. While the NIKKEI was down 1.35% overnight, the Shanghai
Composite was up 0.87%, the FTSE MIB is up 0.29%, the IBEX-35 is up 0.53% and
the CAC 40 is up 0.62%. The Euro is also continuing its recovery from
yesterday with the EURUSD up 0.46%. The Aussie and New Zealand Dollars
are getting pounded this morning with the EURAUD +0.732% and the EURNZD
+0.544%. Part of the strength this morning was tied to an Italian bond
auction this morning which saw 4 billion euros worth of 10-yr bonds sold at
4.83% vs. 4.17% last month. MBA Mortgage Applications were down
3.6%. Durable Goods (-4.7%), Capital Goods (+0.2%) and DOE inventories
due up today.
The southern plains storm moved
east the last 24 hours, bringing heavy moisture to C-IL/IN/OH and the
Carolinas. Totals in IN look better than 1.0” in a large swath of the
state. As our Indy office has stated, they are 100% replenished.
Still snow falling in IA/MO/WI/IL/MI this morning. The 5 & 7-day
forecasted precip maps are dry until some moisture begins toward the 5th
and 6th of March in the ECB. NOAA’s extended maps are
putting above normal precip in SD/NE/IA in the 6-10, and that would certainly
be welcome. 8-14 puts above normal precip for the entire Midwest and
southern plains. Below normal temps during the 6-15. Dry
weather in SAM yesterday. The forecast sees another front to bring rains
of 0.50-1.50” to 85-90% of Argentine growing regions by Friday and over the
weekend. S-Brazil sees 0.50-1.00” for Sunday. Temps remain non-threatening.
Soybean quality is said to be improving in the north as the rains subside while
Mostly better trade overnight as futures try to continue the
moves seen late in the session yesterday. Overnight news flow would
suggest demand is improving at this lower price echelon, thanks in part to the
tightening wheat/corn spreads, spurring feedlot demand for the milling
component. In addition, it doesn’t seem as though any progress has been
made in easing Brazilian logistical woes, raising the possibility of more
Mar/Apr soybean business. Still, news from China would suggest they
are more interested in releasing state reserves of oilseeds (2.0-2.5MMT of
soybeans from ‘09 & ‘10) to bridge the gap to Brazilian supplies, than
reach for a ton of nearby stem. Cash meal markets in the US were very
weak yesterday as the board crush slips to the lowest levels since October at
Bulls continue to discount the Paraguayan soybeans trading
into the US. Analysts note they have bought paper as a hedge against US
beans, but no basis or freight has been established, leaving open the
possibility of it not being executed. In tender news, South Korea’s KFS
bought 60,000MT of optional origin feed wheat at $312.84/MT C&F for June 30
which looks like Indian. India continues to auction wheat from state
reserves. Japan bought 18,340MT of feed wheat and 51,660MT of feed
barley, their first feed purchase in five weeks, a strong signal we have found
a bottom. Japan will be tendering for 320,000MT of feed wheat and barley
on March 6 for shipment by July 30. Egypt said it has 3MMT of
domestic and imported wheat in stockpiles, enough to meet consumption for 123
days. SovEcon said Russian grain stockpiles may fall to 600-700TMT by
July 1 which would be a record low. Winter crop losses are seen at 12%,
but production should still rebound. Grain Union officials there said
prices should remain high in 13/14 on tight supplies.
Also a fair amount of Chinese news on the wire overnight
including the Ministry of Ag saying several provinces received below normal
rainfall, and others were hit by freeze, damaging the rapeseed crop.
Research firm Yigu Information Consulting said feed mills in China will
probably order more US grain on concern the domestic supply won’t meet demand
as well as a higher vulnerability to mold due to recent moisture in Northern
China. They said China’s corn shortfall may reach 5MMT this year
from 2MMT last year. Traders noted US Corn delivered China at $356/MT
C&F in Sept. vs. Dalian futures for September delivery at $390.50/MT.
COFCO, China’s largest state grain trader, is slated for $4.8 billion to boost
processing and shipping capabilities this year. China’s inventory of
soybeans may fall to 4MMT by the end of March from 5.2MMT as of last week
according to grain.gov.cn. Arrival shipments may be 7MMT in Feb-Mar,
lower than the 8.66MMT a year ago.
Open interest changes yesterday included wheat down 6,940
contracts, corn down 5,310, soybeans down 10,380 contracts, meal down 4,780 and
soy oil down 1,960. Partially some long liquidation in the soy complex as
well as traders exiting positions ahead of FND Friday. Chinese markets
were weak with beans down 20c, meal down $1.90, soy oil down 48c, corn
unchanged, palm down 38c and wheat down 5.75c. Malaysian Palm Oil was
down 9 ringgit at 2,410. Paris Milling Wheat is up 1.24%, Rapeseed is up
0.21%, UK Feed wheat is up 0.37%, Corn is up 1.11% and Canola is down 0.40%.
Worth noting, wheat traded below corn yesterday for the
first time since May. Lots of anecdotal reports of feedlots in KS and CO
reaching for HRW instead of corn. In addition, corn basis remains very
firm with +145N PNW being shown for June/July delivery vs. some of the
strongest trades of the year last year around +160N. Group-3 rail also
remains very firm with +30’s being posted commonly. Lastly, remember
funds in Chicago wheat are short more wheat than the commercials are, the only
time in history this has happened, just as US-SRW starts hitting global feed
channels, milling channels and US feed lots.
Call things better today with an eye towards ethanol
production and stocks at 9:30am. It feels as though the news flow is
turning much more positive down at these levels, and according to basis and
spreads, so is demand at least for grains. Would be stress-testing any
short wheat/long corn positions one has on given wheat’s competitive position
relative to corn. Also, it feels as though we’ve discounted the
winter storms for now, or at least until more moisture comes. The market
needs the US farmer’s corn.
Outside Markets: Dollar Index
down 0.080 at 81.381; NYMEX-WTI up $0.33 at $93.17; Brent Crude up $0.96 at
$114.49; Heating Oil up $0.0182 at $3.1139; Livestock markets are lightly
mixed; Softs are all firmer; Gold up $0.60 at $1579.20; Copper up $0.0015 at
$3.5545; Silver up $0.051 at $28.75; S&P’s are up 7.75 at 1508.75, Dow
futures are up 66.00 at 13,938.00 and Treasuries are mixed.
Not much for economic and financial
news overnight with most equity indices higher. European indices are
mostly over 1.0%, and Asia had a mixed close. The European Commission
released their updated growth forecast for the Eurozone in 2013, seeing a -0.3%
contraction, weaker than expected. Little for economic data in the US
today, with few notable companies reporting earnings. Italians go to the
elections polls Sunday and Monday. Gird your loins for the sequestration
fight next week ahead of the March 1 deadline. Only notable currency
moves are a sharp rally in the Aussie Dollar and Kiwi, after the RBA’s governor
said he’s not interested in intervening in currency markets at this time.
More snow in the Midwest
overnight with the water equivalent moisture table for the last three days
below. Additional snowfall is falling in IA/SD/MN/WI/MI this morning with
2-5” expected in those states today. Hutchinson, KS received 14” of
snow. While not wishing to incite a fight over drought, will simply say
this is a definitely a step in the right direction. Forecasted precip
maps show additional moisture hitting the central and eastern corn belt by next
Monday and continuing through Wednesday. Totals look like 0.40-1.12” of
water equivalent. Extended maps turn notably drier in the 6-10 for almost
all of the Midwest and southern plains. Temps will generally be
normal/below with the cold focused in the southeast. 8-14 is
similar. Some light rains in Argentina overnight but should be dry until
tomorrow night. Forecast calls for 0.50-1.00” on nearly 100% of their
growing areas. More rain later next week. Brazil still in good
shape, although probably a little wetter than preferred in the north.
Sharply better overnight led by the soy complex as front
month March was finally able to push through $15.00, something it hasn’t been
able to do since October in any meaningful fashion. News of additional
soybean business, and continued bottlenecks in South America are behind the
buying, and it is likely we see additional sales to China either today or early
next week. As much as 7MMT of beans are waiting to be loaded in Brazil,
and the port strike today and Tuesday won’t aid logistics. The strike is
said to include containers only, not bulk grain, but will likely affect all
loadings. There is also a stranded ship at an Argentine port. The
pickup in sales won’t show up on this morning’s weekly export sales report, so
don’t be surprised at a low number today. Fortunately, prices in China
are confirming the SAM problems with beans and meal rallying sharply there overnight
as demand pull becomes more serious. Chinese analyst JC
Intelligence Co said China may have bought 400-500,000MT of soybeans from the
US this week alone.
In addition to the soybean business, Bloomberg
reported this morning China’s feed mills bought at least 120,000MT of corn from
the US for Sept/Oct delivery at $290-300/MT. This would be the
first purchases of corn by China from the US in quite some time. Their
market is in a huge carry while ours is in a large inverse. Aside from
the grain buying, comments from the Ag Minister of China were also
supportive. “China has a structural shortage” of its grain supply because
demand continues to rise. “Chines faces a very difficult task balancing
its grain demand and supply.” Japan was in for some wheat last night,
buying 37,773MT of food wheat, 24,026MT of food barley and 5,000MT of malting
barley. The food wheat came from Australia and Canada. The USDA is
on the tape this morning with their full Outlook Conference balance sheets, but
I’ll just send out an update later. Markets aren’t paying attention to
them anyway, and justifiably so. Canada has left its 13/14 wheat
production estimate unchanged at 28.5MMT, up 4.8% from a year ago.
Open interest changes during yesterday’s session included
wheat down 6,960 contracts, corn down 4,030, beans down 5,850, meal up 100 and
soyoil down 1,290. March option expiration today, and it looks like we’ll
put some squeeze on the $15.00 calls and puts. I still won’t rule out a
tangle with the $7.00 strike in corn at some point. Chinese markets were
sharply better last night with soybeans up 30.50c, meal up $12.70, soyoil up
34c, corn up 4c, palm up 20c and wheat up 0.75c. Malaysian Palm Oil was
down 2 ringgit at 2,534. Paris Milling Wheat is up 0.10%, Rapeseed up
0.53%, Corn up 0.56%, Canola up 0.44% and UK Feed wheat up 0.15%.
Soybean basis firmed off the PNW and in the Gulf last night,
but remains very thin. Posted numbers on shuttles for spot trains are
+165H or better, while CIF bids are back above +80H for beans. Corn
basis also continues to firm at both export terminals as well as domestic
locations such as ethanol and feedlots. Any wheat basis strength is about
poor logistics and the CP being 2 weeks late on want dates. Cars simply
Call things firmer today as beans continue to do export
business we really can’t afford to do. Corn and wheat should trade higher
in sympathy, but need to see the kind of export demand beans are seeing to
really get excited. Corn needs a rally to fill the domestic pipeline, but
traders are focused on weather right now. Until futures pop, farmers
aren’t going to be willing sellers of corn. Wheat might not have a
choice. Export sales at 7:30.
Outside Markets as of 2:15: Dollar Index up 0.371 at 81.438;
NYMEX-WTI down $2.28 at $92.93; Brent Crude down $1.88 at $113.72; Heating Oil
down $0.0546 at $3.1015; Livestock markets are all sharply lower; Softs mixed;
Gold down $2.10 at $1575.90; Copper down $0.0535 at $3.5545; Silver is up
$0.027 at $28.595; S&P’s are down 4.00 at 1503.00, Dow futures are down
15.00 at 13,875.00 and Treasuries are firmer.
out of time to get a full writeup together, so just a few comments and some
and wheat led downside pressure, due in large part to the better than expected
moisture moving through the Plains and WCB. Most areas in KS saw 8-15” of
snow in places which were only forecast to see 2-5” a couple days ago.
Many wanted to point towards the USDA Outlook Conference and the acreage/yield
numbers being released, but this didn’t seem to be it. Acreage of 96.5
million is probably a little lighter than most thought anyway. What
was “bearish” was the part in USDA Chief Economist Joe Glaubner’s speech
talking about next year’s ethanol demand for corn at 4.675bbu. This is up
175mbu from this year, but well below the 5.100bbu estimate in the USDA
baseline numbers from last week and lower than the 5.00bbu estimate being used
in the trade. He cited lower gasoline demand undermining ethanol demand,
even with better supplies and lower prices. With an ethanol number like
that, carryout easily climbs above 2.0bbu with 95-97 million acres and normal
ethanol production was supportive as it climbed 8,000bbls/day to
797,000bbls/day, but remain around 10,000bbls/day smaller than the level needed
to hit the USDA’s projections. Stocks also remain stubbornly high at
19.495 million barrels, down just 5,000 on the week. Desperately need to
get stocks down before margins will improve on a consistent basis. Other
trade chatter today said China bought 120,000-240,000MT of US corn for
Sept/Oct/Nov 2013 shipment today. Treating it as unconfirmed, but the
$5.25-5.50 level on December corn is though to work into Chinese private
coffers. The IGC raised their world wheat and corn crops. Sanderson
Farms said the Sequestration cuts next month would close its operations as they
are prohibited by law from operating poultry processing plants without the
presense of federal inspectors. Buenos Aires Grain Exchange left their
corn production estimate for Argentina unchanged at 25MMT, while the USDA is at
27MMT. Price of RINs jumped 38% to 41c/gal today.
also crushed on better than expected snows. Daily sales announcement of
120,000MT of SRW sold to unknown destinations seems already priced in. Debate
on whether it was linked to Chinese business, or whether it was part of recent
Turkey business. Iraq bought 300,000MT of Australian wheat, and Jordan
bought 50,000MT of optional origin wheat although this doesn’t look like US
according to US cash traders. India’s exports expected to rise 23% next
marketing year. Reports from the country say the US wheat farmer isn’t
panicking yet, but will be a willing seller of HRW and HRS on rallies.
Going to be very difficult to get back to levels where US farmer turns palms
out seller. We did see some scale in pricing by the exporter as
and meal enjoy loan grain room strength on continued logistical problems in
Brazil, spot business off the PNW (and possibly now Gulf) and necessity to keep
domestic soybean stocks from dropping to dangerous levels before the end of the
marketing year. At the pace we’re going, it won’t be a question of if
we’re importing from Brazil, but how much. Vessel lineups are
approaching 50-days in Paranagua, and is being called the ‘worst ever” by
terminal operators there. The threat of strike continues to hang over
the market. CIF bids perked up on the front end, but remain incredibly
thin and tough to nail down. The Gulf pull isn’t deep. The Rosario
Grain Exchange lowered their estimate of the Argentine production to 49MMT,
while Buenos Aires Grain Exchange is 50MMT. The USDA is 53MMT.
spreads firmed across the board with the most strength witnessed in wheat on a
percentage basis. While the fundamentals might warrant lower prices, it
isn’t moving grain yet, so basis and spreads continue firmer. Corn basis
is very hot in several locations with marketing year highs being paid by
ethanol plants. While I think this trend continues until futures put on a
rally to move grain, might want to be stress testing bullspreads on either
opportunistic plays or moving short basis positions forward. Don’t want
to be left holding the bag, especially in a market like Minneapolis.
USDA Outlook Conference balance sheets released tomorrow morning, so expect
some market reaction to that. Export sales also out tomorrow morning with
some grumblings of better than expected sales on wheat. Might be the
spark this market needs. Otherwise, overall trend of commodities as an
asset class is down. Investors really have no reason for owning
commodities right now relative to other asset classes.
Outside Markets as of 1:00: Dollar Index down 0.025 at
80.081; NYMEX-WTI down $0.24 at $97.27; Brent Crude up $0.08 at $118.74;
Heating Oil down $0.0178 at $3.2184; Livestock markets are mostly weaker led by
feeders down 1.50%; Softs are pretty mixed; Gold down $7.50 at $1642.10; Copper
down $0.0035 at $3.7405; Silver down $0.229 at $30.795; S&P’s are up 1.75
at 1518.00, Dow futures down 17.00 at 13,956.00 and Treasuries are soft.
Mostly better than expected economic today supported, but
equities consolidated near recent levels. Investor sentiment remains
overwhelmingly bullish, and susceptible to correction. The biggest
surprises were several moves in the forex market after Bank of Englad chairman
Mervyn King said the Bank would continue to support the economic recovery, even
if it meant higher inflation. This trounced the pound and sent
pound/dollar to $1.5538, the lowest level since 8/3/12. Pound/Krona fell
to the lowest levels since 1992 and Pound/Kiwi fell to the lowest level on
record. The Argentine 5-yr Credit Default Swap rallied 304bp to 2,519bp,
the highest since November 28th. Not sure what the recent
developments there are, but something to monitor.
Lower with our ninth consecutive lower close which is the
longest streak of lower closes since December of 1980. That’s right, the
longest lower streak in 32 years. In September of 2008, we had 8 lower
closes and one unchanged, so this would technically be longer. New crop
managed a higher close for the second day in a row, but we just can’t seem to
spark speculative interest in our Ag space right now. Better weekly
ethanol production, lighter ethanol stocks, firmer basis, firm spreads and no
movement has yet to spark buying, and index funds are coming out based on their
holdings as a percent of total open interest. The news of Barclays
getting out of either hedge fund trading or index fund trading has the market a
bit spooked we could see other banks make similar moves…
Weekly ethanol production totaled 789,000bbls/day, up
15,000bbls/day from a week ago, and the highest production total in three
weeks. Stocks fell by 598,000bbls to 19.500 million bbls, which also was
a positive signal. With margins slowly improving, and thought positive by
$0.37/bu vs. $0.09/bu a week before, chatter has a couple more ethanol plants
coming back on line. Obviously the ability to source corn, based on the
price require to obtain it, has a big say as does the integrated nature of
these plants and whether they can extract corn oil. Imports did rise to
11,000bbls/day from zero the week before, however. Brazilian corn lineups
continue to shrink with current reports putting it at 1.33MMT vs. 2.09MMT a
week ago. Some analysts are still optimistic for better exports
Mar-Jun. Also interesting to note the crude oil/corn ratio and the RBOB
Gasoline/Corn ratios are at their highest levels since June thanks to the run
up in energy and the selloff in corn. Board cattle crush for August is at
the highest level since November.
CIF corn bids continue to rally with no offers really
visible. There are no trades to report either, so will keep using +65H
through FH-Mar and +63H for LH-Mar. Still puts Illinois River basis
9.7-12.5c above delivery equivalence. Should continue to promote CH/CK
bullspreads up to a dime assuming farmer movement remains slow and economics
remain the same. Rail markets continue to scoot higher as well with +120H
widely bid off the PNW, +20H for Group 3 rail and Hereford, TX said to be trading
+100/102H. ADM-Marshall is firm at +5/8H, Decatur is paying
somewhere around +40H and Clinton is +34H for quick ship trucks.
The CH/CK traded all the way to +3.75c before closing at +1.50c, but should
retain a firm bias. CN/CZ fell another 4.0c to +120.00c, the lowest since
Wheat closed higher for the first time since Friday, pumped
up on “oversold” technicals, rumors of export business to China, firmer cash
markets at the Gulf and a continued lack of movement on all classes of
wheat. Most seem to be expecting a solid week of export sales tomorrow
considering the rumors of business to Turkey, Egypt, Europe, Brazil and
China. The fresh one today was some spring wheat connecting to the Orient
off the PNW today, although details were sparse and there was no one to definitively
say it was US-HRS vs. CWRS. The market also seemed to absorb the moisture
event across OK/TX from the day before, but isn’t quite ready to accept a
change in moisture patterns across all of HRW country. There is business
around, just not sure how much we’re doing yet.
Headlines included Egypt coming out proclaiming they have
enough wheat to meet domestic consumption for 133 days. Total stocks of
domestic and imported wheat total 3.28MMT. This doesn’t mean they won’t
import again, and in fact, usually one of these reports is followed by a tender
announcement. Egypt will still buy if the price is right, just announcing
they have ample stocks should they need to get by. French wheat plantings
are expected to rise 2% y/y, while Germany is expected up 3% according to
FranceAgriMer. Jordan is tendering for 100,000MT, Iraq bids are due today
with validity until Feb 17 on 50,000MT. British analysts said wheat
plantings in that country are expected to be smaller than the November estimate
of 1.756 million hectares due to wet conditions. “The wheat crop in
general isn’t in great shape.” Also why they’re expected to import wheat
again in 13/14, the first back to back years since at least the early 90’s.
Spot floor trades were lightly mixed with 14.0% at +100H.
15.0% is +100/110H. Spot floor report says there were 93 cars including 3
trains which would be heavier than recent days. To-arrive bids remain
around +90/95H for exploders and around 10-15c less on shuttles. In
figuring delivery calculations on spring wheat, it is getting very close to
being able to take delivery in Duluth and rail against the Chicago
market. Triple digit to-arrive bids would likely make it work, and
therefore would be where the commercials would rather buy the MWH/MWK than pay
the country. In other words, take a look at rolling any basis length and
short hedges forward still remaining at current market levels. Might
leave a penny on the table, but better than getting run over by the
commercials. Wheat/corn spreads rallied today, but remain in recent
ranges. SRW/Corn at +40.00c is probably still priced to feed as is
HRW/Corn at +84.75c. Gulf basis was firmer with SRW up 2-3c to +80/83H
bid, while HRW as around 1-2c lower but still bid +125/130H.
Ran out of time for soybean commentary. Make up for it
Outside Markets: Dollar Index
down 0.243 at 79.867; NYMEX-WTI up $0.34 at $97.85; Brent Crude up $0.11 at
$118.77; Heating Oil up $0.0008 at $3.2370; Livestock markets are all weaker;
Softs are mixed; Gold down $2.70 at $1646.70; Copper up $0.0120 at $3.7560;
Silver up $0.006 at $31.025; S&P’s are up 3.00 at 1519.25, Dow futures are
up 17.00 at 13,990.00 and Treasuries are weaker. Euro is up 0.34%, BP
-0.54%, AUD +0.29%.
The obvious financial news of note
is the President’s State of the Union speech last night, although equities
don’t seem to be giving it a second glance this morning. More importantly
seems to be comments from outgoing Bank of England President Mervyn King who
responded to the recent “currency wars” talk by saying countries need to allow currency
rates to move, and he said they will support their recovery even if it means
incurring more inflation. This was taken to mean a weak British Pound and
it is losing dearly to its major counterparts this morning by 1.0-1.8%.
The British Pound/Swedish Krona is at the lowest level since 1992 and the
British Pound/New Zeeland Dollar is at the lowest level on record. At
1.5562, the GBPUSD is at the lowest level since August 3rd.
Otherwise the NIKKEI fell 1.04% last night, the Argentine 5-yr CDS is up 216bp
to 2,472.99bp and John Deere beat earnings estimates by returning $1.65/share
vs. estimates for $1.40 in Q4. MBA Mortgage Applications fell 6.4% w/w,
and business inventories are due at 9:00am (+0.2%).
After the southern plains system
finished up yesterday, there hasn’t been much for precip in the last 12
hours. There is a rain/snow mix moving across KY/S-IL/S-IN this morning
which should continue to support MS-River levels. STL River gauge looks
like it will be in good shape through February. Dry in the Midwest the
next 5-days, but 7-days out sees another major system moving in over the
MS-River Valley and on up the OH-River valley. Totals 100-miles either
side of the river should be in the 0.50-1.30” range. NOAA’s extended maps
confirm with above normal precip for the ECB. Temps should remain below
normal during the 6-15. Some light rains fell in Cordoba, Argentina
yesterday in the 0.10-0.60” range. Otherwise quiet with all eyes on
the system Sat/Sun which is supposed to bring 0.50-1.50” to 85% of growing
areas. S-Brazil is expected to see 0.40-1.00”. “The rains may
not totally end dryness concerns, but if realized, should go a long way towards
easing current conditions.” –John Dee.
Lower for most of the night with corn working on its
ninth straight lower close which would be the longest such streak without a
higher close since September of 2008. One day in that stretch of 2008
was unchanged. The meltdown in the Ag space has caught many off guard and
searching for answers. The catalyst seems clear: the pipeline was empty
so futures “went to where the offers were.” Farmers turned palmed out
sellers with corn at $7.40-7.50 (futes) and beans at $14.75-14.98. At the
same time, weather began to moderate in South America with better chances of
rain the driest areas of their growing regions. In addition, speculative
length bought heavily during a month which is seasonally weak and laden with
bearish inputs (USDA baseline numbers, Outlook Conference). Add on top of
the aforementioned the constant barrage about closing ethanol plants, weak
exports and better precip in the southern plains and we had ample reason to
take price down. At some point, demand should be uncovered given the lack
of farm gate movement.
Japan was in last night tendering for 320,000MT of feed
wheat and barley, but canceled the tender due to a lack of “buyers and
sellers.” This is the third consecutive tender to be canceled with the
tender rescheduled for February 20th. After buying
50,000MT at $380/MT the night before last, Jordan is back in tendering for
100,000MT due to prices dropping further. The 50,000MT was probably
Canadian. Russian analyst IKAR said the recent swoon in domestic wheat
prices is temporary, and prices should start rising again in March of April on
low inventories. Currently at $388/MT. The United Kingdom said they
may be a net importer of wheat in 2013/14 for the second year in a row after
wet weather prevented fall seeding. India’s state owned PEC is looking to
sell another 245,000MT of wheat from government stockpiles this week.
Palm Oil reserves at the end of January fell 1.9% to 2.58MMT in Malaysia which
was above the median estimate of 2.53MMT, causing prices to retreat sharply on
their first day of trading since Friday.
Open interest changes yesterday weren’t heartwarming:
corn up 11,340 contracts, wheat up 9,440, soybeans down 2,760, meal up 240
and soy oil up 5,340 contracts. Fresh speculative shorts are being added
in corn and wheat which is not positive. Chinese markets remain closed,
but Malaysian Palm Oil fell 55 ringgit to 2,505 (2.15%) on bearish stocks
data. Paris Milling Wheat is down 1.45%, Rapeseed down 0.60%, UK Feed
wheat down 0.78%, Corn down 1.78% and Canola is down 0.29%. Worth
mentioning, on the selloff, wheat basis does continue to appreciate. At
the Gulf, HRW is valued at +125/135H which is the highest since 2008. SRW
is seen at +80/85H. Still, this seems like a lack of supply being
offered as opposed to robust demand. Calendar spreads are holding
together overnight. The Northern Plains farmer also needs to consider the
possibility the southern plains might not have a drought this year.
Without that, there is a lot of wheat left in bins north of I-80 which is at
Call things weaker again this morning as speculative selling
is far outweighing any desire by end users to step in and price. Cash is
perking up in a lot of areas, and spreads could be called steady/better in corn
and SRW, but not so for beans and HRS. Ethanol production this morning
should be a bit better with several plants rumored to be coming back on-line
thanks to improving margins. In fact, most domestic end users of corn
have seen margins improve w/w.