Friday, May 30, 2014

Grain Market Comments 5-20-14

Grain markets are mixed this morning after a choppy mixed overnight session that saw corn unchanged to up 2 cents, KC wheat off 2 cents, MPLS wheat off 2-3, CBOT wheat off 2, and beans up ½ to down 1 ½.  At 8:00 outside markets have crude down about 60 cents, gold off 3 bucks an ounce, DOW mini futures pointing towards a slightly softer open, and the US Dollar near unchanged.

It has been a little bit of a broken record lately; ideal weather for the majority of the corn belt; with most of the crop in the ground the focus or headline has been rain makes grain.  Corn and wheat have took most of the pressure; while beans still have a very tight old crop situation that maybe hasn’t been resolved. 

The positive thing for our markets in general has been solid demand.  Yesterday ethanol numbers where supportive and came in above what we need to hit USDA estimates.  We have also seen corn basis firmer, corn spreads firmer; both of which should eventually lead to a bounce in the board.

The wheat situation really hasn’t changed much fundamentally over the past few weeks but prices sure have.  The crop down south hasn’t exactly turned around; yes many parts of had some rain but so far crop conditions haven’t improved; I guess we will see what happens on Mondays crop progress/condition report.  But many think the rain was a little late to help the crop much.  That rain system wasn’t really what put the pressure on the wheat market; that pressure had started long before that; it didn’t help however.  The pressure from wheat came from the world situation along a very overbought situation that had now turned into a very oversold situation.  The funds and our markets in general seem to be really good at over doing both up moves and down price moves.

Locally this weekend our railroad does change hands.  We will now be served by the RCPE railroad; which stands for Rapid City, Pierre, Eastern.  It is owned by the GWRR; we look forward to the changes and even though we might not always get the cars we want the communication should be much better.  That is very important; better communication so you our producers can make better decisions, as well as the buyers.  So welcome RCPE; we look forward to working with you.

Weather forecasts still indicate that there could be some possible issues with PP in some of the Northern States.  When I look at the forecast maps I do become friendly sunflowers; but that doesn’t mean sunflowers can go up without the help of bean oil.  I think the pressure on bean oil lately is one of the reasons the birdseed buyers haven’t shown a lot of interest.  Many are very bearish prices for corn, beans, bean oil, wheat …….etc.

So many getting so bearish grains in general could eventually lead to a bounce; hopefully bigger then what is deserved fundamentally.  But we still need a catalyst to help change charts around and lead to money flowing in.

We did have export sales out this a.m……… is the Van Trump take on those.

USDA Weekly Export Sales Data was released this morning. old-crop Corn and new-crop soybean sales were well above expectations. Below are the details:
·  Corn sales reported at 621,300 MT for 2013-14 and 90,900 MT for 2014-15.   Trade was looking for a 13/14 number between 300,000 to 500,000 and 14/15 number between 150,000 to 350,000. Last week sales were reported at 507,900 MT for 2013-14 and 62,500 MT for 2014-15.
·  Soybeans sales reported at 62,300 MT for 2013-14 and 821,100 MT for 14-15.  Trade was looking for a 13/14 number between -100,000 to +100,000 and 14/15 number between 500,000 to 700,000. Last week sales were reported at 164,400 MT for 2013-14 and 451,200 MT 2014-15.
·  Wheat sales reported at -52,400 MT for 2013-14 and 531,500 MT for 2014-15.  Trade was looking for a 13/14 number between 0 to 200,000 and 14/15 number between 200,000 and 400,000. Last week sales were reported at 142,200 MT for 2013-14 and 209,800 MT for 2014-15.

For more market information check out the below.

This is from Tregg Cronin with Halo Commodities

This below is from CHS Hedging; Morning Highlights

Morning Highlights

By Ami L Heesch

  • Grain and energy markets mostly weaker this morning.  US$ and gold are weaker, while CD$ slightly firmer.
  • Crop progress and conditions report out Monday afternoon.
  • Goldman Roll begins next Friday.
  • Updated US and world balance sheets to be released Wednesday, June 11. 
  • The Corn market traded lower overnight on mostly favorable weather conditions for the newly seeded crop. The December contract appears to dictate market direction.
  • Weekly export sales estimate: 450-850tmt.
  • Weekly crop conditions are expected to be 60-70% G/E on Monday afternoon’s report.
  • Spreads: Mostly firmer on lack of selling interest, improving cash markets and decent demand.  N/U 1 cent firmer at a 7 ¼ cent inverse, N/Z 1 ½ firmer at an 8 cent inverse, U/Z ½ cent firmer at a ¾ cent inverse and the Z/N narrowed slightly to a 21 ½ cent carry. 
Outlook:  lower trade this morning on favorable planting weather
  • The soy complex traded both sides, with the July failing to hold above $15.00 and the November contract unable to push through $12.50.  
  • Weekly export sales estimates: 400-800tmt for beans, 150-350tmt for meal and 0-35tmt for soyoil.
  • Planting progress is expected to be 75-85% complete
  • August palm oil closed down 38 at 2423 ringgit. China bean market was weaker overnight while soymeal was a bit firmer. 
Outlook: lower trade on planting progress, market awaits weekly export sales numbers  
  • The wheat market traded lower overnight on technical weakness and thoughts of a big SRW crop being harvested. Today marks the last trading day for the 2013-14 marketing year (for wheat).
  • Weekly export sales estimate: 200-600tmt.
  • Spring wheat planting progress should be 80-85% complete.  ND and MN should be 70-72% complete as well. Continued wet conditions is slowing planting in the far northern areas.
  • There has been significant basis depreciation in the KC and Mpls spot markets this week.
  • Weather conditions remain mostly good for the US and Europe but there are concerns about dryness in parts of Russia. 
Outlook: lower trade on harvest activity and ample supplies of wheat around

Grain Merchandiser
Midwest Cooperatives
605-295-3100 (cell)
605-258-2166 (fax)

CHS Midwest Cooperatives Logo

This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.   This communication makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  Nothing herein shall be construed as a recommendation to buy or sell any commodity contract.  There is a risk of loss when trading commodity futures or options.

Friday, May 23, 2014

Grain Market Comments 5-23-14

Grain markets are called slightly firmer this morning after a slightly firmer overnight session that saw corn up 2 cents, KC wheat up 3, MPLS wheat up 4, CBOT wheat up 4, old crop beans up 5, and new crop beans up 2.  At 8:05 outside markets have crude up 40 cents, the DOW mini is about unchanged, gold is near unchanged, and the US dollar is up a little with the cash index at 80.357.

Most feel that the strength overnight is a little profit taking ahead of the long weekend; as well as some risk premium ahead of the long weekend.  Markets won’t open again until Monday night after today’s session closes.  Personally with the volatile markets we have had; especially for beans it would surprise me at all to see beans see some profit taking that puts pressure on that market by the end of the day.  We also have option expiration today as the June options expire. 

I mentioned yesterday in the midday update phone call that nothing should really surprise us for a  move in beans.  Tight fundamental situations typically resolve rather violently; end users that need beans will have to do whatever it takes to get coverage; but once that coverage happens or they sense it can happen then bids can vanish.  No one wants to be stuck with old crop beans at 2.50 a bushel premium to new crop beans.  They will take everything they need; but if they can get to new crop and buy a couple bucks a bushel cheaper believe me that’s what they will try to do.  Add to this the fact that beans still have a positive old crop headline story that continues to lead to fund buying interest and you have a rather volatile marketplace.

We are about a month away from when the funds really won’t have much ownership left in the July contract; so we should be nervous on when the tide turns.  Bottom line is we need to be aware that we could see pressure on the markets (beans in particular), even if our fundamental situation hasn’t resolved.  We could see a headline of more South American beans hitting the US and even if it isn’t change our fundamental situation it could be a catalyst that leads to fund selling and from what I hear they simply have too much July ownership.

Don’t get me wrong old crop beans still have plenty of potential but the price action and headlines are scary.  We could be up a couple bucks more or give all of this rally and then some away.  Just be prepared for a wild ride.

So far we haven’t seen corn, wheat, or even sunflowers really follow the strength that beans have had.  The sunflower situation remains tight; but we just don’t have a lot of demand right now.  It feels like we have way too many sunflowers in South Dakota which serves more of the birdseed market and not nearly enough in North Dakota.

Here is some more market info.  The first is morning comments from Tregg Cronin with Halo Commodities

The below is from CHS Hedging Morning Highlights

Morning Highlights

By Joe Hofmeyer

  • As of 7:00 AM CT: US dollar index is up .19%at 80.379, European Stoxx is up .12%, Nikkei closed up .87%, Hang Seng closed up .05%, crude oil is up 24 cents at $103.98 per barrel, and gold is down $1.50 at $1293.40 per ounce.
  • Dry weather in the Northwestern Midwest through Saturday will allow planting progress to continue at its rapid pace. The 6-10 day forecast shows improved chances of moisture in the Southern Midwest that will benefit newly emerged corn and soybeans. Rains will continue in the Southern Plains through May 27 relieving the drought stricken areas.
  • The northern tier of the Corn Belt is pushing hard to get crops planted ahead of crop insurance deadlines and rains that are expected to move in within the next 5 days.
  • Germany’s business confidence reading fell from 111.2 in April to 110.4 in May amid signs that growth in the country’s economy will slow this quarter. Germany is key to the euro area economic recovery efforts.
  • Vladimir Putin said Ukraine is in full-scale civil war after government troops suffered their worst losses in battles with separatists.
  • Rains benefitted Nebraska and Kansas yesterday, while the states of Minnesota, North Dakota, and Wisconsin stayed dry allowing planting progress to continue in the areas that are furthest behind.
  • Even though good progress is being made, with corn planting behind in the North and additional rains in the forecast, it is likely that corn will lose some acres to either preventative plant or soybeans.
  • Old crop corn export sales were revealed at 20 million bushels yesterday by the USDA. We only need 11.8 million bushels weekly to hit current USDA projections.
  • Basis levels are steady to slightly better as producers are not moving grain with their focus on planting.
  • China will auction 3.5 mmt of corn from its temporary reserves on May 29, according to the National Grain & Oil Trade Center.
  • The CZ4/CH5 spread seems to be content to sit at slightly better than a 9 cent carry for the time being.
Outlook: Corn continues to reluctantly follow soybeans higher, but traders see no reason for the added risk premium at this time. Sideways trade is expected ahead of the long weekend. 1-2 higher to start.  
  • July soybeans put in a new contract high yesterday of $15.36 ¾, but settled the day at only $15.18 ¾. The front end of the soybean curve is once again showing strength overnight.
  • July soy-meal closed above $500 per ton for the first time yesterday, and has continued to move higher in overnight trade.
  • There is some chatter that processors are contemplating switching bids from the July to the August board.
  • Old crop soybean exports out of the U.S. were once again net positive yesterday at 6.04 million bushels. We simply cannot afford to continue to export soybeans with our current domestic balance sheet.
  • Talk of South American soybeans being imported into the U.S. continues, but quantifying the amount is proving difficult.
  • China will auction 300 tmt of soybeans from its temporary reserve on May 27, according to the National Grain & Oil Trade Center.
Outlook: Extremely tight domestic old crop supplies continue to result in explosive trade, as the market tries to figure out how, and if, imports will be able to connect the old and new crops. 5-8 higher.
  • Rains will continue through May 27th in the Southern Plains with general coverage of 2 inches according to Commodity Weather Group LLC.
  • Precipitation looks to hold off in the Northern spring wheat growing geographies until late in the weekend, which will allow planting to continue to advance in both the U.S. and Canada.
  • Old crop wheat (crop year ending May 31st) exports yesterday were revealed at 5.2 million bushel. This is behind the needed weekly pace to hit USDA projections.
  • Kazakhstan agreed to sell 100 tmt of wheat to China for the 2014/15 crop year. Kazakhstan exported 10 tmt of wheat to China last year.
  • South Australian sub-soil moisture is adequate to excellent in most areas with producers gearing up to plant.
Outlook: Weather forecasts throughout the world continue to be closely watched by traders, but currently there are not enough problems to get anyone excited with a world balance sheet that is very comfortable. 2-4 higher.

Jeremey Frost
Grain Merchandiser
Midwest Cooperatives
605-295-3100 (cell)
605-258-2166 (fax)

Wednesday, May 21, 2014

grain market comments

Grain markets are called mixed this morning.

At 7:40 we have CBOT wheat near unchanged, corn near unchanged, MPLS wheat up 3-6, KC wheat up a penny, and soybeans up about 8 cents.  DOW futures are firmer, crude is up about 70 cents, and the US dollar is slightly firmer.

The driver yesterday seemed to be fund selling and technical selling.  But isn’t that nearly always the “reason” on down days?  The answer is yes a lot of times it is and what that tells me is that the funds, charts, and money flow having a huge effect on our prices.  Like it or not; it is just the way it is.  They help create the liquidity that we need; it sucks on days when we see pressure on the prices for what they do.  But that’s not my point.

My point is that we know the funds will help over extend price moves, we can become more knowledgeable on things such as charts and where the funds are sitting so we can better determine potential risks as well as rewards.  It makes it challenging because of how prices move.  Take wheat as example, did we really need to move up as much as we did the past few months?  Did we need to correct as much as we have the last couple weeks?  One could argue either way, if not both ways.

Weather  continues to be a mixed bag, still very dry in the south; but very good moisture called for.  Will it be too late?  Is it a headline that leads to fund selling or another leg down?  Overall forecasts appear to be wet and warm which would be ideal for grain that is in the ground.  Still plenty of talk about planting issues in the Northern states; but bears will say their production doesn’t matter and bulls talk about all of the unplanted acres.

With the funds as long as they are if we do get everything planted what will it take to keep them long?  To keep them from selling length?

Fundamentally demand is very strong for beans and corn.  While we are so far away from being competitive in the wheat export world; at least for HRW that it is scary.  The problem with the strong demand for corn and beans is that it isn’t what the market is focused on.  The market is trying to determine supply and is a weather market.  The longer we keep strong demand the better; but the thing that is most likely to move our markets today is weather and will be for the next several months as we determine how big our crops are.

Here is more market info from Tregg Cronin at Halo Commodities

And the below market info is from CHS Hedging Morning Highlights

Morning Highlights

By Joe Hofmeyer

  • As of 7:00 AM CT: US dollar index is unchanged at 80.0059, European Stoxx is up .23%, Nikkei closed down .24%, Hang Seng closed up .01%, crude oil up 85 cents at $103.18 per barrel, and gold is down $4.50 at $1290.10 per ounce.
  • Weather forecasts are still showing improvement in both the Southern Plains and the northern tier of the Midwest. Moisture replenishing rains are expected in the Southern Plains while the Upper Midwest is expected to be warmer and drier aiding planting efforts.
  • Russian billionaires are assembling at the St. Petersburg Economic Forum this week as they weigh the market fallout from Russian/Ukrainian tensions. Investments have continued to flow out of Russia throughout this situation.
  • July corn futures have moved lower the last 5 trading sessions, as advancing planting progress and adequate moisture weigh heavily.
  • Warmer temperatures this week are a major benefit to early crop development for areas that are planted.
  • Producer selling has been light with the focus continuing to be on planting the crop. Basis levels have been steady.
  • Industry participants are looking for another strong ethanol production number (920K barrels/day) this morning, as margin are very profitable and seasonal ethanol demand is strong.
  • After a cool and wet spring that has delayed planting, a Democratic Senator from North Dakota is calling on the U.S. Department of Agriculture to delay the May 25th crop insurance corn planting deadline that is in place for most North Dakota counties.
Outlook: July corn was not able to hold support at $4.75, adding more downside potential. Weather will continue to dictate price action, but the trade is feeling more comfortable with each passing day as more seed is put in ground. Mixed to start.
  • The SN/SX inversion currently sits at $2.37 ¾. The contract high for this spread is $2.77 which was established in mid-April.
  • Eastern crush margins have fallen to 60-65 cents and western margins are down to 40-45 cents. Crush margins are getting close to not being able to cover variable costs.
  • Brazilian farmer selling is strong while Argentinean farmer selling is light with slow harvest progress.
  • Two additional Brazilian bean cargos are anticipated to land in U.S. ports later this week. With the addition of these 2 a total of 7 will now have come into the U.S. since April.
  • China bought 111 tmt of optional origin soybeans for the 2014/15 crop year yesterday.
  • China’s second soybean auction saw 82% of offered beans sold.
Outlook: Old crop volatility continues with July futures attempting to trade above $15.00 yesterday before falling off sharply. Uncertainty remains if we have enough old crop supplies/import to connect the old and new crops. Weather looks near ideal for planting in the week ahead. 5-8 higher.  
  • Spring wheat planting pace should continue to accelerate as we move further into the week.
  • Forecasters are calling for the first general rain in a number of weeks for the HRW region for Thursday into the weekend. Although the HRW crop is probably beyond the point of adding yield, these rains should help maintain what is already there.
  • There are yield concerns for Black Sea wheat, as temperatures are forecast to be above 90 degrees in the wheat growing regions of southeast Russia and Kazakhstan toward the end of the week. In some of these areas less than 20% of their normal rainfall has been received.
Outlook: Having two problem areas in the world (Southern Plains & Russia) should give traders a reason to put a bid back into the market. Weather models for these 2 areas will be watched closely, and can change quickly. 1 to 2 lower in Chicago and KC, 3-6 higher in Minneapolis.   

Jeremey Frost

Grain Merchandiser

Monday, May 19, 2014

Closing Grain Market Comments 5-19-2014

Grain markets closed mixed today with some rather volatile price swings.

When everything was done corn was down 6, KC wheat was up 1, MPLS wheat was down ½ of a cent, CBOT wheat was up ¼ of a cent, old crop beans up 20, new crop beans up 17, the US dollar near unchanged, crude up 50 cents, gold near unchanged, and the DOW closed up 21 points.

Nice strength in the soybean market; many called it technical bounce or a bounce off of support………..but maybe our tight balance sheet just showed up today???  New crop beans probably have more of a weather premium built in then does Dec corn; as we are still not half planted on beans while corn is about ¾ planted.

This afternoon we did have crop conditions/crop progress.  Winter wheat conditions dropped 1 % in the G/E; with South Dakota dropping 5%.

Corn planting came in at 73% which was behind the estimate and slightly behind the 5 year average.  Now is it low enough to get the bulls re-excited??? Probably not by itself; but it does mean that we have a fair amount of corn left to plant.  Ball park in the 24-25 million acre area.

Spring wheat planting came in at 49% which was in line with estimates but well below the 68% on the 5 year average.

Soybeans came in at 33% planted; which was slightly below most of the estimates I have seen and is slightly below the 38% on average over the last 5 years.

Below is a link to CHS Hedging Recap of the Crop Progress/Conditions

The biggest thing that these updates do is help determine what weather means.  If the crop isn’t in the ground and you have moisture in the forecast that would typically be good or supportive to prices.  While once the crops are in the ground, rain makes grain.  Right now I think the market has transitioned to rain makes grain for corn; while moisture is neutral to supportive prices for spring wheat and soybeans.

Overall the weather forecast does have most of the US wet and warm in the 6-10 day forecasts as well as the 8-14 day forecast.  If the crop is planted; then it would be ideal.  The forecast also has much of the HRW growing areas to get a decent amount of moisture in the 5-7 day models. 

The thing with weather that we have to keep in mind is that 10 different people can get 10 different forecasts; and 10 different people can have 10 different views on what the forecasts mean.  It is really subject to how one views it and the forecasts change so often and so fast; that a lot of time it isn’t the actual forecast that means much; it’s what has or hasn’t changed in the forecast that matter as well as what actually happens versus the expectation.

I have had a lot of producers ask me if they missed the boat on pricing some of these grains.  The reality is that yes we probably missed a good opportunity to take some risk off the table; but there are far too many unknown factors to determine how things will shake out on prices several months from now.

As for the grains in specific it feels to me that wheat is a longer term sleeper; that needs a little demand or needs to see the combines roll down south.  I liked today’s price action; but it is still unknown what direction the next move in wheat will be.  It does have potential if you look at the US balance sheets(for some of the classes) but the world balance sheets look to have plenty.  So does wheat really need to go higher if we don’t find more export demand????  It certainly can; but won’t we need at least some catalyst to get the fund wanting to get long again??

As for corn for me it feels like we should see another weather scare at some time and seasonal rally; but when I look at the forecasts and how we are sitting I question it.  The other thing that I question is will demand stay as strong as it has the past year or so?  Probably even more then that is can the demand growth keep up?  I wonder if some of the buyers in the world where so empty after the tight supplies of 2011 and 2012 that they have refilled and hence that is why our export demand has been so solid this year.  Are we close to having the empty pipelines caused by the 2011/2012 crops re-filled????

Corn demand is strong, but the position that the funds have makes me nervous.  I think we might need to give them a positive headline if we want to keep them as long as they are and we risk that that headline doesn’t come and they slowly get shorter and shorter.  Not good if the American Producer is as undersold as some think.  Would take more than a lot of demand to offset selling pressure by both the funds and the producers.  But the positive for nearly all of these crops as they are a long way from the in the bin; heck overall when you look at corn, beans, spring wheat, and other grains like sunflowers I am not sure that we are much more than 50% planted.  So some sort of weather scare is possible; I just don’t see it how I look at the present forecasts.  Good thing those forecasts changed rather regularly.

Basis for grains in general has a steady tone to it.  Producer selling has slowed down by in my shoes I am not getting ran over with demand from end users either.  Plus locally we continue to struggle with the rail situation and are nearing a big unknown time with the new RCPE rail road taking over our rail line in the next few weeks.  I believe that longer term it will benefit the producers in our area; but I can’t honestly know how the transition will effect operations in the short run; I know intentions are very good.

Sunflower market in general remains very tight; but buyers also show little to no interest right now.  Business really needs to pick up for the birdseed guys.

Please give us a call if there is anything we can do for you.

Tuesday, May 13, 2014

Grain Market Comments 5-13-2014

Grain markets are called mixed to better this a.m. on a little turn around Tuesday from yesterdays weak action; at 7:30 corn is up 2-3 cents, KC wheat is up a penny, MPLS wheat is up a penny, CBOT wheat is down 2, old crop beans are up 9-10, and new crop beans are 4 cents a bushel higher.  Outside markets have crude up 70 cents a barrel, the US dollar firmer with the cash index at 80.093, DOW mini futures are up about 20 points, and gold is down a couple bucks at 1294.20.

Yesterdays weakness seemed to be follow up from Fridays USDA report and the fact that the market was expecting big progress in corn yesterday afternoon.  They got that as we jumped ahead of the 5 year average; we still have plenty of corn acres let to plant so weather is still important but overall headlines are slowly turning from Rain prevents planting to rain makes grain.  Just keep that in mind; what once caused the market to go up could cause pressure on our markets in the weeks ahead.

We are probably a little early for that but do keep in mind that we are slowly going to be turning around what info means to market price action; we too much rain until crops planted is friendly; but once crops are planted it because very bearish in a hurry.    The headline that the funds see of corn 59% planted; above the 5 year average isn’t a headline that should lead to tons of buying at this time. 

Spring wheat planting came in at 34%; which is well below average; but actually ahead of the 2011 pace, close to the 2009, and 2013 pace.  The 5 year average there is really skewed by the 91% in 2012.  The 5 day forecast also looks like plenty of progress could be made in ND

Soybean planting came in at 20%; which is in line with the 5 year average. 

Winter wheat crop conditions did drop 1 % in the G/E and that crop continues to struggle. 

Below is a link to CHS Hedging recap of crop progress

Basis overall still feels weaker as in my shoes it feels like we have more supply then demand; plus we have a rail situation that adds some volatility to the cash prices.  Especially locally where we will change railroads in less than a month.  In my shoes I then have to ask myself how will the new rail line be?  What type of car volume can I plan on or not plan on?  Does there become a point where we have everything bought that we can physically handle given the rail info that we know today?  Logically the closer we or competitors on this line get to that covered point the more pressure one should expect on local basis.  Add to that what appears to be a big winter wheat crop on the way and the fact that both producers and elevators need to be prepared and it is easy to see what local cash prices and basis could see some pressure as we move forward.  Don’t get me wrong my talks with our new rail line leave me very encouraged on performance; but in the back of my mind I also realize there can be a thin line between what actually happens and what they intent to happen.

I think one thing we really need to watch out for is what the funds will do.  Do we have some risk that the headline leads to them deciding to get short corn again?  Notice their position today versus how short they happened to be last fall harvest. 

Here is a link with some more info on the fund position; it is from Tregg Cronin with Halo Commodities.  He talks about the “smart money versus dumb money”; this also has his morning comments. 

Lastly for more market info this is from CHS Hedging Morning Highlights.

Morning Highlights

By Steve Wagner

  • EU foreign ministers increased sanctions on Russia by freezing assets of oil and gas producers from Russia, citing the Kremlin’s continued encroachment into the Ukraine. In response Gazprom gave Kiev 24 hours to pay their delinquent gas bill or risk being shut off. In Donetsk, Igor Girkin, known as Strelok or “the Shooter” ordered Ukrainian troops to submit to his command or leave the region within 48 hours. After that time the rebels will begin a “anti-terrorist operation.”
  • US dollar index is up .188 points this morning to 80.086.
  • June crude oil is up $.61 per barrel to $101.20 per barrel.
  • Gold is down $4.30 per ounce trading at $1,291.50 per ounce.
  • Dow Jones equity futures are up 33.00 points trading at 16,688.00. The Hang Seng rose .4% 22,347.20; the Shanghai composite dropped .3% at 2,045.97. The Nikkei was up 1.9 % trading at 14,421.60, after a weaker yen boosted Japanese exporters.
  • Corn opened higher Monday night as traders took profits Monday. Solid exports are also supporting the market.
  • Planting progress stands at 59% vs the 5 year average of 58%, however the upper Midwest, Mn., ND, WI. and MI. are all 20% behind or more.
  • There were no corn deliveries overnight with the next date March 7th.
  • Nonghyup Feed bought 60 tmt of corn paying $1.7796 over Chicago Dec. futures.
  • Taiwan purchased 60 tmt of corn from Mitsui for shipment July 25 through August 14th to ship from Brazil.

Outlook: 2 to 4 cents higher on solid exports and turn around Tuesday.

  • July soybeans opened higher overnight as demand for soybean meal once more pulled the market higher, exports remain above USDA projections.
  • There were no soybean deliveries today with the next date April 23rd, soybean meal had 2 deliveries with the next available date April 29th, in soybean oil there were 117 deliveries with the next available date May 6th.
  • Planting progress exceeded expectations at 20%, the 5 year average is 21%.
  • No prices on palm oil due to a Malaysian holiday, trade resumes Wednesday.
  • Soybeans on the Dalian exchange were 27 ½ Yuan trading at 4,420 Yuan.
  • Soybean exports to China should pick up according to Liu Xianwu, general manager of China’s Cereal and Oils business, citing better demand for poultry and aquaculture.
 Outlook: old crop 5 to 10 cents higher led by better demand for soybean meal - new crop 5 to 8 cents higher.  

  • Chicago July wheat opened with higher overnight profit taking. However, it moved lower as trade progressed on improved planting and weaker Matif wheat.
  • There were 111 Chicago wheat deliveries for today with the next available date May 8th. There were no KC wheat deliveries with the next date May 9th.
  • Planting progress was reported at 34%, up from 26% but still behind the 5 year average of 53%. Minnesota and North Dakota are lagging the most at 8%and 11% respectively.
  • Winter wheat conditions deteriorated to 42% poor and very poor vs last week’s 38% and last year’s 39%. Good to excellent dropped to 30% vs last year’s 31%.

Outlook: steady to 2 cents higher on planting concerns and deteriorating crop conditions.

Grain Merchandiser
Midwest Cooperatives
605-295-3100 (cell)
605-258-2166 (fax)

CHS Midwest Cooperatives Logo

This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.   This communication makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  Nothing herein shall be construed as a recommendation to buy or sell any commodity contract.  There is a risk of loss when trading commodity futures or options.

Friday, May 9, 2014

Closing Grain Market Comments USDA Report Day 5-9-14

Grain markets closed mixed after the release of the USDA report.

When everything was said and done old crop corn was down 9, new crop corn was down 13, KC wheat was off 14, MPLS wheat was off 10, CBOT wheat was off 13, old crop beans up 17, new crop beans up 2, the DOW was up 32, the US dollar stronger at 79.869 on the cash index; while both gold and crude ended near unchanged.

All about the USDA report……….below is a recap; this is from the Van Trump report.

US New-Crop Corn Production

Today's 2014/15
USDA 2014/15
Avg. Guess
USDA 2013/14
Planted Acres
91.7 million
91.7 (March)

Harvested Acres
84.3 million
84.6 (Feb Outlook)

165.3 bpa
165.3 (Feb Outlook)

US New-Crop Soybean Production

Today's 2014/15
USDA 2014/15
Avg. Guess
USDA 2013/14
Planted Acres
81.5 million
81.5 (March)

Harvested Acres
80.5 million
78.5 (Feb Outlook)

45.2 bpa
45.2 (Feb Outlook)

US 2013/14 Ending Stocks

USDA 5/9
Avg. Guess
Range of Guesses
USDA 2013
1.231 - 1.435
0.125 - 0.174
0.570 - 0.630
US 2014/15 Ending Stocks

USDA 5/9
Avg. Guess
Range of Guesses
1.295 - 2.354
0.200 - 0.464
0.425 - 0.652
US Wheat Production

USDA 5/9
Avg. Guess
Range of Guesses
USDA 2013
All Winter
1.312 - 1.591
Hard Red Winter
0.610 - 0.870
Soft Red Winter
0.409 - 0.570
White Winter
0.188 - 0.268
All Wheat
1.891 - 2.182
World 2013/14 Ending Stocks

USDA 5/9
Avg. Guess
Range of Guesses
149.45 - 161.20
67.30 - 73.00
181.91 - 189.00
World 2014/15 Ending Stocks

USDA 5/9
Avg. Guess
Range of Guesses
149.90 - 175.00
67.00 - 95.00
178.00 - 200.00
South American Production 2014

USDA 5/9
USDA April
Avg. Guess
Range of Guesses
22.30 - 23.86
Argentina Soybeans
53.50- 57.00

70.50 - 74.00
Brazil Soybeans
86.50 - 87.50
Overall report was bullish old crop corn and beans; bearish new crop corn and beans.  World numbers bearish across the board.  US wheat numbers friendly on production; but carryout numbers in line with estimates.

After we get a report we open the “what’s next” question.  For old crop corn some ask are we overestimating the increase in corn exports and old crop corn demand?  Basis and cash markets sure feel like we have more than a 1.1 billion bushel corn carryout. 
Are we curbing soybean demand for old crop?

Many ask how can the USDA start at 165 on corn yield and 45 on soybean yield?  I guess the answer is because they can; realistically we could be well below that; but there is also a chance that if mother nature is nice that we come in higher than that when everything is said and done.  One big positive I took from today’s report is just how much demand has increase; it wasn’t too long ago that many talked about an old crop corn carryout near 2 billion bushels ( I should mentioned that it still feels that way to me; but that is probably due to local production along with the railroad issues causing the back log).  Maybe demand for grains is simply strong enough to offset big supplies?

Bulls now can argue that corn demand could be better in the coming year; plus they have plenty of room to take the 165 yield lower.  The USDA has 2014/15 corn usage off by 213 million bushels  versus this present year’s projection.  Now if that is flat and say yields drop to 155; (which might be a better starting spot) You drop 2015 corn carryout to under a billion bushels again in a hurry; close to 700 million.  Bottom line is the headline for new crop corn today is very bearish; but the reality is we could easily end up with a  bull market; just depends on mother nature and demand.   I do thing we have some risk that the June stocks report finds more old crop corn and in the meantime the funds might turn sellers because of the charts and the headline of a big percentage increase versus this year.  Reality is our balance sheet situation for new crop corn and beans is no more known today then it was a month ago.

First thing that needs to be done is determine production and thus supply; realistically we should have a good clear idea for a couple months on that.  If we don’t have issues in weather I could see the funds turning sellers because of the headlines; if the funds do turn sellers that might give us lower prices and thus increase demand.  Making the markets even that more volatile should we not hit the 165 corn yield or the 45 bu soybean yield.

Bean situation for new crop is very similar; can we really think our carryout is 2-3 times what it has been the past several years?  Well today it is at least in the headlines; but the reality is we have no clue what bean yield could be; nor do we know much many soybeans China might use should we actually have them for sale. 
One thing that is scary is the world numbers; but there again how can we have a real forecast that has much accuracy this early in the game?

As for wheat I have to wonder what it takes to continue the rally; with winter wheat production coming in below estimates have we priced the crop issues in HRW country into the market?  Where it sits today is that wheat needs some more planting delays in ND to get the wheat bulls back interested.  Longer term the wheat balance sheet is fairly tight.  If wheat demand can stay flat year over  year we do get the wheat balance sheet very tight in a hurry.  As a matter of a fact if you just keep usage flat our wheat carryout drops to a tighter number then it was in 2007/08.  Keep in mind it is very unrealistic for us to feed the same amount of wheat we did last year unless the price of corn versus wheat really changes.  Now exports on the other hand; should issues develop overseas perhaps we can see exports closer to the present year numbers instead of being decrease by 230 million bushels like the USDA has forecasted?

If the USDA has given us a good definition of wheat production; then the job of the market is to see if it needs to find demand or curb demand; and I am not sure which one it needs to do at these prices levels.  I do know that the wheat headline of an increase in world wheat carryout versus last year has to be a blow the bulls considering the fact that US production was below the estimates.

Overall markets did take it on the chin today; but the old crop corn carryout (should it be accurate) should give some hope to higher prices and at the very least it should have increased the bet or importance of the weather going forward.  Personally I still want to practice good risk management; realizing that we have had a decent rally that should probably be rewarded for some of the grains, and realize the risk of the fund position, risk of weather being ideal, and the risk of the focus turning towards the world balance sheets which in print are ample.
Elsewhere in the market basis continues to feel weak as most buyers simply don’t have tons of interest.  Birdseed market also feels soft as business just hasn’t picked up.  Most buyers are no longer threatening the huge discounts for late shipments like they did a few months ago as some no longer need product or their program has ended. 

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