Thursday, January 30, 2014

Grain Market Comments 1-30-14

Grain markets are called mixed this morning behind a mixed overnight session.

When the overnight markets ended we had corn up 3 cents, KC wheat up 5, MPLS wheat up 2, CBOT wheat up 5, old crop beans unchanged, and new crop soybeans off a penny a bushel.  At 8:00 outside markets have a strong US dollar up 465 on the cash index at 80.965, gold is off 21 bucks an ounce, crude is up 80 cents, and the DOW futures are pointing towards a positive start of about 80 points.

Markets have continued to lack a reason to do anything other then what they have been the past several weeks/months.  The trend has been sideways to down for most of our markets and some of them have been in a total free fall.  We really need some reason to get the funds interested in owning grains or covering shorts.  We need something fundamentally to change and right now we really don’t seem to have anything positive fundamentally.  We may only be one event away from some sort of catalyst giving support to our markets but we still need that catalyst. 

Bottom line to sum up our markets the story has been very similar for months now.   Big supply, demand bouncing but not enough to offset the big supply, and a lack of a bull story for big money to buy into. 

There are some positives out there such as ethanol margin, soybean demand, the strong spring wheat basis we have seen for high pro spring wheat at times.  But overall none of it has been enough to spark a major rally.

This morning we did get export sales and they were supportive.  But enough to spark much of a rally?  Probably not without another bullish piece.

We did have export sales above expectations today and well above what we need on per week basis.  Wheat had 29.2 million bushels in export sales, well above the 8.9 we need on a per week basis.  Corn came in at the highest level this marketing year at 72.4 million bushels; we now only need about 7.9 million bushels a week to hit the USDA estimate.  Soybeans didn’t see major cancellations and actually came in at 18.2 million bushels; to not go over the USDA estimate we now need to cancel about a million bushels of sales a week.  So soybean demand remains very strong.

Wheat basis has been under pressure as of late as the offers are not trading like they did a few weeks ago.  This is all from rail logistics.  There are still good spot values out there but if one can’t get cars they can’t take advantage of the spot market. 

The other thing to consider on wheat basis is how deep the market is.  Yes a lower board has slowed sales down; but the big numbers that have traded on spot haven’t been for millions and millions of bushels.  It seems to be a train here and a train there.

Below is more morning market info from CHS Hedging Morning Highlights

Morning Highlights

By: Joe Hofmeyer

  • Outside markets as of 7:00 AM CT: The U.S. dollar is trading up 0.50% at 80.911, Crude is up 30 cents at $97.66 per barrel. Nikkei is off 2.45% closing at 15,007, the Stoxx 50 is down .20% at 3,006, and U.S. equities down about 1%.
  • Index fund rolls start next week, and this Friday marks month end.
  • Yesterday the FED announced that tapering will continue, as bond buying will be reduced by another $10 billion per month to $65 billion per month.
  • The House passed an updated Farm Bill, and the Senate is also expected to approve the bill sometime this week.
  • The U.S. Midwest and Plain States will warm up to more seasonal temperatures over the next 10 days with light to moderate precipitation expected.
  • Beneficial rains are forecasted for Argentina, while dry weather in Brazil will aid early soybean harvest.
  • Range bound trade between the support level at $4.20 and the resistance level at $4.40 continues for nearby March futures.
  • Yesterday’s ethanol production data showed a rate reduction of 5,000 barrels per day to 900,000 barrels per day. Production is 17% above a year ago, and for the crop year so far annual grind equates to 5.04 billion bushels.
  • For the 16th consecutive week there have been no ethanol imports into the U.S, as margins currently don’t exist for importers.
  • Export sales estimate for this morning: 500 to 900 tmt.
Outlook: Range bound trade and probably a follower to soybeans today… Mixed to start.
  • Rumors persist that China may have cancelled U.S. origin soybean purchases.
  • China’s New Year’s Lunar holiday starts Friday, which should reduce soybean demand news for about a week.
  • Poultry farmers in China are reducing bird inventories as the H7N9 virus (bird flu) spreads.
  • Weather in South American is bearish prices, as Argentina gets beneficial rains and the Brazilian forecast is dry, aiding harvest progress.
  • Early yields out of Mato Grasso continue to be very strong.
  • Additional cases of the hog virus PEDv are being found on Canadian farms.
  • Export sales estimates for this morning: 600 tmt to 1mmt for soybeans, 80 to 120 tmt for soybean meal, and 0 to 20 tmt for soybean oil.
Outlook: Trade will watch export sales closely this morning for direction, looking for cancelations… 2-5 lower.
  • Wheat rebounded slightly in overnight trade after reaching a 42 month low yesterday.
  • As temperatures moderate in wheat growing regions of the U.S. conversations of winter-kill fade.
  • Rail logistics continue to struggle for wheat, especially in the north.
  • Bangladesh bought 150 tmt of wheat from India.
  • Japan bought 179,343 mt of milling wheat. Of the total, 91,247 mt was U.S. origin and the balance was Australian origin.
  • Export sales estimate for this morning: 350 to 550 tmt.
Outlook: Contract lows continue to be challenged as there are ample supplies of wheat in the world. Bouncing back slightly this morning… Up 2-4 cents.

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

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