Weekly Cash Comments
Cash commentary for week ending June 05
It was a mixed week in the cash grain markets with corn posting a modest two-tenths of a cent decline while soybean spot basis was up 2 cents on the week.
In corn, there was little incentive for corn buyers to be aggressive on basis as a reversal in futures prices helped push more supplies into the pipeline. At the Gulf, export basis was off 3 cents a bushel and river terminals followed suit also posting a 3-cent decline for the week. The only bright spot was ethanol plants which held their ground on basis and ended the week mostly unchanged.
For soybeans, it was a different story this week with basis gains of 2-cents a bushel on average across the US. Most of the stimulus was created from soy crushing plants which posted a nearly 4-cent gain on the week. Plants on the Eastern Seaboard had strong gains of 5 to 15 cents a bushel as local supplies are tapped out and processors need to find supplies from Ohio and Indiana. In exports, basis at the Gulf was off 2 cents a bushel and river terminals let basis drop down by 1-cent a bushel.
US Dollar Higher in the Overnight
The U.S. dollar traded higher in the overnight by over a percent this morning which will likely put pressure on the grains after a week of rising prices.
In the overnight session the grains were mixed with corn up 1/4 of a cent, soybeans down 1/2 of a cent and wheat is down 2 3/4 cents. The U.S dollar is trading nearly 1 percent higher this morning after printing lows of 94.67 in yesterday’s session and rallying back to 95.55 percent to close positive on the day. The U.S dollar is trading very close to its 100 day moving average at 96.468.
The wheat market has traded sharply higher this week. After opening at $4.78 on Monday, July Chicago Wheat is now trading at $5.21 with the possibility of trading over resistance near 5.30 1/4 which is set from the previous high back on May 18th. Concerns about hot dry weather in India, the impact of the heavy rains in Oklahoma and Texas last week and dry conditions throughout Europe and parts of Russia has triggered some short covering, despite ample global ending stocks. Even with the rally in futures this week, wheat still remains firmly in its downtrend.
On Wednesday the 10th the USDA will release its June USDA Supply and Demand report. According to a poll of Reuters analysts old crop wheat ending stocks are expected at 712 million bushels a slight increase from last month. Old crop corn ending stocks are expected to show 1.859 billion bushels up eight million bushels from the May report and soybean ending stocks are expected at 339 million bushels down from 350 million last month. Soybean export sales continue to run hot in the second half of the marketing year when sales usually taper to nearly nothing as buyers switch over to South America.
Export Sales Breakdown
Cody gives and extensive walk-through of today's mixed export sales report.
Soybean Sales Mixed
Export sales were mixed this morning with new crop soybean showing the best performance this week.
In the overnight session corn traded lower by 1 1/2 cents, soybeans pushed 2 1/2 cents higher and wheat in Chicago fell by 2 1/4 cents. The U.S dollar is continuing lower today after two days of selling and crude oil is down 39 cents.
This week’s export sales did little to impress with old crop corn and soybeans below expectations and wheat recording cancellations of 20,400 metric tons. New crop sales were mixed with corn showing export cancellations of 54,800 metric tons, soybeans beating analyst expectations by booking 347,000 metric tons and wheat recording sales of 364,000 metric tons which was within analyst expectations.
Yesterday Informa trimmed their Winter Wheat forecast to 1.481 billion bushels from 1.486 billion bushels in their previous forecast. Despite cutting wheat production, Informa raised corn and soybean production in Brazil and Argentina. In Brazil and Argentina soybean production was revised 1 million metric tons higher to 95.5 MMT and 60 MMT respectively. Argentina corn was also increased by 1 million metric tons to 60 MMT. This is another example of the South American crop putting more pressure on U.S. prices as good growing conditions keep analysts revising production higher.
Ethanol production increased this week by 3,000 barrels per day to 972,000 bpd. This is the third straight week of firm production registering well over last year’s production levels and the four year average. Ethanol stocks declined again this week, falling 29,000 barrels to 20.07 million barrels. Cumulative yearly production is running 4.8 percent ahead of last year’s levels.
Grains Still Face Pressure from South America
Tune in for an update on the wheat an ethanol markets.
Could India Grain Production Lift the Markets?
The markets rallied sharply yesterday on the back of a dollar sell-off and concerns about India grain production.
In the overnight session the grains are trading slightly lower with corn down 3/4 of a cent, soybeans down 4 1/4 cents and wheat down 1 1/4 cents going into this morning’s pause in trade. Crude oil is down $1.04 this morning and the U.S. dollar has rallied back nearly 1/2 a percent from the sell-off yesterday. ADP numbers, which are generally used as a leading indicator for non-farm payrolls, were released this morning showing payrolls grew to 200,000 jobs in May, up from 169,000 jobs reported in April. ADP payrolls were better than expected and provided strength to the U.S. dollar this morning.
Yesterday, the rally was mostly fueled by a sharply weaker dollar primarily due to the anticipation of the ADP report and an improved tone toward the Greek debt situation. However, concerns about the intensity of the Indian Monsoon season played a role in the grain rally yesterday as well. Yesterday, India cut its forecast of this year’s monsoon to 88 percent of the long term average. If this comes to pass, this will have a huge impact on India’s grain production. Typically, a monsoon that is 90 percent of normal is considered a drought year.
According to the most recent WASDE report, India is forecast to produce 90 million metric tons of wheat. However, other organizations such as the India Pulses and Grains Association have forecast output to fall to 80 million metric tons. It has been wet in India throughout March and April but recent dryness and exceptional heat has sapped the moisture from the soil making it all the more important for the June-September rains to return.
Support for Grains Across the Board
Even with strong support Cody looks at whether or not these prices can be sustained.
Winter Wheat conditions decline in Texas and Colorado
Winter Wheat rated good to excellent fell by 1 percent throughout the U.S. in the latest crop progress report issued out on Monday.
In the overnight session the grains traded higher with corn up 2 1/4 cents, soybeans up 8 1/2 cents and wheat up 4 1/2 cents going into this morning’s pause in trade. The U.S. dollar index has fallen nearly 3/4 of a percent and crude oil is 55 cents higher this morning.
Yesterday, crop progress showed that all planting for corn is nearly complete with 95 percent done as of May 31st. This is on par with the average of 94 percent complete during this time of the year and up from 92 percent complete last week. The condition of the corn crop remained unchanged from last week.
Soybean planting pace jumped up 10 percentage points this week to 71 percent complete which is on par with the four year average of 70 percent during this time period. Weather looks to provide additional planting opportunities through Thursday throughout the eastern grain belt. Precipitation in the northern plains is expected through Wednesday. Next week’s weather outlook favors drier weather throughout the majority of the U.S., but will bring significant rain the east coast.
Winter wheat good-to-excellent ratings fell by 1 percentage point across for the entire crop but some states were affected more by the rain than others. Texas in particular saw its wheat rated good to excellent slide to 5 percentage points to 51 percent. Kansas and Oklahoma remained unchanged on the week but Colorado fell 4 percentage points to 49 percent good to excellent.
Bearish Wheat Trend is Sustained
Cody talks about pricing strategies for these spikes in wheat prices. Export inspections, weather, and crop progress are also covered.
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