So Where Do Prices Go From Here
After four major reports were released onto the market yesterday many producers are wondering where prices will go from here.
In the overnight session the grains bounced with corn up 3 ¼ cents, soybeans were up 7 ¼ cents and wheat trading 10 ½ cents higher going into the morning pause. This morning's trade session should be supported by a nice export sale of 105,000 metric tons of old crop corn sold to unknown destinations.
Soybeans sold off sharply yesterday after the USDA revised yield and harvested acreage higher, lifting production by 11 million bushels. Ending stocks held steady after the USDA raised the 14/15 export sales expectations. However, traders looked at the 410 million bushels of U.S ending stocks as bearish after expecting to see a 17 million bushel revision lower in yesterday’s report.
U.S production wasn't the only place ending stocks increased. Brazilian soybean production was also revised higher by 1.5 million metric tons which helped lift global ending stocks by .9 million metric tons. With the current quality of the South American crop, and a continuation of the existing precipitation profile, we could begin to see more revisions higher in South American production over the next month which would weigh heavily on the market. With the South American crop expected to reach the peak of harvest in late February I would expect to see weaker prices over the next couple months.
In Brazil, showers are expected to cover central and northwest part of the growing region which will continue to improve the crop development. The northeastern part of Brazil is still the driest region. In Argentina, rains over the weekend helped provide relief to fields after experiencing some hot and dry weather over the last week. In the overnight more rains are expected throughout central Argentina.
Corn prices were mostly stable following the report after yield was slashed to 171 bushels per acre and harvested acres were left unchanged. However, despite the decreased production, quarterly grain stocks were larger than expected revealing weaker than expected feed usage. Ending stocks were revised 121 million bushels lower providing a positive surprise for bulls. With a bullish revision in supply behind us, and demand weaker than expected in this round of reports, I am concerned prices will not be able to make new highs in the rally that began back in October. We will need to see a strong increase in demand to be the backbone behind any further rally, especially with no foreseeable threat in South American production.
Big Reports Today
Many important reports were released today. Tune in to hear Cody dissect the reports and discussed how this week's market might be affected.
January Report Expectations
The grains are eyeing the USDA's four major reports scheduled for release at 11 AM CST. Here are the expectations.
In the overnight session corn is trading down 3 ¾ cents, soybeans is down 4 ¾ cents and wheat is down 2 cents. This morning all eyes will be focused on the four major USDA reports scheduled for release at 11 AM CST.
Corn Production: Average Analyst Guess
Corn production is expected to be lowered by 58 million bushels, with yield revised .1 bushel per acre lower and a 332,000 acre decrease in harvested acres. The large gap between FSA and NASS acreage numbers is expected to narrow in this report.
Soybean Production: Average Analyst Guess
Soybean production for 2014 is also expected to see a slight decline by only 2 million bushels. Yield is expected to increase by .1 bushels per acre, but acres are anticipated to drop by 359,000. Neither corn nor soybeans are expecting a sizable revision in the production side of the balance sheet.
Note: The average analyst guess from the Reuters Poll suggests production to be lowered for both corn and soybeans. However, of the last 20 years there have been 4 record yielding crops for corn and 5 record yielding crops for soybeans. In every record yielding crop the USDA has increased its production forecast in the January report. Perhaps this January report will be no different.
January Ending Stocks Estimates
Analysts are expecting ending stocks to rise for wheat by 12 million bushels to 666 million bushels carryout. Corn and soybean ending stocks are both expected to decline in this month's report. The average analyst guess has corn expected to decline by 71 million bushels to a 1.927 billion bushels carryout and soybeans to shrink 17 million bushel to 393 million bushels as a result of strong export sales which have booked 90% of the current USDA expectation already with 34 weeks left in the marketing year.
Quarterly Grain Stocks Expectations
Quarterly grain stocks are expected to be substantially larger than last years levels at this time due to the record yields this year. If the expected corn stocks are realized, this will be the largest amount of corn stocks ever in the U.S during this time of the year. However, with grain at discounted prices in the 4th quarter of 2014 we may see a healthy amount of grain used for feed which could provide some surprise in the market.
Winter Wheat Seedings
Winter wheat seedings are expected to increase this year by 3.8% with over 500,000 acres being added to hard wheat and over 400,000 acres removed from soft wheat.
Report Expectations For Monday
Tune into GrainTV to listen to Cody and Kevin break down the analyst expectations for this report. Kevin discusses the cash market changes this week. Don't miss this episode.
Weekly Cash Comments
Corn basis was unchanged for the week on average across the US while soybean basis improved a modest one-cent a bushel.
Corn basis was unchanged for the week on average across the US while soybean basis improved a modest one-cent a bushel.
Ethanol production fell for the 2nd straight week as a normal seasonal decline starts to take hold. Although ethanol fuel prices have come down sharply in response to lower gasoline prices, DDG prices have moved higher helping to keep ethanol margins propped up. Year-to-date production is still running 4.8% ahead of the same period last year, although USDA is only factoring in a 0.3% increase in corn use for ethanol on the year. Ethanol plants as a group were up nearly 2 cents a bushel on spot corn basis this week, although must of the strength was confined to the Western Cornbelt where basis levels were up a dime at some key plants in IA & NE. At the Gulf, basis levels were off 2 cents a bushel but had little impact on upstream river terminals as basis levels were unchanged on average across river markets.
For soybeans, basis levels improved 1–cent a bushel across the US but river terminals saw a better improvement thanks to an 8-cent gain at the Gulf this week. Although soybean export business was expected to slow in the start of the New Year, weekly sales of 910,000 were better than the 500,000 to 700,000 MT expectations going into the Thursday announcement by USDA. For soybean crushing plants, basis levels were unchanged on average for the week.
Expectations for Reports on Monday
With the market eyeing the report on Monday here are the expectations for crop production and ending stocks.
In the overnight session the grains are mostly mixed with corn up 2 ¾ cents, soybeans trading 1 ¾ cents lower and wheat down by ½ a penny. Trade will be heavily focused on the reports scheduled for release at 11 AM CST on Monday. Below are expectations for Mondays report.
For the crop production report the average analyst expectation is for corn output to be lowered by 58 million bushels. The average analyst guesses yield will be revised .1 bushel per acre lower and a 332,000 acre decrease in planted acres. The large gap between FSA and NASS acreage numbers is expected to narrow in this report.
Soybean production for 2014 is also expected to see a slight decline by only 2 million bushels. Yield is expected to increase by .1 bushels per acre, but acres are anticipated to drop by 359,000. Neither corn nor soybeans are expecting a sizeable revision in the production side of the balance sheet.
Average Analyst Crop Production Expectations
Production (billion bushels) Yield (BPA) Harvested Acres
Corn 14.349 173.3 82.765
December 14.407 173.4 83.097
Soybean 3.956 47.6 83.044
December 3.958 47.5 83.403
In the January WASDE report analysts are expecting ending stocks to rise for wheat by 12 million bushels to 666 million bushels carryout. Corn and soybean ending stocks are both expected to decline in this month’s report. The average analyst guess has corn expected to decline by 71 million bushels to a 1.927 billion bushels carryout and soybeans to shrink 17 million bushel to 393 million bushels as a result of strong export sales which have booked 90% of the current USDA expectation already with 34 weeks left in the marketing year.
Average Analyst Guess: Ending Stocks
Avg. Ending Stocks Guess December
Wheat .666 .654
Corn 1.927 1.998
Soybeans .393 .410
*In Billion Bushels
For a full report on January 12th expectations take a Grain Hedge 14 day free trial by clicking here.
Very Strong Soybean Export Sales
Soybean sales continue to surprise analysts with weekly strength.
In the overnight session corn slid ¼ cent, soybeans increased 4 ¼ cents and wheat fell 3 ¼ cents. This morning another reportable sale including 118,000 metric tons of soybeans was announced for delivery to China in 14/15 marketing year.
Export sales disappointed this morning for corn and wheat with both grains weekly sales falling 57% from the previous week. Corn booked only 387,000 metric tons, well below expectations of between 600,000 and 800,000 metric tons. Corn has booked 62% of this marketing years expected sales which is ahead of the seasonal pace needed to meet the USDA’s forecast. Wheat sales came in at 151,000 which is a marketing year low and will likely affect prices negatively in this morning’s trade action. Soybeans beat analyst expectations which ranged between 500,000-700,000 metric tons by booking 910,000. Soybean sales were up 49% from last week and are well ahead of pace to meet USDA expectations. With 34 more weeks left of this marketing year soybeans have already booked 90% of USDA forecasted export sales leaving the door open for the USDA to revise expectations higher again in the January WASDE report.
Ethanol production fell 23,000 barrels per day in an EIA report on Wednesday bringing total ethanol production for the week to 949,000 barrels per day. Ethanol stocks rose to 18.85 million bushels, which is the largest ethanol stocks we’ve seen since March of 2013. Despite the decline over the past two weeks, this marketing year’s ethanol production is up 4.9% compared to 2013-14 compared to a .3% increase projected by the USDA.
Will The USDA Raise Production Numbers in January?
Tune into GrainTV to hear Kevin discuss the ethanol production report released early this afternoon and help shine light on the question "will the USDA revise their crop production numbers higher on Monday?"
Grains Mixed as Traders Eye Monday’s Report
The markets were mixed in the overnight as traders eye the three large reports scheduled for release on Monday.
In the overnight session corn fell 1 ¼ cents, soybeans climbed 2 cents and wheat fell ½ a penny. Wheat seemed to be unaffected in the overnight by the frigid temperatures that are currently moving through the grain belt. Illinois, Southern Michigan and Indiana will be the most vulnerable to winterkill with lows expected to fall to between-5 and -15 degrees this evening. In South America there has been dryness in the central Cordoba region which is expected to remain dry for the next couple weeks when showers are indicated in the forecast.
Yesterday, Informa economics released their January crop estimates at 10:30 AM CST. They lowered their soybean yield by .3 BPA to 47.6 on par with the USDA’s estimate of 47.5 BPA. Informa also lowered their production 22 million bushels to 3.969 billion bushels which compares to the December WASDE report showing 3.958 billion bushels. Corn yield was cut by 1.7 bushels per acre to 172.7 BPA, dragging down their production estimates by 68 million bushels. Informa’s production estimates are 18 million bushels higher than the December WASDE forecast. All together the market reaction to these numbers was minimal at the release.
March Soybeans now trading at 10.57 ¾ which is close to the high side of the range it has been trading in since late October. If the market moves higher this morning there should be strong resistance between 10.66 and 10.68 which were both previous highs on December 10th and 29th.
Market Mixed On Informa Numbers
Tune into GrainTV to hear Cody and Kevin discuss why soybeans was able to move higher today and what the Informa numbers mean to your marketing plan.