What Surprise will the February USDA Report Hold?
Here are the analyst expectations for the February WASDE report and what traders will be paying close attention to.
In the overnight session the grains turned negative with corn down 1 ½ cents, soybeans down 2 ¼ cents and wheat down 3 ½ cents on the week. The dollar index is trading higher this morning and crude oil is trading slightly lower. This morning at 11 AM CST the USDA will release their February Supply and Demand report.
Analysts are expecting a 2 million bushel increase to both corn and wheat ending stocks, while soybean ending stocks are expected to decline 12 million bushels to 398 MBU carryout. Soybean export sales continue to run well ahead of pace, building traders’ expectations that the USDA will revise export sales higher in this month’s report. Looking at the last five February WASDE reports we have seen the USDA revise ending stocks on average 56 bushels lower for corn and 9 bushels lower for soybeans.
South America will be highly focused on this report as harvest begins to pick up pace in the southern hemisphere. Some traders believe that revisions in Brazil and Argentina production will occur in next month’s WASDE report with such little harvest data available at this time. However, January was an exceptionally dry month for the northern part of Brazil providing 40 percent less moisture than normal over the last 30 days. With the precipitation significantly less than normal it is likely we see at least a minor revision in production in South America. The average analyst expects Brazil soybean production to be cut to 94.67 million metric tons, and corn production to be cut by nearly a half million metric tons. These production cuts will most likely be offset with increases in Argentina corn and soybean production, with the average analyst expecting 22.54 MMT and 55.58 MMT respectively.
In the overnight session Australia increased their 14/15 wheat crop estimates to 23.61 million metric tons, up from 23.22 million metric tons in December. Texas winter wheat condition also improved this week with 44 percent of the crop rated good-to-excellent up from 42 percent a week before.
Grains Trade Slightly Higher
Today Cody discusses export expectations, ending stock expectations, and South American production. Tune into tomorrow for a break down of the USDA Supply and Demand Report.
USDA Report Expectations
Will tomorrow’s USDA Supply and Demand report move the market? Here are the expectations.
In the overnight session corn soybeans and wheat are all trading slightly lower with corn down 1 ½ cents, soybeans down 1 ¼ cents and wheat down 3 ¼ cents. The U.S. Dollar index and crude oil are both trading higher this morning. Today the market will be positioning for the release of the February 10th USDA Supply and Demand report.
The average analyst guess anticipates an increase in corn and wheat ending stocks. In a Reuters poll of 20 analysts, corn ending stocks was seen increasing two million bushels from the January forecast to 1.879 billion bushels. Wheat ending stocks were seen increasing two million bushels as well to 689 million bushels of carryout. Analysts are expecting a decline in soybean ending stocks by around 12 million bushels to 398 million bushels.
Traders will be focusing on any South American revisions to corn and soybean forecasts as harvest begins to pick up pace in the southern hemisphere. Analysts are expecting both Argentina corn and soybean production to increase by a half million metric tons, while Brazil production is expected to decline. The average analyst guess expects Brazilian soybean production to shed .8 million metric tons from the January forecast due to the dry conditions in the northern part of the growing region. Brazil corn production is also expected to decline .5 MMT to 74.56 million metric tons.
Wheat prices bounced from a low last Monday of $4.92 as a result of a strong macro move in the outside market on Tuesday and talks that Egypt might announce a tender for U.S. wheat as a way to take advantage of a special $100 million dollar credit GASC has at its disposal. Price action on Friday was volatile with some traders getting nervous with no signs of Egyptian buying interest.
Weekly Wrap Up
Tune in for a review of Tuesday's rally and hear Cody break down nationwide basis changes.
Weekly Cash Comments
Weekly Market Wrap Up February 06, 2015
Grain basis was mostly stronger on the week even with futures prices trying to rebound off of recent lows. For the week ending February 5, spot corn basis was up 1 cent a bushel while spot bean bids advanced 2 cents on the week.
For corn, the action in basis continues be mostly playing out along river terminals. A combination of strong export sales and falling barge freight have helped keep basis levels moving higher at river markets in recent weeks, and this week saw average spot basis at river terminals jumping 5 cents a bushel. For ethanol plants, basis levels as a group were on par with the US average posting a modest 1-cent advance. Ethanol production for the week was down 30,000 barrels per day bringing the weekly average to 948,000 barrels per day. Ethanol stocks climbed again this week by 355,000 barrels to 20.99 million barrels.
In soybeans, export business has begun to take a down turn as China buying has dried up. River terminals were fractionally lower this week pressured by a 6-cent loss at the Gulf export market. For crushing plants, basis levels actually improved 3 cents a bushel as farmer selling has all but dried up in the past 6 weeks thanks to the slide in futures prices.
New-Crop 2015 Average Basis by State
State Avg WeeklyChange YearlyChange Avg WeeklyChange YearlyChange
IA -43.8 0.1 -2.7 -66.2 0.1 -2.0
IL -36.6 0.3 -2.8 -36.0 0.4 -10.2
IN -31.8 0.4 -1.1 -35.0 -0.1 -2.6
KS -29.6 0.2 0.2 -84.7 -0.1 -5.4
MI -50.8 0.6 0.6 -59.7 0.0 6.3
MN -52.9 0.2 -2.1 -68.4 0.4 -2.1
MO -43.4 0.4 -9.1 -57.6 -0.1 -11.6
ND -73.7 0.3 -6.5 -98.4 0.0 -14.2
NE -45.7 0.7 -5.9 -77.8 0.5 -5.2
OH -39.3 0.5 -1.4 -46.4 0.0 0.8
OK -12.8 0.8 6.8 -84.8 0.0 -14.0
SD -70.8 0.1 -11.7 -81.8 0.6 -3.4
WI -42.1 0.3 -1.1 -59.4 0.2 0.5
Grains were higher in the Overnight
Wheat led the advance while corn and soybeans also came in higher.
Grains were higher overnight led by wheat which posted a 5-cent advance; corn was up 2 while soybeans came in 3-cents higher.
Wheat has found continued support thanks to news Egypt’s GASC may be in the market for US-only SRW wheat. However, the decision to buy US-only wheat may not be strictly a result of better prices. Instead, Mamdouh Abdel Fattah, vice chairman of the General Authority for Supply Commodities (GASC), said Egypt has a special $100 million credit line the United States made available to the Egyptian government in recent years for purchases of U.S. wheat. He went on to suggest "This has been an option for us for some time, so if the prices are right and we feel the need to use that to buy U.S. wheat, we will.” Overall, however, US export business remains slow. Thursday’s weekly US sales report showed only 397,000 MT. On Thursday, EU showed a record high week of 1.674 MMT, besting the previous record in 2010 of 1.03 MT
For beans, the Buenos Aires Grains Exchange said on Thursday that Argentina should produce a record-high soybean crop in the 2014/15 season of 57 MMT, giving its first harvest forecast for this crop year. That estimate is quite a bit higher than the latest USDA forecast of 55 MMT.
In the corn market, Thursday’s export sales were at the low end of expectations but still coming in relatively strong at 844,900 MT this week. Although sales slowed from last week, corn bookings are still running 2.6 MMT ahead of pace to meet the USDA’s expectations. At the National Cattlemen's Beef Association conference in San Antonio, Texas, meteorologist Art Douglas, a professor emeritus in the Dept of Atmospheric Sciences at Creighton University, says cool weather will likely delay U.S. crop planting in the spring. He says the U.S. will go through US corn pollination with cool weather and then temps will heat up in August. At the same conference, CattleFax projects this year's U.S. corn yield will be in the low 160s, with production of around 13.3-13.5 billion bushels.
Export Sales Helping Grain Prices?
Tune in to hear Cody break down the export sales report and discuss Egypt wheat tenders.
Are todays export sales enough to fuel higher prices
Export sales this morning were mixed, will they be enough to fuel higher prices?
In the overnight session corn is up 1 ¾ cents, soybeans is up 5 ¼ cents and wheat is trading 5 cents higher.
Export sales were mixed this morning with soybeans booking 489,700 metric tons this week which was on the high side of analyst expectations. Soybean sales fell 35 percent week over week, but have booked 94 percent of total export sales forecast by the USDA in the January 12th crop report. Wheat sales came in a bit lighter than expected this morning booking only 397,600 metric tons compared to expectations of between 300-500 thousand metric tons. Wheat sales declined 27 percent week over week and continues to struggle gaining a competitive edge on the global market. Corn sales were reported at 844,900 metric tons this week, which was on the low side of analyst expectations ranging between 800-1,000 thousand metric tons. Although corn sales declined 12 percent from last week, sales are still ahead of the seasonally adjusted pace to meet USDA expectations by 2.6 million metric tons. Corn has booked 72 percent of anticipated export sales.
Yesterday ethanol production showed a decline in weekly production by 30,000 barrels per day bringing the weekly average to 948,000 barrels per day. Ethanol stocks climbed again this week by 355,000 barrels to 20.99 million barrels. In the face of rising ethanol stocks ethanol production could continue to decline in the coming weeks. Despite the decline in stocks this week ethanol production is still up 5.6 percent over last year at this time.
Egypt may utilize a special $100 million dollar credit line from the United States to purchase U.S. origin wheat. This morning Egypt’s GASC stated that they may announce some tenders for U.S. Wheat only soon.
Rains continue to expand into the northeastern growing regions of Brazil and will likely continue into the beginning part of next week. The rains are expected to ease the dry concerns but not eliminate them. Scattered showers may also provide some relief to the north in the 11-15 day forecast.
Grains Slide Back
Cody discusses ethanol production numbers, export sales expectations and what drove the markets lower.
Grains Pause in a Slow overnight trade
Will grains continue to rise? Or is this a golden opportunity for producers to take advantage of sharply higher prices following Tuesdays rally?
In the overnight session corn is down 2 ¼ cents, soybeans are down 5 ¾ cents, but wheat has been able to hold onto overnight gains of 2 ¼ cents. The dollar index has found some support in the overnight and turned back higher while crude oil turned lower on news that crude stocks rose more than 6 million barrels last week.
Informa economics revised their South American forecast higher increasing both corn and soybean production in Argentina by 1 million metric ton to 23 MMT and 57 MMT respectively. Informa left Brazilian soybean production estimates unchanged at 93.5 million metric tons but increased corn production to 72.8 million metric tons. Further increases in Brazilian soybean production seem unlikely with the northern growing region still struggling with significant dryness.
Ethanol production numbers will be announced mid-morning and may start to show signs that crush margins are beginning to weigh on overall ethanol production. Yesterday, Acher Daniels Midland said ethanol producers will have to cut output amid high stocks and stagnant demand. Ethanol production remains 5.6 percent ahead of last year’s pace while the USDA expects only a .8 percent increase year over year.
StatsCanada announced this morning that total wheat stocks were at 24.82 million metric tons which is down 13.5 percent from a year earlier and right on par with the average trade guess of 25 million metric tons. Canola Stocks were 11.10 million tons as of December 1st which was higher than the average guess of 10.7 million metric tons. Barley stocks were above the average trade estimates with 5.38 million metric tons recorded at the end of the year compared to expectations of around 4.9 million metric tons.
China offered 40,270 metric tons of U.S. soft winter wheat this week in an auction and ended up selling only 6.1 percent out of state reserves a decline from 30 percent that was sold the previous week.