Weekly Cash Comments
Weekly Cash Commentary for week ending October 9th
Grain basis was unchanged this week for both corn and soybeans as flat futures prices and slow farmer selling during harvest keep the markets mostly in check.
Futures saw little action this week as early week gains were erased by the end of the week as a tug of war continues between bulls and bears. Production is expected to be cut at the end of the week in USDA’s monthly supply and demand report, but at the same time export business especially for corn continues to be somewhat limited.
For spot basis, there were no significant moves this week as basis stayed mostly flat. For both corn and soybeans, processor or end-user bids fell a bit on the week, but at river terminals basis level found a bit of strength. However, at the Gulf export terminal both corn and beans came under pressure losing 6 and 8 cents a bushel on the week.
Grains Recovered some losses in the Overnight
Grain markets are looking for a slight drop in corn and soybean production from USDA this morning
Grains recovered some of their losses overnight as traders await the latest USDA crop supply and demand forecasts released later this morning at 11 am CDT. In outside markets, crude oil rallied above the pivotal $50 a barrel mark for the first time since July, while S&P futures were up slightly in the night session.
Grain markets are looking for a slight drop in corn and soybean production from USDA this morning with average analyst estimates coming in at 13.504 BB versus USDA in September of 13.585, and soybeans at 3.908 BB versus USDA in September of 3.935 BB. Ending stocks are also expected to fall slightly in this morning’s report.
2015/16 U.S. Crop Production
Oct Expectation Oct Range USDA Sept
Corn 13.504 13.28 – 13.79 13.585
Soybeans 3.908 3.83 - 3.98 3.935
2015/16 U.S. Ending Stocks
Oct Expectation USDA Sept
Corn 1,534 1,592
Soybeans 414 450
Wheat 819 875
In overnight news, Ukraine may reduce winter grain sowing acres for the 2016 crop by up to 30 percent due to excessively dry weather across most of the country, a senior weather forecaster said on Friday. For this year’s 2015 corn crop, Ukraine output may decline to 23 MMT versus 25.9 MMT in 2014.
In export news, Algeria bought 675,000 MT of optional origin wheat for prices ranging from $202 to $202 a MT, while Egypt was also expected to announce a purchase of wheat later on Friday.
S&P Futures (ESZ5) were higher on Friday closing out a solid week as minutes to the U.S. Federal Reserve's last policymaking meeting raised expectations that the central bank will keep interest rates at record lows for longer than anticipated. Those minutes from the Fed's September policy meeting are the main driver in markets as they showed officials worrying over low inflation amid weak commodity prices. Though they expressed confidence in the underlying state of the U.S. economy, traders think policymakers may be getting cool on the idea of raising interest rates for the first time in more than nine years in December and may opt to keep the main Fed funds rate at near zero percent until next year.
In oil (GCLX5 / QMX5), crude extended its gains on Friday and was set for its biggest weekly rise in over six years, on the heels of the Fed news and a private forecaster suggesting higher prices. Forecaster PIRA Energy Group issued a bullish oil price prediction on Thursday, saying oil would hit $70 a barrel by the end of next year and to trade at $75 in 2017. However, overhanging the market is a significant oversupply issue that should make it difficult for a rally to be sustained.
Corn Exports Lagging Behind
Kevin looks at few options producers have to make it through the upcoming months.
Grains were Mixed in the Overnight
Grains should mostly mark time in the coming two sessions with USDA slated to announce their latest supply and demand estimates on Friday, October 9 at 11 am CDT.
Grains were mixed overnight with soybeans a leader to the downside on a 4-cent loss while corn gave up 1 cent. Chicago wheat was trying to hold on to a 1-cent advance. In outside markets, crude oil was up $0.40 a barrel while the S&P 500 slipped 0.40 percent.
Grains should mostly mark time in the coming two sessions with USDA slated to announce their latest supply and demand estimates on Friday, October 9 at 11 am CDT. For corn, analysts look for US production at 13.504 billion bu (vs USDA Sept 13.585); yield 167.1 (USDA Sept. 167.5), harvested acres 80.826 million (USDA last 81.101). For soybeans, the average expectation of USDA’s production figure was 3.908 billion bu (vs USDA Sept. 3.935), yield 47.2 (USDA Sept. 47.1), harvested acres 82.914 mln (USDA last 83.549).
In global supply news, USDA’s attaché in Brazil expects farmers there to increase area to a record Brazilian soybean crop of 97 MMT, which matches USDA's current official forecast. However, in Argentina the 2015/16 soybean production area is unchanged at 20 million hectares with production forecast at 57 MMT.
USDA’s weekly export sales report showed little variation from expectations this week. Soybeans came in at the high end of expectations with weekly net sales of 1,284,600 MT while corn came in just below expectations with weekly sales at only 519,700 MT. Wheat did improve from last week’s disappointing sales to hit 288,200 MT but was in the middle of analyst expectations.
U.S. stock-index futures slipped, with the Standard & Poor’s 500 Index (ESZ5) near a seven-week high, before the release of minutes from the Federal Reserve’s latest policy meeting and earnings from Alcoa Inc. A report today showed filings for unemployment benefits declined last week to the lowest level since mid-July, extending a run of applications near decade lows that shows dismissals remain in check. Jobless claims fell by 13,000 to 263,000 in the week ended Oct. 3, the fewest since July 18, according to the Labor Department. The median forecast in a Bloomberg survey called for 274,000 applications. The benchmark S&P 500 reached its highest level since Aug. 20 yesterday, at the top end of a range the index has traded in since bottoming at 1,867.61 on Aug. 25.
Crude (GCLX5 / QMX5) was up in the overnight trying to recover losses from yesterday’s news of higher stocks. U.S. commercial crude inventories increased by 3.1 million barrels last week, maintaining a total U.S. commercial crude inventory of 461 million barrels. The commercial crude inventory remains near levels not seen at this time of year in at least the past 80 years.
USDA WEEKLY EXPORT SALES (in thousand metric tons)
Weekly Net Sales Expectations
Corn 519.7 550-750
Soybeans 1,284.6 700-1,200
Wheat 288.2 175-375
Lower Expectations for the Upcoming WASDE
Cody reviews expectations for a few of the big reports coming up.
Grains Nearing Resistance
The grains are nearing resistance in the charts. Can corn and wheat continue marching higher?
The grains are moving higher with corn up 3/4 of a cent, soybeans up 6 cents and wheat up 3 1/2 cents this morning. The outside markets are mostly supportive with the dollar unchanged, the E-MINI S&P up .61 percent and crude oil up 48 cents this morning.
The grains have been drifting higher over the last couple days but be wary as corn and wheat near resistance levels. Corn resistance at $4.02 could be relatively potent if corn has the momentum to test it. The resistance level was a gap on July 27th and was unsuccessfully tested back on August 10th. If prices can close above that price level we could see further short covering added to this rally. Wheat resistance is at $5.33 ¼ cents which was also a high back on October 10th. With wheat and corn only cents away from testing these resistance levels both corn and wheat could find it hard to continue the climb higher in today’s session.
The Midwest harvest should be mostly uninterrupted over the next couple weeks. The Planalytics 6-10 day forecast shows 50-60 percent drier than average weather throughout the heart of the grain belt. The 8-14 day forecast also shows no significant moisture entering the Midwest which will provide a large window to progress through the bulk of harvest.
Wheat Continues to Grind Higher
Cody looks at whats causing wheat to move higher and whether the gains can be sustained.
Corn Looks to Move over $4
Corn prices look to move over $4 as prices break from consolidation at the 100 day moving average.
In the overnight session the grains traded a bit higher with corn up 1 3/4 cents soybeans down 1/2 a cent and wheat up 4 1/2 cents. The outside markets are mixed with the U.S dollar trading .22 percent lower, E-Mini S&P futures .1 percent lower and crude oil up 41 cents this morning. On Friday the USDA will release its October Supply and Demand report.
Crop progress was reported yesterday after the market closed and showed that corn harvest was behind analyst expectations with only 27 percent of the crop harvested below the four year average of 32 percent complete. Analysts were expecting to see corn harvest advance to at least 30 percent complete this week. Soybean harvest progressed strongly last week with 42 percent of the crop rated good to excellent, beating analyst expectations of 41 percent and ahead of the 4 year average of 32 percent harvested. Soybean harvest jumped 21 percent this week. Crop conditions remained steady for corn with 68 percent of the crop rated good-to-excellent. Soybeans on the other hand jumped 2 percentage points in the good-to-excellent category to 64 percent.
Export inspections were strong for soybeans on Monday providing strong support for the oilseed. For soybeans export inspections totaled to 1.1 million metric tons last week which was well above the expectations which ranged from 450,000-600,000 metric tons expected by analysts. Corn inspections disappointed with 469,697 metric tons inspected for export and wheat met expectations at 557,109 metric tons.
Keep a close watch on Corn which is breaking out of its consolidation pattern on the 100 day moving average. At Grain Hedge we believe it is quite likely that we retest $4 and probably move even higher based on the technical trading of the grain. Remember, the gap at $4.02 will likely act as resistance in the near future.
Export Inspections Lend Strength to Soybeans
Cody breaks down world news, technicals, and weather to see if prices can continue to increase.
Grains Higher Monday Morning
Wheat is trading higher Monday morning with dryness concerns in Australia and the Black Sea region.
In the overnight session the grains traded higher with corn up 1/2 a cent, soybeans up 3 3/4 cents and wheat up 3 cents. The outside markets are mostly supportive with the U.S. dollar lower by a fraction of a percent, the S&P trading marginally higher and crude oil up 56 cents this morning. Traders are anticipating the Friday release of the USDA October Supply and Demand Report.
Wheat continues to move higher on dryness concerns in Ukraine and Russia. Both countries precipitation is running roughly 40 percent behind normal and forecasts of dryness and cold weather over the next 10 days continues to help support under wheat.
Egypt’s GASC purchased 60,000 metric tons of wheat from Ukraine and another 60,000 metric tons of Russian wheat with an average price of $199.72 dollars per metric ton.
Weather will remain mostly clear throughout this week with Thursday bringing some showers to the grain belt. The 6-10 day forecast shows drier than normal conditions throughout the majority of the grain belt with Ohio showing slightly wetter conditions. The 8-14 day forecast continues to bring dryness throughout the Midwest providing little opportunity for weather to disrupt harvest in the near term.