Grains are continuing lower after this morning’s USDA report. Corn is down 9 cents and soybeans is trading 20 cents lower for the new crop contracts. This report was generally in-line with expectations for soybeans, but 2014/15 corn ending stocks were roughly 25 million bushels above trade expectations.
Old crop corn carryout was raised 100 million bushels, bringing 2013/14 carryout to 1.246 billion bushels. 2014/15 production was lower 75 million bushels as planted acres and harvested acres were lowered from the June report slightly. Yield was left unchanged at 165.3 bushels per acre. On net, supply for 2014/15 was raised 25 million bushels as a result of larger old crop carryout. Feed and residual use was down 50 million bushels and all other demand side numbers were left unchanged. On net, 2014/15 ending stocks were raised 75 million bushels to 1801 million bushels – 25 million bushels above trade expectations coming into the report. The USDA did not aggressively increase demand numbers for 2014/15 as some traders had expected coming into the report. Overall negative report for corn and we are now testing technical support at $3.80. Adding to the bearish sentiment was world corn ending stocks which were raised 5.4 million metric tons (3%) from the June report.
The old crop balance sheet was one of the items that fueled soybean selling in the wake of the USDA supply and demand report. Ending stocks jumping 15 million bushels from last month’s report catching some traders off guard and triggering selling throughout the soybean complex. The ending stocks increase was primarily driven by a negative residual number of -69 million bushels. In the last 21 growing seasons and most likely further back than that we have only seen one year with a negative residual number and that was the 2011/12 growing season when we recorded a -2 million bushel residual. We did have an increase in both crushing’s and exports by 25 million bushels and 20 million bushels respectively to eat through some of the beans but ending stocks were raised to 140 million bushels in the end. This has weighed heavily on the bull spread between August and November futures.
New crop soybean ending stocks missed analyst expectations, showing 415 million bushels instead of the anticipated 418 million bushels. The difference was not significant enough to cause any kind of bullish move and the market quickly sold into the report. The USDA revised total supply up 180 million bushels over the June report and increased demand a little over 4% adding 40 million bushels to crushing and 50 million bushels to export sales. Overall this is a report met trade expectations for 2014/15 ending stocks. World soybean ending stocks were raised by 2.43 million metric tons, but this was almost entirely made up of increases to US ending stocks. Overall a neutral report for soybeans but the argument can still be made that $10.70 futures will not hold through harvest with ending stocks at 415 million bushels for the upcoming marketing season.
With the crop good-to-excellent ratings on soybeans at a 20 year highs, yield will likely be left alone from the June report.
With the crop good-to-excellent ratings on soybeans at a 20 year highs, yield will likely be left alone from the June report. This means 14/15 soybean supply is likely to come out 169 million bushels over last month's WASDE report and up 425 million bushels from last year. The average analyst expects ending stocks to be reported at 418 million bushels which would imply that demand would increase nearly 76 million bushels from June's report, less than half the expected supply increase. Looking back over the last 14 years we would expect the majority of the demand gains to come from exports which responds more readily to large changes in supply and price. In 2006/07 when supply increased 10% year-over-year, export sales made up nearly ¾ of the demand response to the increased production. In 2009/10, another year with a 10% increase in supply, we saw export sales account for 70% of the demand response year-over-year.
Trade estimates for 14/15 U.S. soybean ending stocks do not factor in a robust response from the demand side as seen in 2009/10 or 2006/07. This sets up the soybean market for a potentially positive report on Friday following weeks of sharp selling. We feel any bounce should be used as a pricing opportunity as the long term fundamentals still look undoubtedly bearish. During the 2006/07 marketing year prices approached $9.00 per bushel and looking back to 1975 soybean prices have found support around the $9.00 per bushel level. These historical benchmarks are important as we enter a very different marketing year from what traders have become accustomed to in recent growing seasons.
Please call the office if you have questions regarding your marketing strategy as we enter harvest. Our number is 877-472-4607 and we would be happy to discuss the markets.
Today Cody and Logan discuss the spread between old crop and new crop soybeans and what that could mean to the August soybean contract. They also dig into the expectations for Friday's WASDE report and talk about what that means to soybean demand.
Expand your horizons to include a world market view
We all have our own set of eyes and ways of perceiving everything. We tend to get caught up in our own world and think that what's in front of us is all there is ... but this is completely untrue. This spring taught me that very valuable lesson.
Mother Nature showed us her forces this year in Michigan. We came out of a hard, cold winter that we thought would never end to an unforeseeable spring. First, spring felt like winter for awhile and then we fell into a wet spell. The producers around my area started to become upset and scared about planting season. Even I was afraid for not only my father, but also for every customer I have.
As I visited farms and talked with producers, they just couldn’t see the end in sight. Beets were coming into “late” planting days, as was every other crop. A USDA report was due to come out soon and every producer in our area already knew what the outcome would be — or so we thought. The first report came out as expected, showing that almost nothing was in the ground and we were starting to get behind. But by the time the second report came out, the USDA stated that planting was in full swing and looked positive. I thought "how can this be?" I looked around and hardly anybody had even broken ground yet! What is the USDA talking about? They are nuts! Nor were our markets going through the roof like we thought they would, either. We had no crops in, yet the government was telling us things were fine and the markets stayed steady.
I truly struggled with this report, so I called a few colleagues outside of Michigan and asked about planting in their area. I told them how wet and cold our soil still was, as they proceeded to tell me that nearly all their crops were in. I was baffled! This whole scenario opened up my eyes. It forced me to take off my tunnel vision glasses and look at the big picture. I saw that we are only one part of an entire industry. Even the biggest producers in my area are but a small portion of this agricultural landscape. We need to keep in mind that just because we are struggling with weather, the whole United States may not be. For a producer to sit on last year’s crop because they just “know” that prices are going to go up with the lack of crop due to the Michigan weather is plain ignorant. We cannot simply go off of what we see in our backyards, but instead open our minds and broaden our horizons.
It's human nature to get stuck in our own world and the routine of our daily lives, but we have no reason not to take off our tunnel vision glasses. With today’s global markets, we have no choice but to keep up with the news and happenings all around us. Remember that in order for our agricultural market to continue to grow, we must open up new avenues globally. There will always be a local market, but we can't domestically use all that we grow. Thanks to research and technology, U.S. producers get more production out of our land today than we ever have in history, and this trend will have to continue because, unfortunately, there isn't any way to make more land.
As the world's population continues to grow, we even in the thumb of Michigan have to take a part in helping to feed that population. Not only is this the right thing to do, but it also opens up our local markets to the world. I have never met a cash crop farmer that doesn’t absolutely love to watch the markets on the board of trade go up! This can't happen without keeping the global perspective in mind. Our local markets alone will not get our producers the prices they would like. In my opinion, anyone who is not willing to open their minds to new ideas will be left in the dust. The agricultural world is on a speed train that is flying fast, throw off your tunnel vision glasses and jump aboard for the ride!
Multiple international tenders were announced on Monday morning
Alert: Grain markets open at 8:30 central time this morning
Rain over 4th of July holiday was mixed, with majority of the grain belt receiving small amounts of precipitation. Michigan, Missouri and Nebraska saw the heaviest rain with some areas receiving 1 to 3 inches. The 6 to 10 day outlook projects a drying pattern developing over the central and northern grain belt, while Indiana and Ohio will continue to see precipitation. Crop progress and conditions will be updated this afternoon by the USDA and few changes are expected following a week of good growing conditions. Last week the USDA projected 75% of corn and 72% of soybeans rated good to excellent.
There were three notable tenders on the international market this morning with Jordan issuing a tender to buy 100,000 metric tons of optional origin hard milling wheat, Turkey issuing a tender to purchase up to 235,000 metric tons of milling wheat as well as 200,000 metric tons of feed barley and the United Arab Emirates issuing a tender to purchase 100,000 metric tons of corn along with 30,000 metric tons of feed barley and 15,000 tons of soymeal.
There has been some talk over the weekend that U.S crushing facilities have been looking for South American soybeans for August and September delivery. Last week we did observe basis at river terminals and crushing facilities outperformed the rest of the market significantly, increasing 6 cents from June 25 to July 2.
Corn and Soybean Basis Diverge in the Wake of June 30th Planted Acreage Report and Quarterly Grain Stocks
This week we have seen a divergence in corn and soybean basis. Corn basis for spot delivery has decreased 2 cents on average for the week ending 7/2/14 while soybean basis increased 2 cents on average throughout the U.S. during the same time period. The largest basis changes occurred for premium soybean facilities such as crushing plants and for terminals along the river. The roll from the July contract into the August or September contracts have played a big role in the basis landscape this week.
Soybean basis along the river improved an average of 6 cents this week to help entice grain out of farmer bins after soybeans futures for the August contract sold off 47 cents in the last seven days. Cash movement has been slow as farmers remain uneager to sell into the weakness following the bearish June 30th planted acreage report and quarterly grain stocks report. Soybean crush plants also bumped their basis by 6 cents on average throughout the country.
Shipping delays continue to be problem along the river. This week the river continues to have delays as a result of high waters. Continued rains in that region have caused a number of lock closures and are likely to stop barge movement between Bellevue, IA and Clarksville, MO. The closures began on June 27th at New Boston, IL and should affect Clarksville, MO by July 7th. It is unknown how long these delays will last.
Corn basis at ethanol plants declined 1 ¼ cents this week in line with the country average as basis along the river took the biggest hit, dropping -4 ½ cents.
Summer's storms have been frequeent and powerful in the Corn Belt over the past few weeks. Few places felt the impact as much as Pilger, NE, where two tornadoes touched down side by side, killing two and sending at least 19 more to the hospital. Around 75% of this small farming town was damaged or destroyed, including the local grain co-op. The storm produced four tornadoes altogether, but strong adjacent tornadoes are a rare meteorological event. The town's people are thankful that more were not hurt, and though it will take time, they plan to rebuild what was lost.
General Mills yearly fiscal results came in lower than last year, crushing analyst expectations. With the release, General Mills announced that it would be making cut backs in order to become more efficient and increase earnings, but the details of the plan were not made clear.
Cargill’s new feeding program is said to increase the likelihood that piglets will survive by as much as 6%. They do this by focusing on the special needs of piglets in the first 28 days of life, where the mortality rate can be up to 18%. The program maximizes the piglets’ feed and nutritional intake and has shown effectiveness in weight gain and overall livability in testing. With the cost of pork rising and PEDv still running rampant, producers need every advantage to keep piglets alive.
The American Feed Industry Association asked for the feed industry’s exemption from the Food Safety Modernization Act, and based on comments by the Food and Drug Administration, may have gotten it. They argued that the original intent of the law was designated for human food products and was never intended to be applied to animal feed or pet food.
By filing a $2 billion shelf registration with the Securities and Exchange Commission, CHS, Inc. has given itself fiscal leeway for upcoming business opportunities. This statement will allow the company to sell up to 2 billion of its Class B cumulative redeemable preferred stock over the next three years. Though statement has been filed with the SEC, it has not yet become effective.
Well, those are the top five. I want to remind you to email me if you have any story ideas, comments on what news you want to hear about, or just to say hey. Subscribe to Industry Watch, follow us on Twitter or like us on Facebook for all the latest news in the industry.
Export sales came out within analyst expectations today for corn and soybeans. However, wheat provided a bit of a surprise.
ALERT:Grain Markets close atnooncentral today, markets re-open at8:30 AM on 7/7/2014
Corn and soybeans have finally found bottom after 2 days of follow-through selling. Overnight corn futures are up ½ cent, soybeans up 3, and Chicago wheat up 3.
Export sales were released this morning showing that old crop corn and soybean sales met expectations while wheat sales came in better than expected. Despite meeting analyst expectations this week the 290,000 MT of 13/14 corn sales and 40,600 MT of 13/14 soybean sales wasn’t enough to move either grain any further ahead of pace to meet USDA forecasts. According to our models, corn slipped to 137 million bushels ahead of pace, down 7 million bushels from last week’s projections. Our soybean models also slid 6 million bushels to 102 million bushels ahead of pace to meet USDA expectations. New crop sales for both corn and soybeans were adequate with both grains recording sales within expectations. Wheat sales of 567,500 MT beat analyst expectations with a significant amount of sales going to Brazil. Strong wheat sales may provide some support to the market which has experienced hard directional selling since the beginning of May. The USDA issued an announcement after the export report was released that a one day reportable sale of 176,000 MT of corn was sold to Egypt for new crop delivery.
Port workers in Argentina have begun an indefinite strike at the key grain terminal of Rosario. Argentina is the world’s number 1 exporter of soymeal livestock feed and third biggest supplier of corn. U.S. soymeal prices are currently leading the soy complex higher, helped out by the Argentinian news. South American port strikes are typically short lived and will not provide lasting support to the soy complex.
Yesterday, we saw some international tenders announced from a corn processing association out of Korea for 55,000 metric tons of food grade corn and a Taiwan sugar corporation looking to buy 20,000 metric tons of U.S. corn and 15,000 tons of soybeans to be sourced from either the United States or South America.