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.
Grains were modestly lower in the night trade with corn and soybeans off 2 cents a bushel, and wheat down 3. In other markets, S&P futures were up 0.4% while crude oil was up 1%.
Soybeans were hard hit in yesterday’s trade as news continues to be bearish from US harvest. Merchants continue to report bean yields are better than last year by 5 to 10 bushels per acre, and as yields grow, farmers are becoming more willing to make cash sales. Yesterday, FC Stone pegged the soybean crop at 3.919 BB, above their Sept outlook of 3.791 BB, but still below USDA’s Sept projection of 3.935 BB. For corn, they put the crop at 13.541 BB versus last month’s forecast of 13.457 BB and USDA’s 13.585 BB.
In international news, wheat has been moving higher thanks to dryness in Australia and Russia. However, US export business in wheat continues to disappoint with Thursday’s announcement of only 77,000 MT of wheat sales for the week compared to 250-450,000 MT expected. In South America, one private crop watcher estimates Brazil 2016 soybean crop closer to 99 MMT vs USDA of 97 MMT and Argentina closer to 60 MMT vs USDA at 57.
In stock futures, trading was higher overnight after a lower close on Thursday. Trading has been unpredictable so far this week ahead of this morning’s release of the jobs report for September. This release has taken on even more significance as Wall Street looks for signs U.S. economic strength is still intact after the Federal Reserve's decision to keep interest rates unchanged in September. Economists expect 200,000 jobs to have been added to nonfarm payrolls in September, up from 173,000 in August. The unemployment rate is forecast to remain steady at 5.1%, while year-over-year growth in average hourly earnings expected to climb to 2.4% from 2.2%.
Oil found strength this morning from ongoing fears about the escalating violence in Syria and expectations of strong economic growth domestically. The oil market was factoring in a risk premium over Syria, where Russia and the US are conducting bombing campaigns. The situation was complicated by the arrival of hundreds of Iranian troops in Syria to join a ground offensive in support of government forces, a sign the civil war is turning still more regional and global in scope. Oil is also being supported by economic optimism ahead of US data that is expected to show the creation of more than 200,000 jobs in September.
Outside Markets were higher for crude oil; S&P Futures were also marginally higher.
Grains were mixed overnight with wheat up 3 and soybeans up 2, but corn traded fractionally lower. Outside markets were higher for crude oil, gaining $0.85 a barrel or 1.9 percent while S&P Futures were marginally higher on a 0.13 percent improvement.
Yesterday’s quarterly grain stocks report had little follow through impact on market prices as inventory levels were mostly on par with expectations. The most bullish of the numbers was for wheat stock levels thanks to lower than expected spring wheat production. Wheat stocks on hand as of Sept 1 were 2,089 MB versus trade expectations of 2,149 MB. Soybeans were also lighter than expected with old-crop carryout pegged at 191 MB as compared to 205 MB. Corn was mostly on the mark as stocks were estimated to be 1,731 MB versus 1,739 MB.
Overall the report figures were deemed neutral by the trade and market participants will go back to watching crop harvest reports from the fields. So far, it would appear yields are coming in better than expected especially for soybeans. Merchants in IN & IL are saying soy yields from farmers are coming in very good and in most cases surpassing last year’s yield and in some instances reaching all-time highs.
In demand news, weekly ethanol output reported on Wednesday was up 5,000 BPD to 943,000 BPD. Overnight export news was relatively quiet with only Japan showing any noted interest in US commodities, by making a regular purchase of 128,489 MT of wheat to be sourced from the US, Canada and Australia. Weekly export sales reported this morning by USDA were better than expected for soybeans, on par with expectations for corn and worse than expected for wheat.
USDA WEEKLY EXPORT SALES (in thousand MT)
Weekly Value Pre-Report Estimates
Corn 748.2 700-900
Soybeans 2,506 1,300-1,700
Wheat 77.1 250-450
In equity markets, S&P futures (ESZ5) were up nearly 1 percent in early night trade but retreated by the end of the overnight session to only a 0.2 percent gain. Equity markets on Wednesday recovered some of their losses improving about 1.5 percent on the day but closed out the third quarter of the year with its worst quarterly performance in four years. Despite the gains, the major indexes are still set to post steep losses for the quarter with the Dow down 8.9 percent for the third quarter in its worst performance since the third quarter of 2011 when the blue-chip index tumbled 12.1 percent. The rally on Wednesday was helped by encouraging news about the labor market. Businesses added 200,000 private sector jobs in September, according to a report by payroll processor ADP.
For crude oil (GCLX5 / QMX5), prices were up sharply as sentiment was boosted by a modest improvement in economic data out of China. China’s official purchasing manager’s index, a gauge of nationwide manufacturing activity, ticked up slightly last month to 49.8 from 49.7 in August, beating analysts’ expectations. Markets were also tracking the developments in Syria, where Russia launched its first airstrikes on Wednesday. The intervention added to the uncertainty in the Middle East, the world’s biggest oil producing region.
With traders watching the Quarterly Grain Stocks number scheduled for release today here is what the farmer needs to know.
In the overnight session, the grains traded higher with corn up 3/4 of a cent, soybeans up 3 cents and wheat up 1 cent. Soybeans are trading just a few cents below the $8.90 which has held back four attempts to move higher since August 24th. After so many failed attempts, I would be surprised if this resistance level holds in the coming days. However, trade action will be mostly driven by the USDA Grain Stocks report which will be released out at 11 AM CST.
Expectations are for the quarterly grain stocks as of September first to show corn at 1.739 billion bushels which would be slightly above the September WASDE projection of 1.732 billion bushels. The average guess for soybeans is to have the quarterly grain stocks number show only 205 million bushels which would be a 5 million bushel decline from the September WASDE report. Wheat stocks are expected to be reported at 2.149 billion bushels which would be up substantially from last year when stocks were 1.907 billion bushels on September 1st.
On Wednesday the EU raised its SRW production estimates to 144.6 million metric tons, up sharply from the 140.6 million metric tons forecast last month. However the forecast for corn production declined to 58.4 million metric tons from 58.7 million metric tons reported last month.
Dryness in the FSU continues to cause concerns about germination headed into winter. Australia forecasts show no relief in sight dryness has gripped their landscape for the last month. Traders are concerned about the dryness in Australia as El Nino typically brings drought to the eastern part of the country.
This week's crop progress report showed that corn harvest had not progressed as much as traders expected.
In the overnight session, the grains are mostly unchanged with corn down 1 cent, soybeans up 3/4 of a cent and wheat trading down 4 cents. The U.S. dollar increased a fraction of a percent in the overnight and crude oil jumped 73 cents after selling off during yesterday’s session. The weather looks mostly clear with some showers later on this week. The most recent models show that planting delays seem unlikely in the short run.
The crop progress report was released at 3 PM CST on Monday and showed that corn harvest had not moved along as much as analysts expected. Only 18 percent of corn was harvested which was below the expectations of 21 percent and the four year moving average of 23 percent harvested during this time of the year. The harvest pace for soybeans advanced from 7 percent last week to 21 percent which beat expectations and is well over the four year moving average of only 16 percent harvested.
Crop conditions remained mostly unchanged with corn rated good-to-excellent holding steady at 68 percent. Soybean conditions rated good-to-excellent slipped 1 percent this week to 62 percent.
Yesterday, export inspections were strong for wheat which beat analyst expectations. Wheat recorded 651,194 metric tons inspected for export which was above the 350,000-550,000 metric tons expected by analysts. Corn met expectations by recording 809,383 metric tons and soybeans missed expectations to the low side by recording only 530,493 metric tons.
Dry weather is expected to continue in Ukraine which is running around 40 percent below the average precipitation over the last 90 days. Soil moisture levels are low and there is concern that the dryness is hurting wheat germination in that region. Ukraine’s dryness coupled with the dry forecast in Australia over the next couple weeks has wheat traders wary.
Grains were modestly higher overnight trying to rebound from Tuesday losses. In outside markets, crude oil gave up most of its gains from Tuesday to move lower in Wednesday, while S&P futures were up in overnight trade,
Grains were modestly lower overnight following Monday’s strong turnaround in prices. S&P futures were lower while crude oil was higher after Turkey shot down a Russian warplane overnight, increasing global tensions.