Grains Higher on Falling Dollar
The grains are trading higher today as the dollar continues its slide following the FOMC meeting that removed the chance that the first rate hike would occur in June.
In the overnight session the grains moved higher with corn up 4 1/2 cents, soybeans up 6 3/4 cents and wheat up 6 1/2 cents going into this morning’s pause in trade. The U.S. dollar is pulling back this morning continuing the sell-off on Friday. Corn is currently trading at $3.89 near its 50 day moving average. Crop conditions reports will be released for some the plains states later today.
Over the weekend some precipitation helped out central to eastern Texas, but that was not enough to provide meaningful relief for the drought that is focused on the panhandle of Texas and Western Oklahoma. Dryness looks to continue over the next two weeks with only expectations for light scattered showers. The Delta was able to dry a bit over the weekend providing some opportunity for seeding after excess moisture has slowed fieldwork recently. The weather should remain favorable in the far south for the remainder of the month with showers expected to return in April.
China has turned to Ukraine and away from the U.S. to source corn. In January only 13,663 metric tons of U.S. corn was imported into China which was down 93 percent from last year. However, Ukrainian corn imports have surged in February to 574,000 metric tons, up nearly 200 percent from last year.
U.S. Dollar Decrease Proves Helpful to Grain Prices
Cody and Kevin break down the move higher and discuss weekly basis changes and Informa numbers.
Weekly Cash Comments
Cash Commentary for week ending March 20
Grain futures came under pressure this week as US dollar strength and slow export business took its toll on the market. In the cash market, there was little movement in basis by grain buyers as a whole with U.S. average soybean basis unchanged for the week while corn basis gained only 1-cent on average across the country.
Barge rates were on the rise this week especially along the IL & MS River where gains of 10 cents or more per bushel were fairly common for barge costs. As a result, basis levels in these areas were off fairly sharply. For corn, Gulf export bids were up 4 cents a bushel which helped to blunt some of the basis declines upstream along the river system. For ethanol plants, basis gains were better than the overall U.S. average gaining 2.25 cents a bushel this week. Especially strong were some plants in the Western Cornbelt were gains of 5 to 10 cents were fairly typical at some key plants.
For soybeans, it was another week of lackluster movement in basis with U.S. average basis sitting at -43K, virtually unchanged since the start of the month. At the Gulf, export basis was up 8 cents a bushel, but higher barge costs offset this gain putting river terminal bids under pressure by 2 cents a bushel. For soybean plants, basis levels were mostly unchanged but some modest strength was apparent in the Western Cornbelt plants.
Will we get a Friday rebound?
The grains positive over the night session as the dollar pushes lower.
In the overnight session the dollar pulled back slightly helping grains push higher. Going into the morning pause corn was up 2 1/4 cents, soybeans were up 3 1/4 cents and wheat was up 5 3/4 cents. Keep in mind that at 10:30 CST this morning Informa will release their latest crop planting forecasts. A recent survey from Farm Futures Magazine forecast soybean acreage at 87.25 million acres, up 4.2 percent from the last year. The farm futures poll also saw corn plantings at 88.34 million acres versus 90.6 million acres planted last year.
Yesterday, the Buenos Aires grain exchange held their soybean production forecast for Argentina steady at 57 million metric tons. The Ag Ministry did the same, keeping their forecast at 58 million metric tons compared to the March WASDE report which is looking for 56 million metric tons of soybean harvested in Argentina this year. Over the last two weeks temperatures across Argentina have been above normal putting some strain on the southern growing regions which missed out on the increased precipitation throughout February and early March. Overall there is still very little concern over the crop size in Argentina.
Dryness in the plains continues to provide a reason for traders to cover short positions. The latest drought monitor shows parts of the Texas panhandle and western Oklahoma in “Extreme Drought” with only minor relief expected over the next 30 days. Scattered light showers of 1/4 inch or less was seen across the plains yesterday with some 1/4-1” inch totals observed along the Kansas and Oklahoma border. However, the forecast turns drier over the next 10 days with only chances of light and spotty relief in the 11-15 day forecast.
Export Sales Breakdown
Cody goes in depth about why analysts are expecting a decline and flattening of export sales.
Dollar Triggers Overnight Volatility in Grains
The U.S. dollar traded sharply lower following the FOMC minutes yesterday triggering the grains to jump in the first few minutes of the overnight session.
The overnight session saw significant volatility with the U.S. dollar selling off sharply following the FOMC statement and then recovering in the overnight to an index level of 99.20. Corn, soybeans and wheat all gapped higher in the opening 5 minutes of the night session and spent the remainder of the night backing off of those gains. Corn went into the morning pause unchanged, soybeans are up 1 1/2 cents and wheat gained 2 1/4 cents in the overnight session.
Yesterday, the FOMC issued their latest statement which indicated that a rate increase will be unlikely in the April meeting. The statement issued announced that they will make a rate hike after they are “Reasonably Confident” inflation will move back to the 2 percent target and after further improvement in the labor market. The dollar traded sharply lower following the statement as traders viewed this as continuation of extremely low interest rates and the delay of any interest rate hike that was expected in the near future.
Export sales were within analyst expectations for soybeans and wheat, but on the low side of expectations for corn. Wheat booked 391,900 metric tons for the week ending March 12th, up 12 percent from the previous week. Corn sales were reported at 502,300 metric tons up 20 percent from last week but on the low side of expectations which ranged from 500,000-700,000 metric tons. Soybean sales fell within analyst expectations with 342,000 metric tons booked for 14/15 delivery. Expectations for soybean sales ranged from 250,000-450,000 metric tons.
Yesterday, the EIA announced that ethanol production increased 3,000 bpd to 947,000 barrels per day. This is the second consecutive week of ethanol production gains. This year’s ethanol production is now up 5.7 percent compared to last year’s production during the same time period. In the March WASDE report the USDA lowered its corn used for ethanol to only a 1.3 percent increase year over year. Recently, there has been talk of Brazilian ethanol being imported into the U.S. due to the strong shift in currency rates. This news is a negative sign for the ethanol and corn markets.
Market Reaction to FOMC Statement
Cody and Kevin break down the FOMC statement and discuss ethanol production
Grains Bounce Overnight
The grains recovered a couple pennies in the overnight after hard selling during yesterdays session that chart support levels broken.
In the overnight session the grains rebounded a bit after breaking through key support yesterday. The dollar index remains steady and crude oil has fallen a dollar overnight. Corn is up 2 1/4 cents, soybeans are up 6 cents and wheat is up 2 1/2 cents this morning. Today the FOMC statement will be released at 1 PM CST. Traders are watching the statement closely for indication that the first rate hike since 2006 may be near.
In the overnight, corn and soybean prices are testing the failed support levels that were broken during yesterday’s trade session. These support levels are likely to turn to resistance after failing to support prices in yesterday’s trade action. Keep a close watch on prices around 3.73 ¾ for corn and around 9.61 ¾ for soybeans.
China purchased over 600,000 metric tons of corn from Ukraine this year which is not a positive story for the U.S. corn market. China, a country which typically doesn’t import large amounts of corn, has turned to Ukraine to source its needs. In a statement made this month, China intends to double the nearly one million metric tons of corn it imported from Ukraine in 2014. In January Ukraine shipped 470,000 metric tons to China, which was well over the amount exported to China by the U.S.
Grains Feel Pressure from South American Harvest
Corn and Soybeans broke through the 2015 lows to close the day. Concerns for U.S. corn mount as China purchased 600,000 tonnes from Ukraine.
Traders Eye FOMC Meeting
The grains turned slightly lower in the overnight after selling yesterday in corn and soybeans. Wheat continues to benefit from short covering as traders focus on dry conditions in the Plains and western Russia.
The grains are trading lower in the overnight with corn down 2 cents, soybeans down 2 1/2 cents and wheat down 1 cent. The U.S. Dollar index is pulling back a fraction of a percent this morning and crude oil has slipped under $43 per barrel. Today marks the start of the FOMC meeting which will continue until Wednesday.
NOPA crush numbers showed 146.970 million bushels of soybeans crushed in the month of February, the largest recorded since 2010. This figure was lower than the average analyst guess of 148.537 million bushels, but up from last year’s figure of 141.612 million bushels. The trade reaction to the report was relatively mute with little action following the release of the NOPA numbers.
Yesterday export inspections were disappointing for corn which only showed 735,311 metric tons were inspected last week for export, missing analyst expectations of between 900,000 and 1,100,000 metric tons. Soybeans and wheat both met expectations showing 583,944 and 519,592 metric tons respectively were inspected for export last week.
Wheat continued its short covering rally yesterday as the national weather service issued a “red flag” warning across the plains covering Texas, Kansas, Nebraska and western Iowa. The warning for very warm temperatures, low humidity’s and southwest winds created an environment at risk of rapid wildfire growth. The dry conditions throughout the plains have lead Kansas into dropping its weekly wheat crop rating to 41 percent good-to-excellent from 46 percent last week. Texas weekly crop report showed a one percent increase in good-to-excellent rating and Oklahoma wheat conditions declined to two percent week over week. Russian growing conditions have also been unfavorable, receiving unseasonably warm dry weather fueling crop concerns as farmers begin seeding.