October 23, 2015 | Grain Hedge Insights | Cody Bills | Views: 226

Weekly Cash Comments

Weekly Cash Commentary for week ending 10/23/2015

Grain basis was mostly muted this week as average corn and soybean basis posted fractional increases on the week.


Harvest continued to keep a lid on basis levels as last week farmers harvested another 15% of the corn and soybean crop in a 7-day period. Soybean harvest should be reaching the tail end of the season, while corn still has a few more solid weeks of cutting to go. Weather looks good for much of the Midwest, but forecasters look for Hurricane Patricia, currently off the coast of Mexico, to filter into the Upper Midwest by early next week which could stall corn harvest. The rain may not be welcome for farmers, but river depths are at low levels and are causing barge delays. Early in the week, a barge blockage north of Quincy, IL on the MS River put traffic there on hold for two days. Since being cleared, barge rates have come down precipitously in the later part of the week.


At the Gulf, export basis bids for beans were off 6 cents this week which pushed bean basis lower at river terminals by 4 cents a bushel. Conversely, basis bids for corn along the river were up nearly 6 cents a bushel. End users were mostly flat this week with both corn and soybean plants mostly unchanged on basis. Look for basis levels to start improving as we enter the later stages of harvest and farmer sales dry up on overall price weakness.

October 23, 2015 | Grain Hedge Insights | Cody Bills | Views: 245

Weekly Export Sales Better Than Expected

Grain markets were mixed overnight

Grain markets were mixed overnight with wheat stronger, and corn and beans slightly weaker to unchanged. In outside markets, S&P futures and oil were higher.


Yesterday brought a round of good demand news for soybeans, but that couldn’t stop prices from dropping over 6 cents a bushel. Better than expected weekly export sales of 2.1 MMT versus trade expectations of 1.2 to 1.8 MMT along with a USDA announced sale of 463,000 MT were positive signs of underlying demand, but overarching supply concerns won the tug of war yesterday. In Brazil, analysts are still pointing to a better than 100 MMT crop as planting season kicks into full swing.


Overnight, China’s central bank cut its benchmark lending rate and reserve requirements for banks, stepping up efforts to cushion a deepening economic slowdown. The one-year lending rate will drop to 4.35% from 4.6% effective Saturday the People’s Bank of China said on its website on Friday. Reserve requirements for all banks were cut by 50 basis points, with an extra 50 basis point reduction for some institutions. The PBOC also scrapped a deposit-rate ceiling. This provided some bullish response in overnight trading for commodities helping to ease fears about China’s slowdown.


Corn continues to flounder from lackluster demand. Thursday’s weekly sales report underscored the bull’s dilemma – export sales for the week totaled a paltry 248,000 MT versus  trade expectations of 450,000 to 650,000 MT, and year-to-date sales are 35% below last year, all the while USDA expects annual exports to be virtually unchanged from last year.


Oil prices firmed slightly overnight, finding support from brighter economic data and a global stock market rally after the European Central Bank signaled more stimulus. Along with China reducing its interest rate and easing monetary policies, ECB President Mario Draghi said on Thursday that new euro zone initiatives could be unveiled as soon as December to stoke the economy. 

October 22, 2015 | Grain Hedge Insights | Cody Bills | Views: 278
October 22, 2015 | Grain Hedge Insights | Cody Bills | Views: 229

Overnight Posted Positive Gains in the Grains

Wednesday saw soybeans break through and close above $9

Overnight Posted Positive Gains in the Grains

Overnight markets were generally higher with grains, stock futures and crude oil all posting positive gains.

Wednesday saw soybeans break through and close above $9 and strong demand has helped ease talks of growing US supplies.  However, the looming South American crop is a potential rally killer as well. Brazil's new soybean crop that is currently being planted is expected to produce a record 100.6 MMT, up from the 96.2 MMT in 2015, local analyst Agroconsult said on Wednesday. Planting is expected to accelerate in the coming weeks as rains are forecast to turn more frequent as Brazil moves into its rainy season, the analyst said in its first forecast of the new crop.

Industry analysts in China think the country will buy about 50 percent less corn for state stockpiles in the 2015/16 season than the previous year as local governments offer subsidies to encourage processors to use more domestic grain.  Beijing will buy 40-50 MMT of corn for state stocks during a six-month purchasing period that starts next month, compared with 83 million in 2014/15, the analysts said.

Overnight, Japan bought nearly 100,000 MT from the US of food quality wheat and 35,000 MT from Canada in a regular tender that closed overnight.  Last week, the same tender saw the US only getting 64,000 MT on the deal.

S&P futures (ESZ5) were higher overnight ahead of a host of key earnings reports and economic data. Dow components 3M, Caterpillar and McDonald's report results before the bell, while technology majors Microsoft, Alphabet, AT&T and Amazon are due to report after the close. U.S. data scheduled for Thursday includes unemployment benefits claims. The data is expected to show last week's claims increased to 265,000. Existing home sales are expected to have grown 1.4 percent to an annual rate of 5.38 million units in September.

Oil prices (GCLZ5 / QMZ5) rebounded Thursday with investors bargain hunting after oil fell to near three-week lows this week. The gains came despite mixed news on U.S. inventories, underscoring how used to bad news the crude market has become. The U.S. Energy Information Administration reported Wednesday that domestic crude oil inventories expanded by more-than-expected 8 million barrels last week. Inventories in the U.S. remain near levels not seen for this time of year in at least the last 80 years, adding further pressure to the already oversupplied global market.


WEEKLY EXPORT SALES (in thousand metric tons)

                                           Actual             Expected

Corn                                       248                450-650

Soybeans                             2,100          1,200-1,800

Wheat                                    359                300-500

October 21, 2015 | Grain Hedge Insights | Cody Bills | Views: 304
October 21, 2015 | Grain Hedge Insights | Cody Bills | Views: 193

Grains Listless in the Overnight

Corn reached a 5-week low on Tuesday.

Grains were listless overnight with little directional bias in the market. In outside markets, S&P futures recovered some of the losses from Tuesday, while crude oil printed its lowest price since October 2nd.


On Tuesday, corn reached a 5-week low at $3.72, but has since managed to move slightly higher as prices look to stabilize from a spat of selling. Harvest pressure seems to be limiting any prolonged rally and the lack of significant demand in the export market seems to be putting a lid on the rallies.


Some dryness issues in Ukraine & Russia are helping underpin the market as well. Ukraine’s ag minster on Tuesday said wheat acres there are likely to fall to 5.5 million hectares versus 6.2 that were previously expected as a result of dry conditions. In Russia, farmers have delayed winter grain sowing due to dry weather, analysts and traders said on Tuesday, signaling higher risks for next year's crop in one of the world's key wheat exporters.  A lack of rain has been reported since September by some of Russia's southern regions, the main areas for wheat exports to North Africa and the Middle East.


S&P futures (ESZ5) were modestly higher and reached their highest point since Aug 20. Earnings data for Q3 has turned out better than expected so far. Some 32 S&P 500 companies are due to post results today. Of those that have reported so far, 43 percent have beaten sales estimates while 74 percent have beaten earnings targets.


Oil (GCLZ5 / QMZ5) prices fell on Wednesday following a big build in U.S. crude inventories that fed concerns demand may not be enough to absorb one of the largest global surpluses in modern times. The American Petroleum Institute reported on Tuesday a rise in U.S. commercial crude stocks of 7.1 million barrels to 473 million barrels in the week to Oct. 16, trumping expectations for an increase of 3.9 million barrels. 

October 20, 2015 | Grain Hedge Insights | Cody Bills | Views: 230

Grains Find Support in the Overnight

Barge traffic was halted Monday on the Mississippi River north of Quincy.

Grain markets found modest support overnight as they attempt to reverse course from their 4-day sell-off. In outside markets, the US dollar & stock index futures were lower while crude oil posted modest gains.


Yesterday, better weather and sluggish exports helped push grain prices lower. Forecasts called for rain in Russia and the US Plains which seemed to alleviate fears over winter wheat planting and germination, while wetter weather in Brazil is expected to help planting conditions for soybeans. Weekly export inspections were disappointing for corn and wheat, which came in below trader expectations going into the report. But, for soybeans, export inspections beat expectations by a wide margin coming in at 2.4 MMT versus 1.2 to 1.8 MMT expected.


In cash news, barge traffic was halted on Monday on the Mississippi river north of Quincy, IL as a towboat ran aground from low water. The closure is expected to remain in place until at least Wednesday as the U.S. Army Corps of Engineers dredges the river to deepen the waterway, a Coast Guard spokesman said. The closure halted the flow of corn and soybean barges and prevented many grain elevators north of the closure from receiving the empty barges they need to continue loading out newly harvested soybeans and corn. Spot barge freight rates on some portions of the river jumped by 50 to 100 percentage points of tariff on Monday as elevators scrambled for empty vessels, traders said.


S&P futures (ESZ5) were lower overnight as investors prepared for the peak of earnings season and awaited housing data that could feed into the Federal Reserve’s interest-rate assessment. Third quarter earnings numbers from Walmart to IBM to JP Morgan have been disappointing traders of late, which has kept a lid on the recovery in stocks.


Crude oil (GCLZ5 / QMZ5) tried to hold onto positive gains overnight but oversupply and economic woes in China continue to hamper the recovery. Comments by Iran’s oil minister, Bijan Zangeneh, that the country is likely to boost its oil production by 0.5 million barrels a day in the coming months did not help prices. Industry group the American Petroleum Institute (API) will report its stocks data later today, while the U.S. government's Energy Information Administration (EIA) will release oil inventory data on Wednesday. U.S. commercial crude oil stockpiles are expected to increase by 3.7 million barrels over last week according to a Reuters survey.

October 19, 2015 | Grain Hedge Insights | Cody Bills | Views: 348
October 19, 2015 | Grain Hedge Insights | Cody Bills | Views: 263

Grain Markets were Lower in the Overnight

Wheat fell for the 4th consecutive trade session.

Markets were generally lower overnight with grain, stocks and energy all starting the week on the downside of last week’s close.


Wheat fell for the 4th consecutive trade session as favorable weather and ample stocks keep prices on the defensive. Weather forecasts suggest showers this week that should help germination in Kansas, Oklahoma and Texas, and encourage producers who have been delaying seeding because of dry soils. Overnight, Jammie Penm, chief commodity analyst for the Australian Bureau of Agricultural and Resource Economics predicted that Australia’s wheat crop would come in below 24 MMT based on dry, hot weather that has gripped the country in the past month and hampered the late-season development of the wheat crop there. USDA has Australia pegged at 27 MMT of production in their latest report issued on Oct 9th. In Ukraine, the Ag Minister there pegged the 2015 corn crop at 22.9 MMT versus USDA’s outlook of 25.0 MMT.


In South America, planting pace has picked up as Brazil's 2015-16 soybean crop is 13 percent planted, above 10 percent at this time last year but behind the 18 percent historical average. So far the growing season in Brazil has been on the dry side but rains in the coming weeks should help improve soil moisture. Brazil, the world's No. 2 soy producer and top exporter, is expected to plant a record soybean crop of more than 100 MMT, according to the government's crop supply agency Conab.


S&P stock futures (ESZ5) slipped overnight with energy stocks helping to drive the small decline, as crude oil dropped after China’s latest GDP data and fresh fears about oversupply. Asian markets closed narrowly mixed in the wake of the reading on China’s gross domestic product. Growth in the world’s No. 2 economy slowed to 6.9 percent in the third quarter, below Beijing’s 7 percent target for the first time since 2009, but above forecasts for 6.8 percent.


Oil (GCLX5 / QMX5) was off as well on the news from China. Along with slowing growth in China, data also showed that Chinese oil demand fell slightly in September, meaning the country’s year-to-date growth is running behind the International Energy Agency’s forecast. In other news, Saudi Arabia, the world’s biggest crude exporter, shipped 278,000 barrels a day less crude oil in August, trade data showed,  suggesting demand for Saudi oil is sliding as the global supply glut persists.

October 16, 2015 | Grain Hedge Insights | Cody Bills | Views: 307

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