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.
U.S. grain markets are trying to find bottom today
Alert: Grain Markets close at noon central time on July 3, 2014.
U.S. grain markets are trying to find bottom today, two days after the June USDA report sent markets sharply lower. Coming into the morning trade break, we have corn down 2 cents, soybeans off a penny, and Chicago wheat down a cent. Old-crop soybeans are again taking ground on the new crop, with August up 4 cents.
Corn traders will be watching today’s ethanol crush report, out at 9:30 central time. Helped out by surging crude oil prices, ethanol production reached record levels in mid-June and has been a supportive story for the old crop corn market. Overnight tenders were issued from both the South Koreans and the Taiwanese for U.S. origin corn. Considering a corn crop now rated 75% good to excellent, any strength moving toward pollination will need to be helped out by export sales and domestic usage numbers.
Yesterday Egypt's state grain buyer bought 240,000 tons of Romanian and Russian wheat on an international tender, providing little support for U.S wheat. U.S wheat was offered on the high side of the price range at $259/metric ton while Romanian and Russian wheat was offered nearly $7 cheaper. Of the reported offers, the French wheat was the most expensive, at $262.37/metric ton.
August soybeans found some technical support after it touched briefly on its 200-day moving average at 1304. August, which is now the front month for soybeans sold off 48 ¼ cents on Monday following the report as stocks showed 27 million more bushels on hand June 1 than analysts were expecting.
Reported soybean acres surprised the market by over 2 million acres
U.S. Soybean acres at 84.839 million acres (82.154 Million Acres Expected)
U.S. Corn acres at 91.641 million acres (91.725 Million Acres Expected)
U.S. Wheat acres at 56.474 million acres (55.818 Million Acres Expected)
June 1 Soybean stocks 27 million bushels above expectations (405 Million Bushels)
June 1 Corn stocks 132 million bushels above expectations (3,854 Million Bushels)
June 1 Wheat stocks 8 million bushels below expectations (590 Million Bushels)
U.S. Soybean acres came out 2.5 million acres higher than trade estimates, pushing new crop prices sharply lower. Northern states saw the largest acreage additions year over year, with 1.35 million soybean acres added in North Dakota alone. Michigan, Minnesota, and Wisconsin saw a combined 1.42 million soybean acres added as well. Old crop stocks, which has been the backbone of the soybean markets relative strength, did little to support prices as the number came in 27 million bushels above expectations. Overall these are very negative numbers for new crop soybeans, especially considering the large world ending stocks projected for 2014/15.
Corn acres came out in line with trade expectations. The June 1st stock number is bearish as the 3.854 million bushels reported was 132 million bushels above trade expectations.
Wheat had an overall neutral report with quarterly stocks tighter than expected by only 8 million bushels and a slightly larger acreage figure. At the moment wheat is following the corn market lower.
THERE IS A SIGNIFICANT RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS. PLEASE READ OUR FULL RISK DISCLOSURE AT WWW.GRAINHEDGE.COM
Corn basis slipped a couple cents along the upper Mississippi as heavy rains slow barge movement to the gulf.
Corn basis was unchanged on average this week but we again observed weakness along the upper Mississippi river system. Flooding remains a major problem for barge traffic and as a result grain buyers have been moving spot corn basis lower for the last two weeks. This week saw spot corn basis along the river down 2 cents, with many facilities backing off basis 5-10 cents. Corn has been most impacted by recent flooding, as corn shipments are making up the majority of grain shipments down river. Lock 27, north of St. Louis, reported that corn accounted for 93% of grain shipments down river for the week ending June 21st. With flood waters expected to crest late this week and into the weekend, river basis will have an opportunity to rebound as delays along the river clear up.
Soybean basis was off 2 ½ cents on average across the country, with the river system and crush plants showing relative strength. Old crop export sales worked to strengthen basis at the gulf and major river systems, with soy buyers along the river averaging a half cent increase over the last week. Thursday’s export sales report showed a resurgence of demand for old crop U.S. soybeans in response to the slide in prices seen early on in June. Export inspections have remained strong throughout June giving us reason to believe the USDA may have to revise their export sales forecast in the coming WASDE report.
Monday will be an important day for spot basis traders as the USDA releases June 1st quarterly grain stock estimates. Traders expect the USDA to report June 1st stocks at just 378 million bushels. If expectations are realized, that would be the lowest June 1st soybean stock figure since 1977. Convergence of old and new crop cash prices will be a major issue in the coming weeks, as buyers roll from July to August or September futures. At the moment the spread between July and August is 54 cents and the spread between July and September at $1.66 per bushel.
Kansas City wheat basis increased 2 ½ cents this week across the country as harvest picks up in the southern states. This year should be a particularly difficult year for merchandisers in the winter wheat regions as the heat and drought slashed yield into a fraction of what is considered normal production in that region. On the 23rd, Texas reported its winter wheat was 69% harvested, Oklahoma was 74% harvested, Kansas was 24% harvested and Nebraska had not yet begun harvest. We expect futures prices to continue to be pressured by large global wheat stocks, but domestic basis is to increase in compensation for the tight domestic stocks.
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THERE IS A SIGNIFICANT RISK OF LOSS IN TRADING FUTURES AND OPTIONS.
FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR FULL RISK DISCLOSURE AT WWW.GRAINHEDGE.COM
Monday, June 30th at 11:00 AM Central Time, the USDA will release the Planted Acreage and June 1st Quarterly Stock Reports. Below are trade expectations and our bias on the numbers coming into the report. If you’d like how Grain Hedge can help your farm marketing, please call our office at 877-472-4607. Click here to set up a live demo of the Grain Hedge trading platform that allows you to watch the live market reaction on Monday.
2014/15 U.S. Planted Acreage (Million Acres)
Traders expect the USDA to report 2014/15 soybean acres at 82.15 million acres, up nearly 700,000 acres from the record acreage projected in the March 31st Prospective Planting report. Assuming yield potential remains favorable, this acreage figure would push U.S. production to 3.7 billion bushels for 2014/15, up 12% from 2013/14. It is important to keep in mind that this surge in U.S. production is coming at a time when global ending stocks are expected to increase 22% in 2014/15.
In light of these bearish fundamentals, the new crop soybean market has remained relatively strong in recent weeks. With November 2014 soybeans closing at $12.44 in Thursday’s trade session we feel there is more downside, than upside, looking toward harvest prices. With this in mind, it is our opinion that now is a good time to protect a portion of expected production using a futures or option strategy.
Corn remains a different beast in the upcoming marketing year, with few acreage revisions expected in Monday’s report. On average, analysts only expect the USDA to raise corn acres by 25,000 acres from their projection in the Prospective Planting report. This slight increase would still have overall corn acres down 4 million acres year over year, and leave overall production unchanged from 2013. World corn stocks are expected to only increase 8% year over year, well below the surge in global ending stocks expected for soybeans.
Considering a corn market which has traded lower in recent weeks and the questions surrounding new crop acreage, we feel corn has a larger chance of holding a bullish surprise in Monday’s report.
Call the office to discuss pricing strategies as we come into Monday’s USDA report. Our number is 877-472-4607 and can be reached between 8AM and 4PM central time each day.
Growing Condition Outlook – Impact of El Nino
Today Planalytics had its web meeting focusing on the factors that would influence the intensity of the expected El Nino weather event. Senior Meteorologist Jeff Doran’s main take away was that not all El Nino weather events are the same! In fact a mild El Nino which is classified as sea surface temperatures that average between +0.5ºC and +1.0ºC might actually result in a growing season with little precipitation. Although Planalytics is expecting an El Nino event to occur, there are still indicators that have yet to point to a Moderate or Strong cycle that typically results in more mild growing conditions and adequate moisture throughout the growing season. For a full report on the Planalytics El Nino web meeting give the office a call at 877-472-4607.
THERE IS A SIGNIFICANT RISK OF LOSS IN TRADING FUTURES AND OPTIONS.
FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR FULL RISK DISCLOSURE AT WWW.GRAINHEDGE.COM
Strong weekly soybean export sales indicates demand responding to early June selloff.
Soybean export sales were reported at 317,200 – well above trade expectations for around 150,000 tonnes sold. This morning’s report included the large reportable sale of 140,000 tonnes to unknown destinations from last week. This was a very strong week for U.S. soybean exports, considering the fact that excluding the large reportable sale it would have been the largest week for U.S. soybean sales since March. Keep an eye on the July and August soybean contracts as the market opens this morning.
Corn export sales were reported at 321,000 tonnes, also above trade expectations for this morning’s report. Our models now indicate that U.S. export sales of old crop corn are running 145 million bushels ahead of pace to meet USDA expectations. Wheat export sales were very strong, but in line with trade expectations. Gulf basis for SRW wheat has moved 20 cents higher in the last week as export demand and quality issues at harvest have forced merchandisers to improve their spot wheat bids.
The cash basis at the gulf has increased in the recent days as moisture during flowering has elevated the levels of Vomitoxin. The quality of SRW wheat does not meet quality standards leaving exporters willing to pay a premium for high quality wheat. The Kansas City wheat market was also supported by confirmation that Brazil has postponed the usual 10% import tariff for up to 1 million tonnes of wheat through August 15th, a terrify that usually applies to U.S. and Canadian wheat. Brazil was forced to take action after concern about supplies from Argentina which is Brazil’s primary source of wheat.
For corn and soybeans traders are mostly focusing on the USDA acreage report and quarterly stocks numbers. Soybeans quarterly stocks will be closely watched as analysts expect the smallest stocks since 1977. This morning soybeans are trading higher, moving up through its 100 day moving average, but still within the consolidation range that we have traded in since the 13th.
In the overnight session the grains are trading sharply higher with corn up 5 ¼ cents, soybeans up 7 ¼ cents and wheat up 15 ½ cents this morning. This morning we saw large single day reportable sales of 126,000 metric tons of corn to unknown destinations, 1.5 million metric tons of...
In the overnight session corn, soybean and wheat are all trading higher. Corn improved 3 ¼ cents, soybeans is up 3 ½ cents and wheat is trading 13 ½ cents higher this morning. The wheat market is continuing focus on the developments in Russia as yesterday’s announcement that the Veterinary...
Corn and soybeans are trading lower this morning with corn down 2 ¾ cents, soybeans down 9 ¾ cents and wheat trading 6 ¾ cents higher. Wheat continues its move higher as Russian policy aims at curbing exports.