Weekly Cash Comments
Cash Commentary for week ending September 25th
Soybean basis was off sharply this week giving up 5 cents a bushel, while corn basis was relatively quiet and unchanged for the week.
Harvest has gotten into full swing with USDA reporting at the start of the week that 10 percent of the corn crop has been harvested and 7 percent of the soybean crop. Heavy rains around Nebraska and Iowa late in the week stalled harvest progress, but the 10-day outlook shows clear and dry weather which should accelerate the harvest progress. Yield reports so far have done little to sway the expectation of bumper crops for both corn and beans that the market has factored in. Historically, big crop years lead to lower basis levels at harvest, but it starts to improve rapidly after harvest. This year seems to be no exception, with both corn and soybean basis generally less than 5-year average levels. We would expect basis levels to start improving around mid-November into the next calendar year.
For soybeans, spot basis was off 5 cents this week but was significantly weaker at river terminals where losses averaged 10 cents a bushel. Barge rates continued to climb this week as grain movement starts to pickup. At soybean plants, losses of 20 cents a bushel were fairly common this week as the market adjusts fully to new-crop supplies hitting the market.
Chinese Soybean Purchase Lifts Soybeans
A large soybean purchase made by the Chinese lifted soybeans in the overnight session.
In the overnight session the grains traded higher with soybeans leading the way up 9 1/4 cents. Corn jumped 2 cents and wheat climbed 3 ½ cents to help erase some of the losses seen yesterday. Crude oil is trading 37 cents higher and the U.S dollar is up .6 percent after the Fed Chairman Janet Yellen said she expects rate hikes later on this year. It was announced this morning an export sale of 260,000 metric tons of U.S. Soybeans to be delivered to China for 15/16.
Soybeans are higher this morning after China inked a deal in Iowa to purchase 13.18 million metric tons of U.S. soybeans to be delivered in 16/17 valued at 5.3 billion dollars. The deal is viewed by traders as mostly “frame contracts” with the details to be settled at a later date.
There were a few tenders this morning with the Taiwan Flour Millers association issuing an international tender to purchase 89,150 metric tons of milling wheat and the Korea Flour Mills Corp. purchasing 23,000 metric tons of wheat.
In this week’s Chinese state auction for corn only 35,861 metric tons of corn was sold making up only .7 percent of the total amount of corn offered this week. The corn was sold at an average price of 2,271 yuan per metric ton. This week’s state corn sales were the worst performing state auction this year.
Corn And Wheat Miss the Mark for Export Sales
Cody looks at the charts and export sales numbers.
Grains Turn Lower
The grains turn smaller corn and wheat sales than expected.
In the overnight session, the grains traded lower with corn down 3 1/4 cents, soybeans down 3 1/4 cents and wheat down 5 1/4 cents. A reportable export sale of 313,000 metric tons of soybeans was reported today to unknown destinations for 15/16 delivery.
Yesterday, the EIA announced that ethanol production decreased 23,000 barrels per day to 938,000 barrels per day. Ethanol production is above last year’s levels at this time by only seven thousand barrels, but above the 4 year moving average by 67 thousand barrels per day. Ethanol stocks are up 609,000 barrels per day to 18.9 million barrels of inventory.
Export sales were on the low side of expectations this week for wheat with 282,800 metric tons for delivery in 15/16. Export sales were down 25 percent from the previous week but still within the range of analyst estimates between 250,000 and 400,000 metric tons. Corn sales were disappointing, booking only 426,300 metric tons in 15/16 which was a 20 percent decline in sales from last week. Corn expectations ranged between 550,000-750,000 metric tons. Soybean sales beat analyst expectations by booking 1,316,000 metric tons which was a 44 percent increase from last week. Analyst’s expectations ranged from between 1,000,000-1,200,000.
This morning the Russian deputy prime minister announced this morning that the government proposes to change the wheat export duty to 50 percent from of the customs price minus 6,500 Roubles per ton. They also announced that the Russia could export as much as 30 million metric tons of grain this marketing year if total production increases to 100 million metric tons.
Markets Higher in the Overnight
Wheat had the biggest recovery posting a 7 cent advance.
Markets were broadly higher overnight after widespread weakness took its toll on commodity and financial markets on Tuesday.
Wheat had the biggest recovery posting a 7-cent advance in the night session where concerns about dry weather in Australia and the Black Sea region are mounting. There are some minor concerns in southern Ukraine where it has been too dry to consider sowing winter grain. The pace of sowing winter wheat in Ukraine is running slightly behind schedule but it is only early with typically around 20 percent of the crop planted at this point in the year. In Australia dryness is starting to push crop estimates lower there, with the crop expected to be 24-26 MMT versus 26 MMT by USDA.
In soybeans, prices traded off their lows of $8.61reaching $8.68 towards the end of the night session, but harvest pace and yield seems to be on track. Early reports from Northern Ohio suggest better than expected yields. For corn, prices were up a modest 4 cents a bushel. The last 6 weeks has seen corn locked in a narrow range of $3.60 to $3.95 and with prices currently around $3.85 it may prove difficult to break to the upside of this range until harvest is in the books.
U.S. index futures followed European shares higher, reversing earlier declines, after the Standard & Poor’s 500 Index fell to its lowest level in almost two weeks. Overnight the E-Mini S&P (ESZ5) was up 0.4 percent. However, the outlook for the global economy became bleaker on Wednesday as signs of a deeper downturn in China emerged, despite massive policy stimulus, coupled with weak growth at best in Europe. China's vast factory sector shrank at its fastest rate in 6-1/2-years in September, a private survey showed, sending investors worried about sagging global growth scurrying out of risky assets.
Crude oil futures (GCLX5 / QMX5) recovered as well on Wednesday posting a nearly 1 percent advance as a drawdown in U.S. crude oil stocks outweighed the negative impact of weak economic manufacturing data from China. The American Petroleum Institute (API) said U.S. crude stockpiles fell 3.7 million barrels last week, with stocks at the Cushing, Oklahoma, delivery point for U.S. crude futures down almost 500,000 barrels. Although total U.S. oil inventories are at record highs, the draw suggests a rebalancing of the biggest domestic oil market is under way as oil production slows in the face of low prices.
Commodity and Equity Markets Lower in the Overnight
Grains under pressure overnight following USDA Crop Progress Report
Commodity and equity markets were lower overnight as broad-based bearish sentiment continues to entrench the global view. In grains, soybeans were down 6 cents a bushel while corn and wheat gave up 4-cents in the night session. Overnight trade showed stock markets in Japan and Europe on the downside, with S&P futures off 1.7 percent. Oil also was lower posting a $1.40 a barrel drop or 3 percent.
Grains came under pressure in the night session following USDA’s crop progress report showing another uptick in soybean ratings from 61 percent good-to-excellent last week to 63 percent this week. Harvest pace for beans was pegged at 7 percent while corn improved to 10 percent cut. With the brunt of harvest still ahead, it would seem that any rallies in the next 2 weeks would be short-lived. Weather looks to be mostly ideal in the coming weeks showing warm and dry weather over much of the Midwest which should aid late-season development and harvest.
For wheat, Monday saw some positive price moves thanks to lingering dryness in the former Soviet Union, where farmers are planting ahead of the 2016 harvest, and in Australia, where wheat needs moisture for its final grain fill. Ongoing dryness is expected in about one-third of former Soviet Union and Australian wheat areas for the next two weeks.
In South America, a new round of rains due next week will weaken the hot, dry air mass that has been gripping Brazil's main farm belt. A slow-moving cold front expected to vacate the waterlogged southern grain state of Rio Grande do Sul from Sept. 26 will begin to push into Parana, Mato Grosso do Sul, and Sao Paulo initially. By the second week of October the front is expected to create showers over Mato Grosso, Minas Gerais and Goias. “The (precipitation) volumes will not be heavy, but will allow soil moisture levels to improve, guaranteeing favorable conditions for the planting of the new soybean crop," Somar senior meteorologist Marco Dos Santos said on Monday. The official planting season for soybeans started on Sept. 15 and typically continues until early December. The earlier Brazilian grain farmers can get their crops planted, the better the prospects for planting their winter corn, wheat and cotton crops before the rains retreat in the early months of 2016.
Crude oil prices (GCLX5 / QMX5) were off 3 percent on Tuesday, reversing a steep rally the previous day of nearly 4 percent. Oil continues to be plagued by sky-high surpluses and uncertainty over whether global demand will cut into the stockpiles. There is evidence that U.S. shale production is starting to feel the pinch of oil prices near six-year lows, which has prompted the International Energy Agency (IEA) to issue more bullish forecasts for the market balance next year. But uncertainty is running high over the outlook for demand in top consumers such as China, as well as the resilience of the U.S. economy following the Federal Reserve's policy meeting last week.
S&P futures (ESZ5) were solidly lower in the night session giving up 1.7 percent as much of Asia and Europe posted weaker closes in stocks overnight. U.S. assets got a boost Monday as a fourth Fed official talked up prospects for higher rates in 2015, just days after the central bank jolted investors by citing global market turmoil and a slowdown in China as reasons for standing pat. Several technical charts are sounding warning signals that the worst of equities turmoil may not be over.
Grains Mixed in the Overnight
Weather expected to be near ideal for harvest in the US this week.
Grain markets were mixed overnight with soybeans advancing 4 cents a bushel, while corn and wheat slumped about a penny going into the morning break.
On Friday, Egypt announced the results of its latest wheat purchase, with Russia, Ukraine and France splitting the business on a 230,000 MT deal. The US continues to remain at lofty price levels that are uncompetitive in world trade. Also on Friday after the close, USDA reported the latest cattle on feed estimates. As of September 1, all cattle on feed were at 103.0 percent versus a trade estimate of 103.4 percent, but the big surprise was August placements of 95 percent versus trade expectations of 100.2 percent. Cattle movement into U.S. feedlots last month dropped 5.0 percent from August 2014 to their lowest level since the government started tracking the data in 1996. The wider-than-expected shortfall in placement was attributed to lower slaughter cattle prices and feedlots that delayed buying pricey calves, or feeder cattle, that eroded their margins for nine straight months.
In South America, a port labor strike is threatening to slow corn exports out of Brazil. A strike by Brazilian federal agricultural agents responsible for approving certificates required for shipments could affect Brazil's corn exports, the director of the cereal exporters association Anec Sergio Mendes said on Friday. Mendes said the strike that started on Thursday was "the worst thing that could happen" to grain exports, though it is too soon to quantify the effects. The Federal Agricultural Agents' Union (Anffa) estimated that 70 percent of its workers nationally were adhering to the strike. But at the main Port of Santos, 100 percent of the agents were on strike. Also on Friday, Safras projected an increase in Brazil’s corn and bean crop in the coming season. They peg Brazil’s 2015/16 bean crop at 100.5 MMT vs 99.8 in July, and corn at 88.6 MMT vs 86.2 in 2014/15.
US weather is expected to be near ideal for harvest in the US as dry weather and minimal threats of frost should lead to good progress for harvest. Last week USDA reported 5 percent of the US corn crop was harvested and today after the close trader’s will get new estimates from USDA’s Crop Progress Report.
In financials, U.S. stock index futures were slightly higher in the night session after Wall Street closed lower last week as the Federal Reserve's decision to keep interest rates unchanged stoked fears of slowing global economic growth. Mini S&P 500 futures (ESZ5) were up 10 points at a 0.5 percent gain this morning. Investors will be looking for more clarity on the Fed's decision with a number of central bank officials slated to speak this week, culminating in Chair Janet Yellen speaking on Thursday. Chinese markets closed higher with the Shanghai Composite index up 1.9 percent and the CSI300 rising 1.75 percent. China's vice finance minister, Shi Yaobin, said the recent market volatility was a short-term issue and that the country could maintain a healthy economic growth rate going forward. U.S. data scheduled to be released on Monday includes existing home sales for August, which are expected to have dropped 1.3 percent last month after rising to an eight-year high in the previous month. The numbers are expected at 10 a.m. ET.
In Oil, nearby crude prices (GXLX5 / QMX5) were up over a $1 a barrel in night trade as Asian markets were stronger overnight. But, oversupply fears still linger. Oil stockpiles held by Saudi Arabia, the world's biggest crude exporter, climbed to a record, Bloomberg News reported. It said the country's commercial petroleum stockpiles advanced to 320 million barrels, the highest since at least 2002, citing data on Sunday on the website of the Riyadh-based Joint Organizations Data Initiative.
Prices Continue Lower to Close the Week
Weekly Cash Comments
Commentary for week ending September 18
This week the grains traded higher with soybeans gaining 10 1/2 cents, corn increasing 5 1/2 cents and wheat in Chicago increasing 3 1/2 cents. On Thursday, Federal Reserve Chairman, Janet Yellen, announced that interest rates will remain unchanged at 0-0.25 percent which seemed to have little impact on the grains immediately following the announcement. Janet Yellen emphasized that our economy was improving and the labor market was improving but that uncertainties abroad lowered their inflation outlook. It seems that interest rates will remain low at least for the time being which should pressure the U.S. Dollar.
Grains found strength on Monday on concerns about Brazil's crop which saw two consecutive frosts over the weekend. Parts of the southern state of Rio Grande do Sul saw deep frost Friday night and more freezing temperatures on Saturday night, said Pedro Aguiar, of Cotrisa cooperative in northeastern Rio Grande do Sul. The market also benefited from a better than expected wheat export inspection report on Monday which showed 647,000 MT versus trade expectations of 325,000 to 475,000 MT. Soybeans also came in better than expected at 370,000 MT versus trade estimates of only 150,000 to 350,000 MT. Only corn failed to meet expectations with a sub-par week of 711,000 MT as compared to 775,000 to 950,000 MT expected.
After the close on Monday, USDA reported corn harvest at 5 percent complete across the US, lagging slightly the 5-year average of 9 percent at this time of year. The condition of the corn crop was unchanged with 68 percent of the crop rated as good-to-excellent. For soybeans there was a surprising dip in conditions with 61 percent of the crop good-to-excellent as compared to 63 percent last week.
On Tuesday, NOPA reported the August crush numbers at 135.304 million bushels compared to the average analyst guess of 135 million bushels. Although this crush number slipped lower from July's 145.227 million bushels it is still well over the four year moving average of 117.414 million bushels and the largest August crush since 2007. Soyoil stocks were reported at 1.480 billion pounds which is higher than 2014 soyoil stocks of 1.213 billion pounds. Soymeal exports were reported at 491,510 metric tons.
Export sales were in line with expectations this week for all the grains. Corn booked 533,000 metric tons within expectations which ranged from 400,000-600,000 metric tons. Soybeans also met expectations with 912,000 metric tons sold this week. Soybean sales were mostly made up of sales to China and unknown destinations. Wheat booked 377,500 metric tons which was up 30 percent from last week. Wheat sales were within the expectations which ranged from 275,000-450,000 metric tons.
Ethanol production increased week over week by 3,000 barrels per day to 961,000 barrels per day. This is a strong start to the new marketing year, already 34,000 barrels ahead of last year during the same time period. Ethanol stocks declined this week by 351,000 barrels to 18.29 million barrels.
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