October 27, 2015 | Grain Hedge Insights | Cody Bills | Views: 325

Wheat Up Against a Strong Ceiling

Many global and local factors are hindering wheat. Kevin breaks down these as well as what to expect for corn basis over the next month.

Wheat Up Against a Strong Ceiling
October 27, 2015 | Grain Hedge Insights | Cody Bills | Views: 254

Harvest is Moving Fast

Corn is showing 75% harvested and soybeans have reached 87% harvested

Wheat and corn gave back some of their gains overnight from yesterday’s rally, while soybeans recovered some of the losses from Monday’s session.  Crude oil continued to fall, reaching its lowest price since August 27 while S&P futures were modestly lower.


Wheat posted an 18-cent gain in Monday’s trade, fueled by concerns of flooding in Texas, and dry weather in the US Plains. After the close, USDA’s crop progress report showed 47% of the winter wheat crop was in good-to-excellent condition, which was lower than last year’s reading of 59%.  USDA also showed harvest was moving fast, with corn at 75% harvested while soybeans reached 87% harvested. 


Weekly export inspections were impressive for soybeans this week, coming in at 2.6 MMT versus trade expectations of 1.8 to 2.1 MMT. Meanwhile corn and wheat exports continue to come in at the low end or below expectations. YTD exports for corn are 26% behind last year’s pace and wheat is 18% off. USDA expects both crops to see exports roughly unchanged year-on-year, so a lagging trend is problematic.

S&P futures (ESZ5) and the US Dollar index (DX-MZ5) dipped on Tuesday, as investors locked in some of the sharp gains seen over the last month ahead of the Federal Reserve's policy meeting and results from Apple. The Fed begins their two-day to discuss the need for an interest rate hike. Markets are pricing in only around a 7% chance of a rate hike this week, but will be watching be for clues to whether "lift-off" could come at its next meeting in December.


Crude oil (GCLZ5 / QMz5) continued to be pressured falling below $44 a barrel for the first time since late August. API will release their inventory report this afternoon while EIA will release their report Wednesday morning. Analysts look for a 5th straight week of higher stocks with the average estimate pointing to a 3 million barrel increase in crude oil inventories.


The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a dba of Foremost Trading LLC (NFA ID: 0307930)

October 26, 2015 | Grain Hedge Insights | Cody Bills | Views: 462
October 26, 2015 | Grain Hedge Insights | Cody Bills | Views: 250

Grains were Mixed in the Overnight

Global markets are mixed, with some green being seen in Asia, and Europe modestly lower.

Grains were mixed overnight with wheat posting the biggest gains, advancing 6 cents overnight while corn was fractionally higher. Soybeans gave up 3 cents in the night session.  In outside markets, stock index futures were mildly weaker while crude oil showed a small advance.


Wheat was buoyed by missed rain forecasts in the Plains.  While Texas is likely to see significant precipitation over the next week, areas to the North are not.  Dry weather also is persisting in Russia. In international deals, overnight Ethiopia announced it was tendering for 1 MMT. The deal is expected to go to Black Sea or EU markets.


In corn and beans, remnants of Hurricane Patricia are expected to hit the Midwest in coming days which could slow the tail end of the harvest season. The path is projected to put rains of 2 to 4 inches in the Mississippi River and Ohio River regions. USDA will announce the latest harvest progress numbers after the close of trade today. Last week corn was 59% harvested while soybeans stood at 77% harvested.

Global markets are mixed, with some green being seen in Asia, and Europe modestly lower. After a major rally at the end of last week, S&P index futures (ESZ5) are taking a breather on Monday morning, down about 0.15%.The FOMC meets this week, with very few expecting the central bank to hike rates.


Crude oil (GCZ5 / QMZ5) were modestly higher in night trade but still below $45 a barrel. Goldman Sachs said crude oil prices could drop sharply lower as refined product storage sites come close to maximum capacity, further adding to a glut that has already seen crude prices fall by more than half since June 2014.  Goldman said that inventories were already "too close for comfort", bearing the potential for a sharp fall in crude prices.

October 23, 2015 | Grain Hedge Insights | Cody Bills | Views: 221

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: 239

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: 273
October 22, 2015 | Grain Hedge Insights | Cody Bills | Views: 225

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: 301
October 21, 2015 | Grain Hedge Insights | Cody Bills | Views: 188

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. 

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