Will Ethanol Production Stay Ahead of Pace
Ethanol production has been running well ahead of pace to meet USDA expectations all year, will we begin to see production soften this week?
In the overnight session the grains traded slightly higher with corn up 3/4 of a cent, soybeans up 3 1/4 cents and wheat up 3 ¾ cents. Soybeans are trading at $9.87 ½ just below $9.91 which is the low side of the sideways range it traded in since late October. The low side of the range which acted as support multiple times since late October will likely act as resistance since prices broke below $9.91 on January 20th.
Ethanol production and stocks will be released today due to the Martin Luther King Jr. holiday on Monday. Ethanol production increased sharply in last week’s report following two holiday shortened weeks of declining production. As of last week 14/15 ethanol production was running 5.3% ahead of last year. Ethanol production this year is significantly higher than the .8% increase the USDA has factored in. Seasonally, production begins to slow during this time of the year and with depressed crush margins throughout the Midwest there is a strong possibility this week’s ethanol production will be lower than last week. On a more positive note, Brazil’s agricultural minister stated this morning that the government will raise its ethanol blend requirement in gasoline in the first week of February.
Ukraine Farm Ministry announced that they have an agreement with traders to limit the amount of milling wheat exports to 1.2 million metric tons between January and June of this year and have a preliminary agreement that overall wheat exports will be limited to 12.8 million metric tons in the 2014/15 marketing year which is 1.8 million metric tons higher than the USDA currently forecasts. So far Ukraine has exported 8.5 million metric tons this marketing year.
The European central bank held its policy meeting on Thursday and announced it will buy up to 60 billion euros worth of sovereign bonds from March until September 2016. This is a more aggressive quantitative easing policy than the ECB has undertaken in the past. The move was widely expected by the market and has been a contributing factor to the price slide in the Euro recently.
River Basis Shows Strength
Kevin and Cody discuss what is supporting river basis and give a summary of where they think the wheat market is heading.
Wheat Jumps in Early Morning
Grains are mixed this morning with wheat showing strength after a sharp sell off over the last 20 days.
Grains are mixed in the overnight session with corn down ¾ of a cent, soybeans up 1 ½ cents and wheat up 7 cents after a sharp selloff over the last 20 days helped U.S. wheat gain some competitiveness on the global market. Also helping wheat is the accusations out of Kiev that Ukrainian soldiers have come under attack from Russian forces in north eastern Ukraine. Russia continues to deny that it has sent soldiers to eastern Ukraine. This morning a reportable sale of 176,000 metric tons of soybeans was sold to China.
Brazil’s crop analyst Celeres increased production estimates for Brazil’s soybean crop to 94.2 million metric tons up 2.8 million metric tons from its August forecast. Growing conditions have been positive in Brazil except for the north-eastern growing region which has experienced a moisture deficit for most of the growing season. Despite the dryness in parts of the country the main growing regions have experienced adequate to surplus moisture which has more than offset the negative impacts on yield caused by dryness in parts of the country. More rains over the next two weeks should continue to aid crop development. The current USDA production estimate for Brazil is 95.5 million metric tons which increased 1.5 million metric tons from the December Supply and Demand report.
Yesterday, corn and soybean export inspections were both reported on the high side of analyst expectations with corn reporting 747,634 metric tons inspected and soybeans reporting 1,517,985 metric tons. Wheat export inspections fell within analyst expectations with 310,307 metric tons inspected for export.
Support for Wheat?
Cody and Kevin discuss where wheat might be heading this week. They also look to ethanol numbers to see how they might effect corn.
Another Chinese Soybean Cancellation
The second soybean cancellation in five days is announced this morning which will weigh on soybean prices which are set to open below key support.
In the overnight session the grains traded lower with soybeans leading to the downside by 8 ¼ cents by the morning pause. Corn slipped 3 ½ cents and wheat slid 1 ½ cents on Tuesday morning. Soybeans are now trading below key support at $9.91 as higher than expected ending stocks coupled with lower than expected December soybean crush weigh on prices. This morning another cancellation from China including 174,000 metric tons of old crop soybeans will weigh on market prices in the early morning. This is the second cancellation in five days following last week’s cancellation of 285,000 metric tons. The USDA will release export inspections today at 10 AM CST due to the Martin Luther King holiday.
This morning China announced that its economy had grown at 7.4 percent in 2014 down from 7.7 percent growth in 2013. This year’s economic growth in China has been the slowest in nearly 27 years and increases the chances the government takes steps to stimulate growth to avoid a more serious decline.
In Brazil harvest has advanced to about 4.1% of the estimated 21.9 million acres only 1% behind the pace of last year’s harvest. Despite the dry spell that occurred in October these early planted crops are showing promising yields. The north eastern part of Brazil, which has been the driest this season looks to remain dry in the 6-10 day forecast. Despite the dry weather in the north, the southern growing regions have received above average precipitation this growing season which has helped offset the dry conditions in the north.
Mixed Trade to Close the Week
Export sales seem to give way for a mixed market to close the week. Cody will also discuss changes in basis around the country.
Weekly Cash Comments
Grain futures fell sharply this week following the release of USDA's revised supply and demand data.
Grain futures fell sharply this week following the release of USDA’s revised supply and demand data. As a result, corn futures were off 14 cents, while front-month Mar soybean futures plummeted 57 cents. In the cash market, basis improved on average by 2 cents for soybeans and 3 cents for corn.
In corn, the big stimulus was a sharp increase in Gulf export basis, which improved 17 cents a bushel for the week. Export business has been improving in recent weeks. This week’s export sales tally came in at 818,700 MT versus trade expectations that ranged from 550,000 to 750,000 MT. Although the Gulf was up sharply on the week, river terminals were less subdued showing only a 7-cent advance on average. Barge rates began to creep up after recent lows which limited basis strength along the Mississippi & Illinois River systems. For ethanol, basis levels were up 2 cents a bushel this week, but many plants in the Western Cornbelt saw more impressive gains of 5 to 10 cents a bushel.
For soybeans, basis at the Gulf by a slimmer margin than corn posting a 6 cent advance on the week, while river terminals as a group were up 3 cents. Even so, export sales for soybeans continue to be impressive with this week’s total eclipsing 1,100,000 MT versus trade expectations of only 700,000 to 900,000 MT. For soybean plants, basis levels improved more than the US average posting a 3 cent average for the week. Gains were most prominent in the Eastern Cornbelt with advances of 5 to 10 cents a bushel fairly typical in Indiana and Ohio markets.
Soybean Cancellations Add Bearish Sentiment to Market
Strong export sales this marketing year have been a key demand element to support soybean prices in spite of large production. Soybean cancellations could begin to undermine prices.
The grains were mixed in the overnight with corn up 1 ¾ cents, soybeans down 2 cents and wheat up 3 ¼ cents going into the morning pause in trade. In a report from FAS this morning, China canceled 285,000 metric tons of Soybeans which will likely pressure the market lower this morning. FAS also reported a 101,600 metric ton old crop sale of corn to unknown destinations.
NOPA crush numbers were released on Thursday showing that the total number of soybeans crushed in the month of December was 165.383 million bushels falling just shy of 165.384 which is the monthly crush record set in December 2013. Despite the fact crush was near record highs, this report disappointed many analysts whose average guess was to see 166.9 million bushels crushed last month. This surprise further pressured soybeans causing the oilseed to close out the day at $9.91 ¾ just a fraction of a cent above the extreme lows of the range soybeans has traded in since late October. Producers should be alert in this trading environment looking to hedge prices if soybeans were to fall below $9.91 on strong volume.
Keep a close watch on March corn in the 60 minute chart today after yesterday the contract printed a bounce off $3.76. Another test of that level would leave me suspicious that corn could continue lower.
Chinese flour mills purchased 83.6% of the 2 million metric tons of high protein wheat offered to lock in import quotas for high-protein wheat. Another 630,000 metric tons of Chinese wheat will be offered at regular auctions on the 20th. It was also stated in an announcement today that China will sell 139,000 metric tons of imported high protein wheat from state reserves on January 21st in an effort to provide relief to a tight domestic market. U.S. wheat has closed lower for seven consecutive sessions and since December 19th has only posted four days out of eighteen where the contract closed higher than it opened.
Export Sales and NOPA out Today
Tune in to hear how the Export Sales Report and NOPA numbers effected the market. Cody will also discuss what he thinks will cause wheat to find a bottom.
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Weekly Cash Comments
Grain basis levels continued to stagnate this week with both corn and beans each posting less than a 1-cent improvement on the week.
In corn, the biggest movement occurred at the Gulf where export bids were up 3 cents a bushel on nearby basis, but river terminals as a group posted only...[Read More]
Wheat Prices under Pressure
In the overnight session corn is down 3/4 of a penny, soybeans are up a cent and wheat is up 3 1/4 cents. The dollar is trading slightly higher this morning, now hovering at 97.640 while crude oil is trading down nearly a percent after news that OPEC’s production in March added to the...[Read More]
Grains to Trade Higher?
Soybean Sales Beat Expectations
In the overnight session corn and soybeans traded a relatively wide range but went into the morning pause mostly unchanged. Wheat increased 3 1/4 cents in the overnight and the U.S. dollar index continued its slide for the third straight day. Crude oil is also trading lower this morning off...[Read More]
NOPA Crush and Ethanol Reports
Soy Market Focused on NOPA Crush
In the overnight session the grains were mixed again with corn down 2 cents, soybeans up 1 3/4 cents and wheat in Chicago up 3 cents. The NOPA crush numbers will be released at 11 AM CST this morning which is expected to show a record amount of soybeans crushed for the month of March....[Read More]