Traders Eye USDA Report on Tuesday
Traders will be focusing on the USDA report to be released on Tuesday
In the overnight session corn traded down 3/4 of a cent, soybeans jumped 1 3/4 cents and wheat fell 1 3/4 cents as we enter the morning pause. The dollar index is up 1/3rd of a percent this morning and crude oil is 14 cents higher this morning. Planting pace for corn is expected to have another big jump in this week’s crop progress report scheduled for release at 3 PM CST. Some traders are expecting corn plantings to be as much as 70 percent complete.
Traders will be watching the May supply and demand report due out on Tuesday at 11 AM CST. The average trade guess expects old crop wheat and corn stocks to increase since last month’s WASDE report. Wheat ending stocks are expected to climb to 693 million bushels from 684 million bushels in April. Corn ending stocks are also expected to climb to 1.864 billion bushels from 1.827 billion bushels last month. The average trade guess expects to see soybean ending stocks fall by 10 million bushels to 360 million bushels as strong weekly export sales force the USDA to revise demand numbers higher. The average trade guess pegs new crop ending stocks for wheat at 750 million bushels, corn at 1.752 billion bushels and soybean carryout at 443 million bushels.
Keep a close watch on South America production as both Argentina and Brazil has had better than expected harvests. The average analyst guess expects Argentina corn production to increase nearly 1 million metric tons to 24.95 MMT and soybean production to increase 1.5 MMT to 58.5 MMT. Brazil corn production is also expected to increase to 76.87 MMT from 75MMT in the April report. Brazil soybean production is expected to stay mostly unchanged at 94 MMT.
China cut its interest rates on Sunday for the third time in six months which should support soybean prices this morning as lower borrowing costs can have a positive impact on demand for imports. China’s economy continues feel economic pressure with analysts expecting annual growth to fall to 7 percent this year from 7.4 percent in 2014. More economic numbers will be released on Wednesday including industrial output and investment.
Weekly Basis Update
Tune in for a break down of the wheat tour forecast and how basis has been moving across the country.
Weekly Cash Comments
Weekly cash commentary for week ending May 08
Grain futures continued to dip lower this week with planting in full swing and promising prospects for another year of bumper crops. In the cash market, corn basis posted some modest strength this week, while soybean basis continued to be flat, showing no significant change on average across the country.
For corn, export business continues to be seasonally brisk with weekly sales of 841,000 MT topping analyst expectations of 300,000 to 500,000. Although Gulf basis was up just slightly shy of 2 cents a bushel, river terminals as a group posted a nearly 4-cent advance. In ethanol, plants as a group were up 3 cents a bushel, but gains in the range of 5 to 8 cents a bushel were fairly widespread in the Western Cornbelt.
In soybeans, basis levels continue to be flat and most buyers are discounting basis for June/July delivery versus spot, suggesting limited chances of big basis rallies in early summer. For river terminals, they did find some strength this week, with a modest 2-cent advance. But, soybean plants were off 1-cent a bushel on average.
Winter Wheat Forecast below Expectations
The winter wheat forecast seemed to come in below most analysts’ expectations after the Wheat Council finished their three day tour of Kansas fields.
In the overnight session the grains were mostly unchanged with corn down 3/4 of a cent, soybeans down 3/4 of a cent and wheat gaining 1 1/4 cents going into the morning pause. Oil is trading 68 cents higher and the U.S. dollar is down 1/10th of a percent. South Korea purchased 63,000 metric tons of corn late yesterday.
This week in Kansas City, crop scouts met Thursday afternoon to release the final wheat yield and production forecast after three days on the tour. The wheat council’s Kansas crop forecast was 35.9 bushels per acre which is well below the 5 year average of 40.3 bushels per acre. They also pegged production at 288.5 million bushels per acre which was down from the 5 year average of 331.6 million bushels. The wheat forecast reflected an early season drought, winterkill events and observed disease throughout the three day tour.
China is expected to produce 232 million metric tons of corn for 2015/16 which is up 7.6 percent year over year. Farmers have had incentive to plant more corn as a result of Beijing’s high price stockpile policy which has kept domestic corn prices as much as 30 percent higher than global prices. As a result of the excellent crop this year Chinese corn imports are expected to fall 2 million metric tons this year, while sorghum imports are expected to grow to 8.2 million metric tons from 8 million metric tons this year.
Precipitation looks to clear up for most of next week giving the western grain belt more opportunity to get into the fields. The 6-10 day forecast shows drier than normal conditions from eastern South Dakota and Nebraska to Ohio which should continue to support strong planting progress. Precipitation reenters the forecast in the 8-14 day outlook with above average moisture blanketing most of the U.S.
After a mixed report the grains closed lower. Cody looks at the charts and export sales pace to see where prices might go from here.
Soybeans Exports Continue to Impress
Soybean export sales continue to impress during a period when sales are typically weak and pressured by South America.
In the overnight session the grains are mostly unchanged with corn down 2 3/4 cents, soybeans unchanged and wheat in Chicago up 3/4 of a cent. The U.S. dollar is up a fraction of a percent this morning and crude oil is trading 14 cents higher.
Export sales provided another strong week for corn and soybeans and yet again disappointed for wheat. Corn booked 841,000 metric tons which was above analyst expectations which ranged between 300,000-600,000. Soybeans reported strong export sales for the second week in a row by booking 338,000 metric tons which was on the high side of expectations which ranged from 0-350,000 metric tons. Soybean have booked a cumulative 49.4 million metric tons of sales which is well ahead of the roughly 44.6 million metric tons last year and the 45.8 million metric tons expected to meet current USDA expectations.
Wheat sales disappointed expectations this morning with cancellations of 148,000 metric tons. Analysts were expecting sales that ranged from -100,000 to 100,000 metric tons. New crop sales booked 446,800 metric tons which was up from the previous week but below the 4 week average.
Ethanol production on Wednesday fell 35,000 barrels per day to 887,000 barrels per day. The decline was the smallest weekly production data since the second week in November and was partly due to routine facility maintenance. Ethanol stocks declined 35,000 barrels to 20.76 million barrels this week. Despite the decline in production this week, overall ethanol production is still running 5 percent over last year.
Relative Strength in the Wheat Market
Cody talks ethanol production, stocks, and what caused wheat to trade sharply higher today.
Is Corn Ready for a Rebound?
The grains are mixed this morning as corn bounces of support found at $3.55 during yesterday’s session
In the overnight session the grains were mixed with corn up 1 1/4 cents, soybeans down a penny and wheat up 3 1/4 cents. Corn prices are moving higher after finding some support around $3.55 per bushel during yesterday’s trade session.
Yesterday, the Egyptian grain buyer GASC purchased 120,000 metric tons of wheat sourced from Russia and Romania. The Russian FOB wheat was offered at $194.22 per metric ton, the Romanian offer was $200 per metric ton and the U.S. wheat was offered at $227.50 per metric ton. Despite the sustained decline in wheat prices, U.S. wheat is still not competitive enough on the global market to trigger above average buying interest.
Yesterday marked day one for the annual Wheat Council’s survey of HRW fields. Throughout the next few days roughly 90 scouts are taking to the fields to survey the quality of the wheat crop which suffered from dryness in the early part of the growing season. The tour is scheduled to release their final yield forecast for Kansas wheat production on Thursday.
In Argentina, port activity returned to normal after a port workers strike vote was postponed. Argentina has been struggling with delays at export ports caused by stevedoring strike that left cargo vessels delayed.
This morning StatsCan announced that total wheat stocks in Canada on March 31st was 16.74 million metric tons down 25 percent from the previous year. Durum wheat on stock was reported at 2.32 million metric tons this year which was down from 4.01 million metric tons in 2014. Canola stocks were reported at 7.04 million metric tons down 18.9 percent from the previous year.
Grain Trends Update
As grains continue to trend lower, Cody looks at what it will take for them to break through.
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Keep an Eye Out for Basis Opportunities
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Market Finds Footing in Overnight
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