August 14, 2015 | Cody Bills | Views: 506
August 14, 2015 | Grain Hedge Insights | Cody Bills | Views: 222

Weekly Cash Comments

Weekly Cash Commentary for week ending 14 August 2015

USDA delivered a blow to grain markets this week with significantly higher production and yields than expected. Not only did futures markets plummet on the key news, but basis levels were moving lower following the report. US soybean basis was off 2 cents while corn basis was 1 cent lower.


In corn, weakness was most apparent along the river terminals with the Gulf basis down by 7 cents a bushel. On average, river terminals were off 2 cents a bushel. For ethanol plants, basis levels were unchanged on average although some plants were clearly still trying to vie for pipeline supplies with double-digit gains by a few plants in MN, MO & MI.


For soybeans, crushing plants were down 6 cents a bushel on average as the premium being offered in the past few weeks quickly eroded following the USDA report. At the Gulf, basis levels were unchanged but the ripple effects from last week’s pummeling. River terminals on average were unchanged but noticeably weaker for the week along the middle Mississippi river and Illinois River regions. 

August 14, 2015 | Grain Hedge Insights | Cody Bills | Views: 320

Grain Bounce Stops in the Overnight

The grains turned lower in the overnight with little bullish on the horizon. Weather continues to look optimal and Wednesday's WASDE report will most likely continue to pressure grains lower over the next couple weeks.

The grains rebound from the lows printed on Wednesday came to a halt last night and reversed with corn down 3 1/4 cents, soybeans down 11 cents and wheat down 2 3/4 cents. The U.S. dollar is trading down .12 percent and crude oil is down 13 cents this morning. Egypt’s GASC purchased 175,000 metric tons of wheat in a tender that was sourced from Ukraine and Russia.  


On Thursday the U.S. Climate Prediction Center announced that the likelihood of El Nino continuing through the spring has increased to 85 percent from 80 percent last month. According to the center this year’s El Nino is “significant and strengthening” with most models pointing to an event above 2.0 on the Oceanic Nino index. The last El Nino event that registered over 2.0 was in 1997.


The weather forecast will provide moisture to some of the drier areas next week with the 6-10 day forecast also favoring a wetter than normal Midwest. Temperatures should be warmer than normal which should help speed up crop development and provide little stress on the crop. Temperatures could reach mid 90’s in North Dakota over the weekend. 

August 13, 2015 | Cody Bills | Views: 519
August 13, 2015 | Grain Hedge Insights | Cody Bills | Views: 202

Grains Bounce in Overnight

The grains have been able to claw back some losses in the overnight, after sharp selling dominated the market following the UDSA report on Wednesday

In the overnight session the grains traded higher with corn up 3 cents, soybeans up 8 cents and wheat up 4 cents. The U.S. dollar is trading higher by .30 percent and crude oil is down 25 cents this morning. Grains traded sharply lower on the August Supply and Demand report which was released out yesterday. A surprise yield increase for both corn and soybeans shocked the market resulting in significantly larger ending stocks than originally expected out of this report. Corn yield was adjusted 2 bushels per acre higher to 168.8 BPA bringing new crop corn ending stocks to 1.713 billion bushels which was 289 million bushels over expectations. Soybean yield was revised .9 bushels higher to 46.9 BPA in this report pushing ending stocks 169 million bushels above analyst expectations to 470 million bushels.  


Export sales showed some slight improvement this week for corn and soybeans but sales remained lackluster. Wheat booked 421,600 metric tons this week which was down 50 percent from the previous week and was on the low end of analyst expectations. Corn sales were positive but only recorded 29,200 metric tons of old crop sales which was well below the expectations which ranged from 50,000-250,000 metric tons. New crop corn sales met expectations with 501,900 metric tons sold last week. Old crop soybean sales were up noticeably from the net cancell​ations in the previous week. With 96,300 metric tons sold, this week’s sales were able to meet expectations. New crop soybean sales were also strong with 660,500 metric tons reported this week.     


Ethanol production increased 4,000 barrels per day this week to 965,000 BPD snapping a four week decline in production. Ethanol production this week is recorded 86,000 barrels per day more than the four year average and 34,000 barrels per day ahead of production in the same week last year. Cumulative ethanol production this year is 4.6 percent ahead of the pace last marketing season. Ethanol stocks declined this week by 710,000 barrels to 18.53 million barrels.  ​

August 12, 2015 | Cody Bills | Views: 512
August 12, 2015 | Grain Hedge Insights | Cody Bills | Views: 257

Report Day Expectations

The USDA Supply and Demand report is scheduled out at 11 AM CST. Below are some expectations.

In the overnight session the grains are mixed with corn up 3/4 of a cent, soybeans down 2 3/4 cents and wheat up 3 3/4 cents. The U.S. dollar index is down nearly 1 percent and crude oil is trading higher by 64 cents. China’s Yuan fell for a second day after policy makers took steps to lower interest rates and devalue the national currency on Tuesday.  


Excessive storms throughout Santa Fe and northern Bueno’s Aires has dropped as much as 7 3/4 inches of rain and triggered flooding across a key wheat growing region in Argentina and threatening 2015/16 yield.


Today, the USDA will release two major crop reports including the Crop Production report and the August Supply and Demand report. The August Supply and Demand report could provide some spark to the market with analysts expecting planted acreage to be revised lower and yield to be adjusted due to the excessively wet spring that left Missouri, Indiana and Ohio saturated. In the July report, the USDA announced that planted acreage in certain states was going to be re-surveyed which will be revealed in today’s report. This August Supply and Demand report also has impact because it will be the first survey-based yield estimates. 


Below are the expectations for the production for the 2015/16 marketing year. Analysts are expecting to see corn production revised 202 million bushels lower to 13.327 billion bushels and soybean production to be revised 161 million bushels lower to 3.724 billion bushels. Acreage is expected to be left mostly unchanged for corn, but soybean acres are expected to fall by 1.178 million acres to 83.271 million acres in the August report.


The average analyst expects to see significant yield revisions in the August WASDE report. The average corn yield guess for this report is 2.3 bushels below last month and the yield guess for soybeans is 1.3 bushels per acre below the July report. However we are questioning if the USDA will make much of a revision at all. The crop conditions have actually improved by 1 percent in the good-to-excellent ratings and soybeans are unchanged at 63 percent rated good-to-excellent. However, despite crop conditions remaining steady throughout July, keep in mind that this is the first survey based yield results which will likely render an adjustment from the forecast given to us by the USDA in July. 

August 11, 2015 | Cody Bills | Views: 258
August 11, 2015 | | Views: 508
August 11, 2015 | Grain Hedge Insights | Cody Bills | Views: 184

China’s Yuan Falls Sharply in the Overnight

The sharp drop in the Chinese Yuan rippled throughout global markets last night and triggered selling in commodities.

In the overnight session the grains are trading lower with corn own 6 1/4 cents, soybeans down 14 3/4 cents and wheat down 7 3/4 cents. The U.S. dollar is lower by .17 percent and crude oil is trading lower by over a dollar. China policy makers cut its daily reference rate by 1.9 percent which triggered a sharp selloff in its currency the Yuan. The policy to cut the reference rate was intended to help combat the economic slowdown that has dominated Chinese markets over the last few months. The move to cut rates and devalue the Yuan triggered selling in commodities last night as traders worried that a continued decline in the currency would hurt the buying power of Chinese consumers.


Crop progress was reported yesterday and showed that corn and soybean conditions were unchanged. The corn crop was rated 70 percent good-to-excellent and the soybean crop was left unchanged at 63 percent rated good-to-excellent. Weather over the next two weeks will be critical for soybeans which have 69 percent of the crop setting pods. Winter wheat harvest has mostly wrapped up with 97 percent of harvest complete which is ahead of the 4 year average of 90 percent harvested. Spring wheat conditions declined by 1 percent to 69 percent of the crop rated good-to-excellent.


Brazil’s government crop supply agency dramatically increased their 2014/15 corn crop to 84.3 million metric tons from 81.81 million metric tons in July. The soybean crop was left mostly unchanged at 96.20 million metric tons compared to the July estimate of 96.22 million metric tons. Conab forecast 2015 wheat production would total to 7.00 million metric tons on par with July’s estimates.


Keep in mind that the August Supply and Demand report and Crop Production report will be released on August 12th at 11 AM CST. These reports will show the resurveyed acreage throughout much of the states that experienced heavy rainfall throughout the spring and will provide the first survey based yield estimates.   

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