US dollar up sharply
The US dollar is trading sharply higher this morning putting pressure on the grain complex.
In the overnight session the grains are trading lower with corn down 2 1/4 cents, soybeans down 1 cent and wheat down 4 3/4 cents. The U.S Dollar is trading up over a percent this morning and crude oil has slipped 68 cents. Japan is seeking to buy 100,262 metric tons of food quality wheat from the U.S or Canada in a regular tender closing tomorrow.
Heavy rains which ranged from 1-4 inches fell across Texas, Oklahoma and parts of Kansas causing localized flooding and adding to the concern of winter wheat crop quality. This is the 5th week in a row that significant rains have fallen throughout the southern plains. The southern plains are expected to receive more precipitation later on this week before the outlook turns drier once again.
Between 1/4 inch and 1 1/2 inch of rain fell throughout the majority of the Midwest this weekend providing excellent growing conditions for the newly seeded crop. Crop progress will be released at 3 PM CST today and will show the first crop condition ratings for corn. Last week the crop progress showed 85 percent planted with soybeans 45 percent complete.
UkrAgroConsult announced that it has raised its 2015 forecast for grain harvest to 54.9 million metric tons from 52.3 million in its previous estimate. The increased grain outlook was primarily due to revision higher in wheat production. Ukrainian farmers have planted 95 percent of acreage as of May 25th. SovEcon announced it expects Russia to harvest 95 million metric tons of grain this year down significantly from the 105 million metric tons last year.
Short Covering Rally
Cody reviews the overall downward trend from the grains and looks at where they might find support.
Weekly Cash Comments
Cash Commentary for week ending May 22nd
Basis levels for corn were off 1 cent for the week adding to the previous week’s losses, while soybean basis managed a 2-cent advance thanks to a sharply lower week on the futures market.
For corn, there was modest weakness along the river markets this week with a 3-cent loss at the Gulf providing the biggest catalyst of change to upstream facilities. Corn buyers along the East Coast and Plains saw relatively more strength this week, but ethanol plants as a group were off 2-cents a bushel. Areas of Iowa and Minnesota were especially prone to losses this week with 5-cent a bushel losses being fairly typical at some key end users.
In soybeans, basis levels improved on average by 2-cents a bushel this week, although there was a distinct dichotomy between end-user groups. For export sensitive areas, losses of 5-cents a bushel at the Gulf kept river terminals mostly weaker. Although soybean export business has been winding down this week’s sales of 165,500 metric tons was a 21 percent improvement week over week. For soybean plants, crushing facilities raised their basis by 2 cents a bushel for the week, but Eastern Cornbelt plants saw more impressive gains with some facilities up 5 to 10 cents a bushel.
Wheat continues short covering correction
The wheat market continues its short covering correction higher this morning after four days of pause and consolidation near the 100 day moving average.
In the overnight session the grains traded higher with wheat leading the way up 4 3/4 cents, corn traded up 1 3/4 cents and soybeans up 1/4 cent. The U.S. dollar index is trading about a 1/4 percent higher this morning and crude oil is down 58 cents.
Yesterday, Agroconsult raised its forecast for Brazil’s 2014/15 corn and soybean crop higher. The consultancy raised its forecast for soybean production from 95.8 million metric tons to 96.1 million metric tons, and raised their first corn crop forecast from 29 million metric tons to 30.7 million metric tons. The consultancy also raised their second crop production expectations to 51.4 million metric tons up from 50.4 in March.
Argentina exports have slowed recently as buyers hold back from purchasing grain hoping the government will turn up pressure to resolve a three week long strike by the Industrial Oilseed Complex Workers Federation.
The drought monitor has shown improvement over last week with the last of the severe and extreme drought in the southern Plains disappearing after four weeks of substantial rains. The rains have acted as a double edged sword providing moisture relief to parched soil, but causing quality concerns to a wheat crop late in its growing season. As a result of the heavy rains the western half of Kansas and Oklahoma and parts of Texas have been reduced to mostly moderate drought to abnormally dry from ratings like severe and extreme drought just weeks ago.
Bearish Trend Continues for Soybeans
New crop export sales took and unexpected turn. Check out our extensive breakdown.
Can export sales lift corn?
Export sales were positive this morning with strong old crop corn sales and a reportable sale announced early this morning.
In the overnight session the grains are trading higher, with corn up 1 1/2 cents, soybeans up 1 1/4 cents and wheat up 3 cents. The U.S. dollar is lower by 1/10th of a percent and crude oil is 48 cents higher. This morning a reportable export sale was announced for 152,400 metric tons of old crop corn to unknown destinations and 50,800 metric tons of new crop. Chicago wheat trades near its 100 day moving average (5.18 3/4) which has acted as strong resistance on Monday and Tuesday this week. Wheat traders are focusing on the heavy rains in the southern plains which have been causing concerns that the wheat will have quality issues at harvest. Wheat traders are also monitoring Russia whose forecast has turned dry over the next two weeks and whose crop is beginning to feel stress from the hot dry weather.
Export sales this week showed that wheat, corn and soybeans all met expectations. Wheat booked 74,400 metric tons of old crop sales and 128,200 metric tons of new crop. With analysts expecting to see as much as 200,000 metric tons of cancellations, this week’s sales were relatively positive. Old crop corn sales jumped 12 percent from the previous week with 812,600 metric tons booked above the 400,000-600,000 metric tons expected by traders. Soybeans also showed positive export sales this week with 165,500 metric tons of old crop sales which was a 21 percent improvement week over week. Soybeans continue to outperform sales expectations late in its export season.
Yesterday, the EIA weekly ethanol report showed a sharp jump in production by 46,000 barrels per day to a total of 958,000 barrels per day. This decisively ends the two week slump in ethanol production that brought weekly totals below 2013 levels. However, routine facility maintenance played a big role in the early may production slump and it appears production is picking back up again as we move into driving season. Ethanol production year to date is up 4.8 percent compared to the USDA’s expectations which only show a 1.3 percent increase YOY. Ethanol stocks also climbed by 135,000 barrels to 20.43 million barrels this week.
A waterway leading to Argentina’s Rosario grain hub was blocked for the last two days after a ship ran aground. This disruption comes during the busiest season just following harvest
Ethanol Production Jumps
Ethanol production smashes through 2013 levels. Positive export sales are expected for the new crop grains.
GrainTV: Grains Find Resistance Today
Cody looks at what drove the market lower and export inspections
Cooler Temperatures Could Shock the Wheat Market
Cody reviews the fundamentals that moved the wheat market higher and planted progress.
Continued Strength out of Soybean Conditions
Can the Grains Recover?
In the overnight session the grains are trading lower with corn down 2 1/2 cents, soybeans down 9 1/4 cents and wheat down 4 1/2 cents by the morning pause in trading. The outside markets are also trading lower with crude oil down $1.20, the U.S. dollar down .22 cents and the mini Dow Jones...[Read More]
Improving Yield Potential for Beans?
Weekly Cash Comments
Grain basis was mixed again this week with corn basis gaining 1.5 cents a bushel, while soybean basis gave up 4 cents on average across the U.S.[Read More]
Grains pressured by positive weather outlook
In the overnight session, the grains inched higher with corn up 1 1/4 cents soybeans up 5 cents and wheat up 1 cent. The U.S. dollar is trading mostly unchanged and crude oil is down 46 cents. The EU cut its corn production forecast this month to 58.7 million metric tons from 65.5 million...[Read More]