Positive Gains in the Overnight
Grains Bullish after three day weekend
Grains were in a bullish mood this morning coming back from the three-day weekend with positive gains across the board. Wheat and beans led the charge higher posting 8 cent gains in the overnight session while corn logged a 5-cent advance.
Global markets felt more at ease on Monday and Tuesday with China’s stock market showing a robust advance of 2.9 percent on Tuesday, although speculation exists that the buying may have been triggered by the government in an attempt to bolster the market. US stock futures were also higher in overnight trade with S&P futures up 1.9 percent suggesting a stronger open for equities this morning. However, there are still lingering doubts about the market’s strength. Japan's Nikkei Stock Index fell to a 7-month low on concern Chinese demand for Japanese goods remains weak after Chinese Aug imports fell for the tenth consecutive month.
In wheat, Russian agriculture consultancy IKAR said on Tuesday it had lowered its forecast for Russia's 2015 wheat crop to 60.6 MMT from 61.8 MMT. The downgrade was due to a slightly lower than expected harvest in Urals and Siberia, it said. Its forecast for corn remained unchanged at 12.5-13.0 MMT.
On Tuesday, a Chinese government think-tank cut its 2015/16 forecast for the country's corn output by 3 MMT to 229 MMT as a result of a localized drought. Nonetheless, it would still be a record output and an increase of 6.2 percent over last year. The consulting group expects China to curb imports of corn and milo. Imports of sorghum for 2015/16 were seen dropping to 7 MMT from the 10 MMT expected in the current marketing year, according to its latest estimate.
In Ukraine, the Ag Minister there said wheat exports are expected to jump to 15.9 MMT in the 2015/16 season from 11.2 MMT a season earlier due to a large harvest and stocks. For corn, they expect exports to be only 16.9 MMT this year versus 18.8 MMT in 2014/15 and a USDA forecast of 17.5 MMT.
USDA’s monthly WASDE report will be released on Friday and although no official pre-report estimates have been released, it would seem that early guesses are saying that there will not be much change by USDA in terms of production as they opt for more definitive data in October once harvest has started.
Corn and Beans to Continue to Trend Lower?
Cody looks at the technicals and fundamentals to weigh in on what he thinks will happen to corn and beans in the weeks to come.
Weekly Cash Comments
Cash Commentary for week ending September 4th
Soy basis continued to plunge lower this week as old-crop premium levels eroded closer to new-crop delivery levels. For the week, US average soybean basis fell 17 cents a bushel, while corn managed a positive 2-cent gain.
In corn, basis levels firmed mostly thanks to strength out of the ethanol sector which posted a 3-cent gain on the week. Western Cornbelt plants saw more improvement than the East this week as double digit gains were noted at plants from Iowa, Minnesota and North Dakota. At river terminals, basis levels were off sharply giving up 6 cents this week. Barge rates were up sharply this week helping push basis levels down along the river system. For spot versus new-crop, there is little premium difference for spot delivery as old-crop supplies are abundant. This week, basis levels for spot delivery are fetching only a 3-cent premium over new crop delivery.
For soybeans, spot premium levels plunged this week reaching a 30-cent premium over new-crop delivery after being at 48-cents last week. Soy crushing plants had the biggest loss this week giving up 23 cents on average, while river terminals dropped basis by 11 cents a bushel.
Grains Mixed Headed Into a Long Weekend
The grains are mixed as traders head into a long weekend. Precipitation expected late in the weekend is expected to benefit the crop.
In the overnight session the grains traded a bit higher with corn up 1/2 a cent, soybeans up 3 cents and wheat up 2 1/2 cents this morning. The outside markets are weaker with the mini Dow down 1.14 percent and the e-mini S&P down 1 percent. The U.S. dollar is trading mostly unchanged at the moment. This morning it was announced that job growth increase was less than expected last month as non-farm payrolls increased 173,000 in August, down from 245,000 in July. Unemployment fell to 5.1 percent, a 7 1/2 year low.
Rains are expected to cover most of the Midwest next week with the heaviest precipitation expected between Sunday to Tuesday. The precipitation should be up to 5 inches in parts of Kansas, Nebraska, Missouri, Iowa and the northern parts of Illinois. Despite the expectation for heavy rains there seems to be little concern that the precipitation will result in damage to the crop. Currently the early freeze risk remains very low.
Keep in mind that Monday is a Holiday and the grain markets will be closed until 7 PM CST when the night session opens for Tuesday’s trade. On Friday the 11th, the USDA will release their latest Crop Production report and Supply and Demand report at 11 AM. The latest 3rd party yield estimates have revised their corn and soybean yields higher from last month but few have lifted them to the current USDA forecast. Planalytics see’s corn yield potential shrinking slightly in its latest forecast as the heat throughout Midwest speeds up the maturity process and limits the maximum yield potential.
Big Surprises for New Crop Export Sales
Cody gives an update on global news, export sales, and yield forecasts.
New Crop Soybeans Outperform
New crop soybeans booked export sales better than expectations this morning helping support the prices.
In the overnight session the grains are trading lower with corn down 3 1/4 cents, soybeans down 3/4 cents and wheat down 4 1/4 cents this morning. The U.S. dollar index is trading higher by .67 percent and crude oil is down 20 cents.
Ethanol production fell 4,000 barrels per day last week to 948,000 barrels per day. Ethanol production has been in a seasonal decline since early June but continues to be well ahead of the four year moving average and last year’s production levels. This week’s production was 27,000 barrels per day over last year’s production and 87,000 barrels per day over the four year moving average. Ethanol stocks also increased last week by 374,000 barrels to 19 million barrels of ethanol this week.
Export sales were positive for new crop with corn, soybeans and wheat all meeting expectations late in the marketing year. Old crop corn booked 112,700 metric tons which was within the range of analyst estimates and much better than last week’s cancelations. Soybeans also showed positive sales with 60,500 metric tons which actually beat the high side of analyst expectations. Wheat was on the low end of trade expectations which ranged from 250,000-500,000 metric tons by booking 277,500 metric tons, less than half of what was booked last week.
New crop sales were very strong for soybeans but disappointing for corn. New crop soybean sales totaled to 1,532,800 metric tons which was better than expectations which ranged from 700,000-900,000. This morning’s export sales report was accompanied a reportable sale announcement of an additional 110,000 metric tons of U.S. soybeans to China and another 773,400 metric tons of U.S. soybeans to unknown destinations. New crop corn sales only totaled to 328,300 metric tons below expectations which ranged from 500,000-700,000 metric tons.
Strong Ethanol Production
Although ethanol production declined slightly this week there are signs of long term strength.
Can Corn Hold Support?
The corn market is trading next to a critical price level which has acted as support multiple times since January.
In the overnight session the grains traded slightly lower with corn down 1/2 a cent, soybeans up 3 cents and wheat down 3/4 of a cent. The outside markets are somewhat positive this morning with the Mini S&P up nearly a percent, the U.S. dollar index up .38 percent and crude oil down $.64 this morning. Corn is hovering right around a critical support level of $3.65 which it has tested two times in the last three weeks. If corn closes below $3.65 today, probability increases that prices move another leg lower.
Last night at 3:30 CST, FC Stone released its latest yield and production forecast. Their latest corn yield forecast was set at 165.9 bushels per acre up from 165 which it estimated last month. This is on the low end of expectations right now with Planalytics yield estimate at 166.8 bushels per acre, the USDA at 167.2 bpa and Pro Farmer at 164.3 bushels per acre. Corn production was estimated at 13.457 billion bushels from 13.381 billion last month.
FC Stone pegged the national average soybean yield at 45.4 bushels per acre up from 45 last month. This is still on the low end of estimates with Planalytics yield forecast at 46.2 BPA, USDA at 46.9 BPA and Pro Farmer yield at 46.5 BPA. FC Stone is looking for 3.791 billion bushels of U.S soybean production, up from 3.797 billion bushels this month.
Traders await the September WASDE report set for release at 11 AM CST on the 11th. NOPA crush numbers will then be released on the 15th of this month.
Will Corn Continue to Move Lower?
Cody reviews the world news and yield forecasts to see whether or not corn prices will continue to decline.
Soybeans Pressured By Negative Manufacturing News Out of China
The soybean market is being pressured this morning by negative manufacturing news out of China which has triggered a selloff throughout the Global market.
In the overnight session the grains traded lower with December corn down 4 cents, November soybeans down 8 1/4 cents and December wheat up 2 cents. The outside markets are sharply lower this morning with the Dow down 2.5 percent and crude oil down $2.13 dollars after surging $4.00 higher yesterday. The global markets are lower this morning after China’s official manufacturing purchasing managers index for August fell to 49.7 from 50 in July. This marks the lowest level for the index since August 2012.
Crop conditions this week showed that corn good-to-excellent ratings declined 1 percent to 68 percent this week which was in line with analyst expectations. As of Monday 92 percent of corn was at Dough stage and 60 percent of the crop was Dented. Soybean conditions remained unchanged at 63 percent rated good-to-excellent this week which was better than expected.
Export inspections were strong this week with corn recording 1,000,175 metric tons beating the average guess which ranged between 775,000-900,000 metric tons. Soybeans was on the high side of expectations with 184,285 metric tons inspected for export, and Wheat beat expectations with 601,639 metric tons inspected at ports compared to the average guess of between 275,000-400,000 metric tons.
The Planalytics Agribusiness Weather brief showed that this week’s temperatures will remain above normal throughout the Midwest with chances of precipitation through eastern South Dakota, eastern Nebraska and Minnesota on Sunday. The 6-10 day forecast looks to bring wide coverage of precipitation throughout the corn and soybean belt with above average temperatures.