Grains Start the Week on a Strong Note
Grains start higher on Monday, but two reports scheduled for release on Wednesday will dominate price direction for the second half of the week.
In the overnight session the grains traded higher with corn up 4 cents, soybeans up 7 1/2 cents and wheat up 1/2 cent this morning. The U.S. dollar is trading .16 percent higher and crude oil is up 21 cents this morning. Traders will be focusing on the Crop Production report and Supply and Demand report scheduled for release at 11 AM CST on Wednesday. Traders will also be paying close attention to the crop progress to be issued out at 3 PM CST.
Last week both Informa and FC Stone released their yield estimates for corn and soybeans below the existing July USDA forecast. Informa set its corn yield forecast at 165.4 BPA and its soybean yield forecast at 45.4 BPA. FC Stone set its corn yield estimates at 165 BPA and its soybean 45 BPA. The July USDA forecast set corn yield at 166.8 BPA and soybean yield at 46 BPA.
Thundershowers provided relief to some of the drier areas in the grain belt over the weekend and more scattered showers are expected today. The 6-10 day forecasts continues to show drier than normal conditions across the majority of the grain belt with some precipitation expected in the northern areas in the 8-14 day forecast.
France is expected to harvest 28 percent less corn than 2014 after fewer acres were planted this year and dry, hot weather damaged crop development and robbed yield potential. The latest forecast for French corn production is roughly 13.2 million metric tons with an average yield of 8.3 metric tons per hectare. French corn production is down from a production record in 2014 that yielded 10.4 metric tons per hectare.
On Friday, Saudi Arabia bought 505,000 metric tons of wheat in an international tender supplied by a variety of countries throughout the European Union, North America, South America, Australia and Canada. Jordan’s state grain buyer also issued a tender for 100,000 metric tons of corn to be sourced from optional origins.
Will Next Week’s Crop Report be Worth the Wait?
Cody looks at news that may be influencing the crop report next week.
Weekly Cash Comments
Cash Commentary for week ending August 7th
Grain futures were mostly stable this week as traders’ awaited fresh news on the crop supply situation from USDA’s August 12th report. In the cash market, average basis levels across the country were mostly unchanged for soybeans but up 2 cents a bushel on the week for corn.
For corn, export bids at the Gulf were off this week by 3 cents a bushel which put upland river terminals on the defensive for the week. Some terminals slipped as much as 10 cents on the week. The one bright spot was ethanol plants which posted a 4-cent gain on the week. Eastern Cornbelt plants in Illinois, Indiana and Ohio were especially strong with gains of 10 to 15 cents on the week fairly common.
In soybeans, cash basis along the river was dragged lower by Gulf bids that plunged 41 cents this week. Cancellations of old crop export sales in the past few weeks has taken the premium out of spot beans and caused spot basis levels to erode. At soy crushing plants, basis levels put up a 3-cent advance for the week although double-digit moves up or down were fairly typical as plants jockey for late season supplies.
Will soybeans break through resistance?
Will dry conditions in the 6-14 day forecast give soybeans enough energy to finally break above the 100 day moving average?
In the overnight session the grains are trading slightly higher with corn unchanged, soybeans up 3 cents and wheat up 2 cents. The U.S. dollar is trading .35 percent higher this morning and crude oil is lower by 25 cents. U.S. employment figures were better than expected this morning with nonfarm payrolls increasing 215,000 last month giving more justification for the Fed to begin raising interest rates. With the strong employment data this morning the U.S. dollar is rallying against the Euro.
Next Wednesday the USDA will release its August Supply and Demand report and its Crop Production report. This month’s supply and demand report will include the results of the resurveyed planted acreage in the states that were delayed due to excessive rainfall. This month’s crop production report will be watched closely because it is the first survey-based yield projections this year.
This week both Informa and FC Stone released their crop production forecasts below the July USDA report. Informa pegged corn yield at 165.4 bushels per acre and soybean yield at 45.4 bushels per acre compared to the USDA’s July estimates of 166.8 BPA and 46 BPA respectively. FC Stone estimated corn yield at 165 bushels per acre and soybean yield at 45 bushels per acre.
This morning’s updated 6-10 day outlook continues to show dryer than normal conditions across the Midwest and the 8-14 day forecast offers little relief. With 54 percent of the soybean crop setting pods, this dryness could have negative impacts on this growing seasons yield potential. The weather forecast will likely support soybeans after dismal old crop export sales triggered selling near the resistance of the 100 day moving average on Thursday.
This morning the European Commission estimated total cereal output in 15/16 at 302 metric tons, down from 307 metric tons last month and a substantial decline from 329 MT grown last year.
Export Cancellations Pressure Prices
Cody breaks down the export sales reported out this morning and explains what this means to the farmer.
Strong Wheat Sales Lift the Grain
Strong wheat sales helped provide support for the grain, but significant cancellations is putting pressure on soybeans which bumped against the 100 day moving average yesterday.
In the overnight session the grains were mixed with corn up 1/2 cent, soybeans down 6 cents and wheat up 6 1/4 cents this morning. The U.S dollar is higher by only a fraction of a percent and crude oil is down 53 cents this morning. This morning exporters sold 132,000 metric tons of soybeans to China for 15/16 delivery.
Export sales this morning were dramatic with soybeans reporting old crop sales cancellations of 447,300 metric tons which missed expectation which ranged from 0-200,000 metric tons. Soybean sales are still ahead of pace to meet current USDA expectations, but this week’s sales erased all of last week’s sales of 416,700 metric tons. New crop soybeans outperformed this week booking 1,024,200 metric tons which was above last week and above expectations which only ranged between 350,000 and 700,000 MT. Corn sales were also ugly with only 2,700 metric tons this week was a marketing year low for the grain. Expectations ranged from 250,000 to 450,000 metric tons. New crop corn sales missed expectations, only booking 277,000 metric tons. Wheat recorded a marketing year high in export sales this week which is helping to lift the grain in this morning’s session. Wheat booked 838,500 metric tons this week which was well above the 400,000-600,000 MT range of estimates.
Ethanol production declined 4,000 barrels per day this week to 961,000 barrels per day. This is over 100,000 barrels per day over the four year average and 59,000 barrels per day over last year’s production for the same time period. Ethanol stocks declined 409,000 barrels per day to 19.24 million barrels this week.
Soybeans Test the 100 Day Moving Average
Cody looks in the technicals of soybeans as it tests the 100 day moving average. Is this the start of a rally?
Soybeans to test 100 day moving average
Soybeans printed a bullish price pattern in the last two trade sessions. Can it break through overhead resistance at the 100 day moving average?
In the overnight session the grains were mixed with corn up 1 cent, soybeans up 9 3/4 cents and wheat down 1/2 a penny. The U.S. dollar is trading a fraction of a percent lower and crude oil is higher by 73 cents. This morning the ADP jobs data showed that 185,000 workers were added to payrolls in July which was below expectations which ranged from 190,000 to 263,000. Egypt announced a tender for 55-60,000 metric tons of wheat from either the US, Ukraine, Russia or Australia. The U.S. is not expected to win the tender due a stronger U.S dollar and higher prices here in the U.S. Korea also issued a tender for purchase of up to 207,000 metric tons of yellow corn to be sourced from optional origins this morning.
Last night at 3:30 PM CST FC Stone announced their first 2015 corn and soybean production forecast which was below current USDA forecasts. FC Stone’s corn production estimate was 149 million bushels shy of the USDA with 13.381 billion bushels. They see corn yield at 165 bushels per acre compared to a current USDA forecast of 166.8 BPA. Soybean production was also below current USDA estimates with 3.797 billion bushels forecast for the 15/16 marketing year. Soybean yield was forecast at 45 bushels per acre compared to a current USDA forecast of 46 BPA. This morning China’s agriculture ministry proposed to lower corn prices to help support margins for domestic hog producers and lower the prices of pork.
The weather forecast looks to bring some excitement into the market for soybeans as chances of rain in the 6-15 day forecast provide low confidence that extensive showers will relieve the dry spots in northeast Iowa, northern Illinois and southern Wisconsin. Only 54 percent of the soybean crop has set pods making the short rooted crop more vulnerable to dryness in the coming weeks.
Bears and Bulls Continue to Battle it Out!
Cody reviews the chart technicals and weather outlook for the week.
Weekly Cash Comments
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