Global Markets Try to Rebound
Global markets will be a major influence on the grains as markets try to rebound after hard selling early on this week.
In the overnight session the grains traded lower with corn up 1 cent, soybeans unchanged and wheat up 1 1/4 cents this morning. The U.S. dollar is trading up .38 percent and crude oil is 34 cents higher this morning. This morning the U.S. stock market is expected to open higher after a rally in European markets. China however, which has been the driving force in the recent sell-off, has been unable to see a market gains since the PBOC lowered interest rates yesterday. The Shanghai composite index fell another 1.27 percent last night.
The volatility over the last two days has triggered two reportable new crop soybean sales to be delivered to unknown destinations totaling to 330,000 metric tons. Despite this week’s sales, new crop soybeans has still only booked around 68 percent of sales volume compared to what we typically see around this time period.
Weather looks to remain cool and dry this week except for the western grain belt which should receive above average precipitation in the middle of this week. The 8-14 day weather outlook shows moisture forecast for the northern parts of the grain belt which should aid crops in main growing regions. Currently, there is no significant threat of an early freeze.
Selling Pressure Starting to Spur Export Sales
Cody reviews soybean and corn technicals and looks at the upcoming weather.
China Lowers Rates to Support Sliding Markets
China made a move to lower interest rates in an attempt to turn around a sliding market.
In the overnight session the grains are trading higher with corn up 5 cents, soybeans up 14 1/4 cents and wheat up 6 1/4 cents. The U.S. dollar is trading .76 percent higher and crude oil is up $1.17. After experiencing another sharp day of selling, China announced they were cutting interest rates for the 5th time since last November and supplementing that with an additional move to lower the reserve requirement at major banks. This announcement triggered an immediate rebound in the market after 5 days of selling.
Export inspections were in line with analyst expectations with wheat showing 277,922 metric tons inspected for export. Corn recorded 883,987 metric tons inspected for export which was within the 825,000-1,000,000 metric tons expected by analysts. Soybeans recorded 210,128 metric tons inspected for export which was also on the high side of analyst expectations.
On Monday, Argentine farmers started a five day crop sales strike to help bring farm policies to the front of attention during an election year. Farmers have not been satisfied with the policies of President Cristina Fernandez saying that her policies have damaged profitability.
This week should remain cooler than normal throughout the Midwest with precipitation expected during the middle of the week in the northwestern part of the grain belt. According to the latest crop conditions report 87 percent of the soybean crop is pod setting which is on par with the 4 year average. Corn conditions remained unchanged this week at 69 percent rated good to excellent. Soybean conditions also remained unchanged.
Global Markets Impact U.S. Grains
Cody breaks down the continued downtrend for soybeans and looks at positive crop progress numbers.
Macro Selling Pressures Corn Lower
The grains couldn't escape the selling that has left the Shanghai index down 8.49 percent at the close.
In the overnight session, the grains are trading sharply lower with corn down 10 cents, soybeans down 31 1/4 cents and wheat down 8 1/2 cents today. The U.S. dollar index is trading down 1.26 percent and crude oil is trading down $1.57 at $38.875 per barrel. This morning a global sell-off is pressuring the grains lower with the Shanghai index closing down 8.49 percent, Japan’s Nikkei 225 down 4.61 percent, the German DAX down 3.73 percent. Corn, Soybeans and Wheat are not immune to this sort of macro selling and have moved sharply lower this morning. This morning a reportable export sale of 120,000 metric tons of new crop soybeans did little to slow the slide in prices.
On Friday, Pro Farmer announced its national corn and soybean forecasts after touring the U.S. from Ohio to South Dakota last week. Pro Farmer sees 2015 corn yield at 164.3 bushels per acre compared to the current USDA’s August forecast of 168.8 bushels per acre. Pro Farmer’s soybean forecast was lower than the USDA by .4 bushels per acre at 46.5 bushels per acre. Pro Farmer pegged 2015 corn production 363 bushels below the current USDA projection at 13.323 billion bushels. Soybean production is estimated at 3.887 billion bushels.
The EU crop monitor cut its forecast for corn yield to 6.4 tons per hectare, down 4.6 percent from last month’s forecast. The EU crop monitor kept its yield forecast for soft wheat mostly unchanged at 5.81 tons per hectare.
Soybean Prices Continue to Slide
Cody looks at why soybeans are continuing to slide and reviews the crop tour.
Weekly Cash Comments
Cash Commentary for week ending 21 August 2015
Divergence was the game this week, as corn and soybean prices continued to move in opposing directions. Corn managed a 7 cent advance in futures while cash basis levels were firmer by 1 cent a bushel, but beans couldn’t shake their negative fundamentals giving up 9 cents on the board and 4 cents on spot basis.
In corn, basis levels were bolstered by modest gains in ethanol plants and a more robust move by river terminals. Ethanol plants showed the most strength in the Western Cornbelt with a handful of plants posting gains of 5 to 10 cents a bushel. But in the Eastern Cornbelt gains by ethanol plants were mostly non-existent with a few plants bidding lower. At the Gulf, bids were up 6 cents a bushel, but increasing barge rates on the week, muted the Gulf’s impact on upstream river terminals with bids up only 2 cents a bushel.
For soybeans, basis levels were off 4 cents a bushels as late-season cash premiums paid by buyers have eroded quickly since the USDA report last week. Soybean plants in particular were hard hit this week, giving up 7 cents a bushel on average and many plants posting losses of 10 to 20 cents on basis for the week. At the Gulf, export basis was 8 cents higher but it had little impact on upstream river terminals which lowered basis by 3 cents on average for the week.
Will Pro Farmer Yield Estimates Lift Corn?
Pro Farmer is set to release its yield forecast for the U.S. after the close of trade today. With some deviation from the August USDA yield projections on a state by state basis, can Pro Farmer's announcement move the market?
In the overnight session the grains were mostly mixed with corn showing relative strength with a 3/4 cent gain. Soybeans slipped 5 1/4 cents lower and wheat fell another 4 cents. The U.S. dollar is trading down .6 percent and crude oil is off 41 cents. Pro Farmer will release its U.S. yield forecast today after the close of trade.
Last night Pro Farmer announced its Minnesota Corn yield estimate at 190.87 bushels per acre which was up significantly from last year’s 170.76 and the USDA’s August estimate of 184 bushels per acre. The scouting tour also counted an 8 percent increase in soybean pods over last year with a count of 1,119.22 in a 3x3 foot area. Pro Farmer estimated Iowa corn yield at 180.25 bushels per acre, down from the August USDA production estimate of 183 bushels per acre. Soybean pod count in Iowa was up 3.8 percent this year with 1,219.21 pods counted in a 3x3 foot area.
In Europe, FranceAgrimer rated the French corn crop 55 percent good-to-excellent this week which was unchanged from the previous week showing some stabilization in the crop after hot, dry conditions stressed the crop this growing season.
China soybean imports rose to 9.5 million metric tons in the month of July, an increase of 27 percent over last year. China’s corn and corn substitutes also hit record highs in July as buyers took advantage of cheap South American prices.
Can Strong Export Sales Lift the Market?
Soybeans have been breaking into new lows recently as the weather continues to be optimal during its most critical development stage. Can strong export sales help turn the grain around?
In the overnight session the grains traded mixed with December Corn up 2 1/2 cents, soybeans down 1 cent and wheat in Chicago up 4 cents. The U.S dollar is down .12 percent and crude oil is mostly unchanged.
Pro Farmer went through Iowa and Illinois on Wednesday and reported at the end of the day its forecast for Illinois is 171.64 bushels per acre which is on par with the August USDA forecast of 172BPA. This would be a 14 percent drop in yield from the previous year. Both Pro Farmer and the USDA are below the latest Planalytics forecast of 176.2 BPA. The soybean pod count was 1,190.47 in a 3x3 foot area which was down 12 percent from the previous year. The Pro Farmer crop tour will be leaving Iowa this morning and scouting crops in Minnesota today. The tour will meet in Rochester, MN and release their final U.S yield projections later today.
Export sales were positive this week falling within analyst expectations for all the grains. Old crop corn booked 282,700 metric tons which beat analyst expectations and soybeans booked a positive 46,400 metric tons which was above the 0-200,000 metric tons expected by analysts. Wheat sales were on the low end the expected range at 314,400 metric tons. New Crop corn and soybeans were on the high end of expectations, with corn booking 576,400 metric tons and soybeans with 784,400 metric tons this week.
Ethanol production was unchanged this week at 965,000 barrels per day. Ethanol production remains well over the 4 year average and significantly higher than last year at this time. Ethanol stocks increased 32,000 barrels to 18.56 million barrels this week.
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Traders Eye Quarterly Stocks
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