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Archive for July, 2017

Market Report

Wednesday July 12th, 2017

September corn closed down 16 ¼ at $3.85 ½ and December 17 corn closed down 15 ½ at $3.98 ¾. August beans closed down 8 ½ at $10.20 ¾ and November 17 closed down 9 ¼ at $10.34. September wheat closed down 16 at $5.37 and July 18 closed down 14 ½ at $5.90 ¾. Crude oil closed up $.43 at $45.66.

The corn market sent new longs scrambling for cover on report day, finishing $.16 lower. Bearish headlines from the report, along with a less-threatening two week weather outlook, both conspired to take some of the new-found vigor out of corn. The funds were viewed net sellers of 25,000 futures today, which would re-establish them as a decisive net short in the market. The government report really didn’t say much new. As the data did not include any objective yields and incorporated elements previously-reported back on June 30th. The only real surprise was that the USDA did not take into account lower yr/yr condition ratings in their yield methodology. They left 17/18 yields at a trend-line 170.7 bpa. The up-tick in acres resulted in roughly 200 MB extra production to “play with” relative to the June report. Carry-in stocks from 16/17 also received a modest boost due to the large quarterly stocks data. They reduced feed/residual demand by 75 MB. The end result was a 215 MB increase in 17/18 US corn carryout forecasts to a very comfy 2.325 BB. This bled into higher world carryout numbers as well. 17/18 world stocks seen at 200.8 mmt, up from 194.3 mmt in June and 195+ expected.

Soybeans closed lower for the first time since June 23rd as the market works to correct its overbought posture. During this time the market rallied $1.40 from low to high and featured to gaps that remain open. Beans ran into contract highs which has stalled momentum for now and the market is looking for more inputs in deciding whether we have another wave higher or we have come far enough. The weakness today was triggered by rains for parts of the corn belt and a mid-day outlook suggesting more moisture for the coming two weeks, it also came from liquidation of length ahead of and following the USDA crop report which featured tighter US ending stocks but increasing world stocks numbers for beans. US old crop stocks tightened by 40 mb to 410 mb compared to trade estimates for 430 mb as exports were raised by 50 mb to 2.1 bb while crush was reduced 10 mb to 1.9 bb. New crop stocks tightened by 13 mb to 460 mb compared to trade estimates for 495 mb on the lower beginning stocks and an uptick in harvested acres and no change to exports or crush.  In the WASDE global soybean stocks in the old crop were raised by 1.6 mmt to 94.78 mmt and new crop stocks were also raised by 1.3 mmt to 93.53 mmt.  There were no changes made to Southern Hemisphere crops with Brazil at 114.0 mmt and Argentina at 57.8 mmt.

The wheat complex started the evening lower, and remained weak throughout the night with trade entering the morning break lower across the board. Trade remained on the defensive leading up to the report, and the data just reinforced that thinking. On the report front, total winter wheat production came in at 1.279 BB vs June’s 1.250 BB. We were looking for an increase from June, but it was a larger than expected with the increase coming out of HRW. The USDA pegged HRW wheat production at 758 MB vs June’s 743 mil. Again, a small increase was expected, but don’t think traders were expecting a 15 mil increase. The USDA pegged SRW wheat production at 305 mil bu vs June’s 298 mil and in line with expectations. White winter was also in line with expectations, with the USDA putting it at 216 MB vs June’s 209 mil and expectations of around 212 mil.

Anna Kaverman

Market Report

Tuesday July 11th, 2017

September corn closed down ¼ at $4.01 ¾ and December 17 corn closed down ½ at $4.14 ¼. August beans closed up 4 ½ at $10.29 ¼ and November 17 closed up 4 at $10.43 ¼. September wheat closed up 3 at $5.53 and July 18 closed up 3 ¼ at $6.05 ¼. Crude oil closed up $.63 at $45.23.

The corn market turned a little more choppy after Monday’s rally, as rains gave bulls some pause as to whether they wanted to chase corn over $4. Futures were weak to start, but firmed back up once the mid-day runs injected fresh weather uncertainty into the trade. The funds were estimated small net sellers of the day, as they hang with a small net short position in the market. Tomorrow’s USDA report and continued weather uncertainty likely left many traders content. Most expect the July WASDE to have some bear feature, as the USDA incorporates elements of the June 30th report into the balance sheet. 2017 acreage will come up, as will 16/17 carryout. The only question really is just how much the gov’t has to adjust yields at this juncture. The answer is “probably not much”, but they tend to weight crop ratings some this time of year, which likely hints at a small reduction in corn yields for 17/18. World statistics could also be addressed, and it is very possible the USDA may have to raise South American production one more notch. Ahead of the USDA report, Brazil’s CONAB raised full year corn projections to 96 mmt, from 94 mmt in the prior forecast.

Soybeans sold off overnight as rains moved through parts of the Midwest including Central IL where crops were needing a good drink. In addition, the new crop bean rally uncovered some fresh farm selling on new highs. The USDA crop report is out tomorrow and the charts had become overbought on a near term basis. The bean market had numerous reasons to correct the rally but we could not sustain weakness with the market reversing back to the topside during the day session as the forecasted heat and the less certain crop potential trumps all, for a moment. Mid-day weather forecasts hinted that the ridge could strengthen and drift further into the center of the corn belt than previously advertised by the middle of next week and into the eastern/southeastern belt by the 24th. World Weather noted caution that this model was overdone but this would be a more threatening set up if it were to verify. Bean supplies are not tight domestically or globally and that will be highlighted in tomorrow’s report, at least for a few minutes, but the focus is on the threat to US production and the market is pricing in that uncertainty.

The entire grain complex started the evening strong based off the continued deteriorating condition reports from Monday afternoon. Much of the early part of the day saw trade remain on the defensive in both Chicago and KC, but Mpls was trading a little better. By midday, Chicago started to resurrect itself and over the late stages of the day would actually become the leader of the complex. As we look ahead to tomorrow, it is all about the Crop Report in the morning. The average guess for US spring wheat production is around 416 MB vs 448 MB in June, but some traders are already penciling in a sub 350 mil crop, and heard as low as 320 MB as the heat and dry conditions has hurt what crops remain.

Anna Kaverman

Market Report

Monday July 10th, 2017

September corn closed up 9 ½ at $4.02 and December 17 corn closed up 10 at $4.14 ¾. August beans closed up 23 ¾ at $10.24 ¾ and November 17 closed up 23 ¾ at $10.39 ¼. September wheat closed up 15 at $5.50 and July 18 closed up 16 at $6.02. Crude oil closed up $.21 at $44.60.

The corn market started strong overnight and maintained a solid bid throughout. While it wasn’t quite a “gap ‘n go”, leaving Friday’s close was a vote of confidence in the market. The funds were viewed net buyers of about 25,000 corn today, which would leave them net short still by roughly 40,000 contracts. The latest CFTC report last Friday confirmed aggressive short-covering into July 4th. The weather picture continues to hold mixed feature. Beneficial rain fell overnight from NC to E Iowa and N Illinois, but some of the driest areas in SE Iowa and C Illinois missed out on significant rainfall. The next week is expected to bring more showers, centered mostly on the Eastern Belt and portions of MN & IA.  Worries will persist over the Western Belt drying down ahead of pollination, particularly with ridge talk front-and-center. After the close, the USDA confirmed ideas corn conditions slipped during the reported week.  National Good-Excellent ratings dropped 3% wk/wk to 65%, which compares to 76% seen this time last year. The percentage of crops rated Poor-Very Poor at 10% are double levels seen in 2016. On a state-by-state basis, rating declines were broad-based, with more states losing a little than gaining a little.  19% of the crop is now silking nationally, down 8% from average.

Soybeans continued their rally into new highs on the hot/dry weather forecasts that have shorts running for the exits and new longs also hopping on board. The forecasts are not completely dry with the center and eastern belt to see rains near term while the western belt and northern plains crops will not and those crops will be most directly in harm’s way of the heat/dryness starting mid-month spreading from west to east in addition to parts of Canada. New crop hedging was active today as November beans met and exceeded its contract high established in last fall. The charts in beans and meal gapped higher and led the rally the past couple day because that is where the shorts are at while oil has quietly been tugged into a good technical trade too. Bean supplies are not tight domestically or globally, but the focus is on the threat to US production and pricing in uncertainty.  Crop progress report showed soybean conditions down 2% to 62% good to excellent which was about as expected.  The states that saw the biggest decline were IL -4%, IA -5%, KS -3%, KY -2%, MS -2%, MO -4%, NC -5%, OH -5%, SD -2% and TN -2%.  34% of the crop is blooming which is up from 18% a week ago and 2% ahead of the 5 yr avg. USDA crop report on Wednesday – avg. trade est. for US soybean production is 4.243 bb on a 47.9 yield. This report will use the June 30th acreage of 89.5 million which was a slight increase from the March planting estimate.  Ending stocks are estimated at 430 mb in old crop and 473 mb in new crop.  World stocks are estimated at 93.12 mmt old crop and 92.14 mb new crop.

The wheat complex started the evening strong, continued to extend gains through the night and although trade remained firm through the day, the $5.50 level seemed to be a magnet to trade for Chicago Sept. There were a few factors over the weekend that was supportive to trade and influential to the overnight price action. First off we have continued hot and dry conditions for most of the western belt. This is driving trade across the entire sector. Also, we had the GASC tender that wrapped up on Saturday that was more than six dollars above their previous tender. And we had a COT report Friday afternoon that if taken by what the data showed, show the funds were not nearly as big of buyers during wheat’s latest run than anticipated. Condition reports this afternoon showed more deterioration in the Spring wheat crop. Spring wheat conditions were off 2% from a week ago (in-line with expectations), and now stands at 35% G&E. Last year was 70% G&E. Total Spring wheat crop is now 39% P&VP, which is a jump of 6% from last week. Only one state saw improvement and that was Montana which was up 3 to 11% G&E.

Anna Kaverman

Market Report

Thursday July 6th, 2017

September corn closed down 1 ½ at $3.90 ½ and December 17 corn closed down 1 ¼ at $4.02 ¾. August beans closed up 4 at $9.85 ¾ and November 17 closed up 5 at $9.99 ¼. September wheat closed down 21 at $5.39 and July 18 closed down 9 ¾ at $5.90 ¾.

The corn market had another rather “confused” day, though we likely established today that the market does not want to break particularly hard. Traders had a great excuse, particularly with MPLS wheat futures trading as much as $.50 lower and rains in the immediate forecast. Yet corn finished the day just a penny and change lower. The funds were viewed small net buyers of the day as they pare back their net short in corn back to roughly 100,000 contracts. CFTC data will be out at the usual time (Fri PM). The Midwest will continue to see an erratic distribution of rain and few long-lasting periods of hot and dry weather through the next two weeks. Important rains are slated to fall Sunday into Tuesday, with a potential boost July 13-15. The eastern Dakotas, western Minnesota (both of which are already seeing some stress), western Iowa and Nebraska may be exceptions?  Plenty of “ridge” talk as different computer models have the event in different places around the country. Informa did not seem too concerned, pegging US yields at 169.7 bpa.  They are likely trying to “guess” the USDA’s yield in their July crop report, due next Wednesday.

Soybeans shrugged off overnight weakness to extend its rally to new highs including a new crop trade above $10 that was met with pretty good selling at a flat price level not seen in nearly 3 ½ months.  Afternoon maps are hot/dry once you get past this coming 5 day stretch – the market isn’t likely to set back very much in this environment. The feature trade today was the weakness in oil which has slipped from 35.4% 3 days ago to 33.8% on today’s settlement. Soybean oil did a good job of fighting off the EPA snub yesterday but today the market was right back under pressure in both flat price and a very active trade in the oil share. The next key to watch for in soybean oil from a regulatory standpoint is the potential imposition of an anti-dumping tariff on biodiesel imports from South America which has been discussed as part of the new administration’s approach to our trade deals and would in affect increase our domestic production. Elsewhere in the news, Informa estimates the US soybean crop at 4.253 bb using a 47.9 bpa on 88.8 million harvested acres.  Very close to current USDA numbers. 

The wheat complex was sharply lower overnight with Mpls trading as much as $.55 lower at one point. Both Chicago and KC traded as much as $.25-$.26 lower. Trade recouped some of those losses by the morning break, and continued to battle back during the early stages of the day. Mpls found some pretty good selling above $8.00 in the Sept. There really was no fundamental reason behind the sell-off, so chalk it up to technical selling following the wheat complexes strong recent move. Maybe we can also contribute part of the selling to Informa’s larger than expected production estimates (below). Informa released new production estimates this morning, and they were eye popping to say the least. They pegged total wheat production at 1.783 BB vs the latest USDA estimate of 1.824 BB(above most trade estimates). US winter wheat was pegged at 1.281 BB, which is 31 MB above the USDA June estimate (also above trade estimates).

Anna Kaverman

Market Report

Wednesday July 5th, 2017

September corn closed up 3 ½ at $3.92 and December 17 corn closed up 4 ¾ at $4.04. August beans closed up 11 ¾ at $9.81 ¾ and November 17 closed up 13 ½ at $9.94 ¼. September wheat closed up 5 at $5.60 and July 18 closed up 4 ½ at $6.00 ½.

The grain markets had a rather “confused” day of price action upon their return from the July 4th holiday break. The highs were made on the rare 9:30 AM “hard open” (ie: no night session), the lows were made not long after, and futures spent the rest of the session battling back. In the end, corn closed 3-4 cents higher, and have rebounded $.25 off last week’s lows in just four days of trade. 30 down, 25 up – welcome to summer!  The funds were net buyers of 10,000 corn today, which would trim their net short back to roughly 105,000 contracts. Weather remains a rather mixed bag for corn, and it seems as if everyone has a slightly different opinion. Hot and mostly dry weather led to increasing levels of crop stress in much of the eastern Dakotas and western Minnesota early this week. Elsewhere, several rounds of timely rain are expected over the next two weeks, along with “not too hot” conditions. These rains will likely not be “soakers”, so follow-up precip is critical as we delve deeper into July, particularly with pollination on the horizon. Condition reports were a little surprising, as the USDA found a 1% up-tick in US Good-Excellent (G-E) corn ratings.  This season’s 68% G-E is still well behind 2016′s 75% G-E.  More states saw improvements than not, though the Dakotas, Ohio, PA, Iowa, and Colorado, all saw declines. After exhausting the markets with countless delays and false starts, the EPA finally published a proposal for 2018 biofuel mandates.  The stats offered no real surprises, as the 2018 mandate was left unchanged from 2017 at 15 billion gallons, which is the statutory maximum.

Soybeans closed higher for the 7th consecutive session since making a new low last month ($.77 ago) which has August beans challenging their May high while new crop has exceeded their May high and is trading at a 3 ½ month high with threatening weather forecasts supporting the trade while pressuring the old/new spread. Afternoon crop conditions were off 2% in soybeans to 64% good to excellent which compares to 70% this time a year ago and 66% 5 yr avg.  The states that saw the most improvement were LA +4 and MS +2 while the states that saw the biggest declines were IA -2, KS -2, MI -3, MN -4, MO -2, ND -5, OH -2, SD -3, and TN -4.  Beans are 18% blooming up from 9% last week and about in line with the 5 yr avg. The long awaited and overdue details on the EPA biofuels targets came out today with a surprise reduction in the 2018 biofuels mandate, reportedly, to 4.24 bln gallons (4.28 current mandate). The soybean oil market has been anticipating an increased mandate which would have added to domestic demand so this was a let-down for the oil bulls.  Soybean oil crashed on this headline initially but found underlying support and bounced back to settle unchanged in an impressive performance all things considered.

The wheat complex had a hard opening this morning, a rarity in this day and age, and what it did was provide a lot of uncertainty and volatility to the markets. Mpls was the leader early on, racing out to more than $.51 higher, with Chicago trading around $.20 higher and KC trading around $.18 higher. Those strong gains were short lived. Shortly after the opening, the CME announced that they were going to increase margins in both KC and Chicago wheat. Many, many times this is perceived as a big negative when the market is on a rally, and very supportive when the markets are on a break. Prices in both Chicago and KC dropped $.27-$.29 initially, rallied back $.15 or so, than sold off again when Mpls prices dropped more than $.60. Price action quieted midday slowly gravitating back towards unchanged, before firming into the close. Overall winter wheat conditions were down 1% from a week ago, coming in at 48% G&E. By class, the HRW wheat crop came in at 44% G&E, up marginally from last week. Kansas, South Dakota and Nebraska were each up one to 2%, while Colorado and Oklahoma were each down 4%. The SRW wheat crop came in at 69% G&E which was down one from a week ago. Ohio was down 4% while all other states were unchanged.   Winter wheat harvest moved up 12% from a week ago and is now 53% complete (slightly behind expectations).

Anna Kaverman