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The Huebner report from 1-8-2015

As I sit down to write the commentary this morning we are T-Minus 72 ½ hours until the January USDA reports and it would seem that just about everything else becomes a side issue at this point.  I have often lamented the fact that we seem to place an inordinate amount of emphasis on each and every report issued by the USDA but have to admit that this one is a bit more crucial as it will include a quarterly stocks report and theoretically will set the tone and market parameters into the spring.  While there is the possibility of an element of surprise in the production figures, unless the USDA elects to make a big shift in the harvested acreage, that figure I believe is of a lessor concern to what may show up on the grain stock figure, particularly for beans.  If you recall, it was back in October the government surprised us with a cut in the ending stock of beans for the 2013/14 crop year to 92 million bushels market from the previously estimated 130 million which had been around that level for months of reports.  The question is will the usage for the last three-months now appear 40 million bushels stronger than is realistic due to the fact the we needed to refill this depleted pipeline?  We witnessed a similar situation a year ago in corn.  I guess we shall have to wait until Monday to find out.

While they may be taking a back seat to pre-report anticipation, there are other elements that we need to keep track of.  The weekly ethanol production figures did raise a few concerns.  While you cannot call a production of 279 million gallons poor, that was the lowest number recorded since the last week of October.  This still represents around 100 million bushels of corn usage but was 2 ½ % below the 4-week average and 2% below the 10-week average.  Possibly more telling is the fact the ethanol inventories climbed another 32 million gallons and over the past two months have increased 70 million.

Exports sales were released this morning and were solid on beans but for corn and wheat…not so much.  Corn sales came in at 387,700 MT or 15.3 million bushels, which was down 57% from last week, 55% from the 10-week average and set a marketing year low.  Even though that was a shortened week, it was disappointing.  Top purchasers were Mexico with 251.3k MT, Columbia at 63.4k MT and Japan buying 50.1k MT.  Year to date total sales stand at 1.076 billion, which is about 3% behind the same time last year.  Beans in turn posted a surprisingly strong 910,600 MT or 33.5 million bushels.  This figure was up 49% from last week, 39% over the 4-week average but was still 4% below the 10-week average.  I am sure you will be shocked to hear again that China was the top purchasers with 550.1k MT or 60% followed by the Netherlands at 134.4k MT and then unknown destinations at 60k MT.  The wheat demand appeared to have fallen off a cliff this past week as we sold a mere 151,000 MT or 5.5 million bushels.  This figure was down 57% from the previous week, 61% from the 4-week average and like corn, set a marketing year low.  Evidently no one around the world is having problems securing wheat even in face of all the hype about restrictions coming up in Russia.  The top purchasers were the Philippines with 201.4k MT, Iraq buying 50k MT and Japan for 28.3k MT but much of this was offset by cancellations of 116.8k MT by unknown.

Looking out to Monday, we have a couple more surveys released.  Reuters averages have corn production at 14.349 billion, ending stocks at 1.927 billion and December 1st stock of 11.123 billion.  For beans they came up with total production of 3.956 billion, a carryout of 393 and Dec.1 stocks of 2.59 billion.  Wheat ending stocks at an evil 666 and all acreage at 42.56 million.   The other and we believe more important estimate, particularly seeing that we participate in it, was conducted and released by the Wall Street Journal.  Here we find an average corn production estimate of 14.366 billion with and average yield at 173.5. Carryout at 1.94 billion and December 1st stocks at 11.161 billion. For beans the average estimate for production came in at 3.965 billion with a yield of 47.7.  Projected carryout at 402 million and a December 1st inventory of 2.608 billion.  Wheat ending stocks are estimated to be 663 million.

I suspect we will look at choppy, generally range bound trade between now and Monday.

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