Monthly Archives: May 2017

30 May 2017

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  • Soybean futures break down In technical trade, following last week’s break to the downside, soybean futures shrugged off old crop export demand and extended losses in Monday’s trading. Ahead of the morning open, the USDA announced an export sale of 130,000 mtof old crop soybeans to an unknown destination. After the close, NASS reported national planting progress at 67% complete, versus 53% last week and the five year average of 68%. MN is leading the Cornbelt states with 81% of it’s crop in the ground, trailed by IA at 77%. IN and OH were each at 54% complete, and both states were 17 points behind their five year averages. 37% of the US soybean crop was reported emerged, just behind the average of 40%. Old and new crop soybean contract’s are now deeply oversold, with funds sitting on the largest net short position in over a year while hedgers are still holding a rare net long position. Support should be found in July ’17 futures around or just below $9.00/bu.
  • Corn falls on weather; crop rating lower than expected: Somewhat expectedly, Chicago futures start the summer season lower on a modestly improved US forecast. Additional soaking rain is absent through the next 10 days, and temperatures will eventually reach into the mid/upper 70s across much of the Corn Belt by mid-July. Planting and emergence dates continue to track close to normal, though crop conditions provide evidence of this season’s less than ideal start to the growing. Funds are estimated to hold a net short in Chicago worth 193,000 contracts. The US crop is rated at 65% good/excellent vs. 72% a year ago and the lowest since 2011. Ratings are decent across the Plains and W Corn Belt, but are concerning in the East. IL’s crop is pegged at 52% good/excellent, down 19% from last year, IN’s crop is pegged at 43% good/excellent, down 26% from last year, and work suggests without improvement US yield potential is no better than trend. In the primary corn belt, only NE conditions are better than last year. We also mention that Gulf corn for spot delivery is priced at parity with S American origin, and ethanol margins have rebounded quickly following the break in corn.
  • Wheat ends down; world cash market still firm. Wheat futures followed corn and soybeans to moderate losses, though as the US dollar weakens Gulf wheat remains competitive in the world market for spot delivery. Russian cash prices have rallied slightly and origination issues persist, and Gulf SRW is not only the world’s cheapest origin, but also holds a sizeable discount to EU and Black Sea wheat. US wheat crop conditions remain well below last year. Winter wheat conditions fell 2 points to 50% good/excellent vs. 63% on this week a year ago. Declines of 4-5% are noted across the Plains, and early harvest results continue to feature very low protein levels. Spring wheat is rated at 62% good/excellent vs. 79% a year ago and the lowest in late May since 2008. We remain somewhat concerned about high protein wheat availability. There is also increasing concern about developing drought in E Ukraine, where 30-day rainfall in some areas now rests at 20-40% of normal. Record old global stocks must be worked through, but increasingly wheat is viewed as cheap below $4.20, spot Chicago, as N American weather has been far from ideal, and as for the first time in years the US is competitive with Europe for summer export demand. Egypt released its first tender for new crop supply this afternoon, the results of which will be watched closely by cash traders on Wednesday

 

25 May 2017

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  • Firmer markets in Chicago’s early trading were not sustained with an improved C US weather forecast pressuring prices lower. Weaker crude oil prices added to macro selling as the bulls decided to bank what profits they had ahead of another extended weekend break.
  • Soybeans were the leader lower as Chinese soybean meal demand slowed down, potentially weakening an already pressured (negative) crush margin. Other fundamental news has been limited today. Rangebound and choppy prices are expected into the long weekend break. Heat and dryness is not anticipated to any real degree this summer (as of today’s longer term outlook), and whilst not ideal right now as growers wish to see establishment and early growth pick up, the potential damage that heat and dryness can inflict in full summer would seem to be longer term yield/output positive.

24 May 2017

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  • Wednesday has been dull with trade either side of unchanged and grain closing a shade higher with soybeans closing marginally lower. Clearly many are waiting for the verdict on whee weather will take us in June before making key decisions.
  • Choppy and indecisive looks to be the trend in the short term, with clarity awaited as far as crop making weather conditions are concerned Current forecasts offer cool and wet conditions across E Midwest US areas and variable but drier conditions across Plains and W Midwest regions. Prices remain historically low, at their lowest June numbers in six years, and this is leaving downside struggling as sellers are reluctant to say the least.

23 May 2017

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  • It is probably fair to report that the corn market in the US is heavily short as we enter the heart of the N Hemisphere growing season, indeed, the funds are sitting on the second largest net short corn position on record. This does not lend itself to a bullish trend, however such a position does mean that in the event of a weather scare any rally will likely be more significant than would otherwise be the case.
  • Soybeans closed down in Chicago today on the back of weaker S America currencies and early strength was quickly attracting sellers, which saw prices capped early on and pressure remained in place until the close. The weaker currencies continued to see further availability of supplies coming to market. The Argentine Peso has dropped to all time lows whilst the Brazilian Real is at a five month low.
  • Some of the recently introduced weather premium in corn has been removed as fresh news is lacking and crop progress shows plantings catching up.The surprise is that the corn crop is so highly rated across the Delta and W Midwest which missed the recent flooding rainfall that affected so much of the cropped area.
  • Wheat markets ended weaker on the back of the latest crop condition report and a somewhat stronger US$. EU wheat followed lower on the back of US crop ratings. Aside from this the market is seeing lower volumes and the lack of fresh news is clearly evident. US wheat’s discount to EU origins is clear to see, and is now, in the case of SRW, is the world’s cheapest milling origin, albeit of lower quality than some competing origins. Discounts of as much as $15 to Bench are evident today. It feels very much as if, without above trend line yields in Black Sea and EU cops, downside in prices are very much limited.New crop Russian offers appear to be close to levels we would view as being potential season lows and whilst upside may be a while in coming, there feels limited reason to search for significant further discounting right now.

22 May 2017

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  • US wheat crop condition data has been released as follows:
  • Today has seen weather premium being added as cool to cold conditions and further light rains have continued across the Midwest and remain forecast for much of the coming week. Concerns are growing that crop development delays will result in reduced yield and overall output.
  • Crops are struggling in the US right now and it will be June weather that will be the saviour, if improvements are seen. The crops are shallow rooted and any lasting heat or dryness will cause stress levels to rise. Fund short positions remain a point to watch with a wary eye as any change of heart could well see prices receive a sharp upward shock.
  • Soybeans continued higher as it seems selling that was tied to the Brazilian currency was largely done and dusted last week, and US weather has taken over trader’s focus. US soybean planting progress reached 53% vs. 56% last year and a five year average of 52%. Despite climbing ahead of the average there is no doubt the crop needs warmth.
  • Corn in the US added modest weather premiums today and US$ weakness added further support. The US corn crop reached 84% planted, the same as last year and almost on the longer term averages. Condition of the crop is mixed and we await official data starting next week. Warmer and dry conditions will go a long way to helping the crop develop its full potential/
  • US wheat futures were supported by US$ weakness and EU prices were buoyed despite €euro strength. Global exchange rates are assisting US demanding  with prices at multi yea lows it is tough to support a bearish outlook. Lasting heat and dry conditions in Europe and Black Sea would not be welcomed.

18 May 2017

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  • US export data has been released as follows:
  • Stratégie Grains have cut their EU grain harvest estimate by 3.6 million mt to 301.6 million mt, which should also be noted as an increase of 4.5 million mt year on year, but still behind the 2015 crop of 309.8 million mt. Dry conditions have impacted Spain in particular as well as France, UK and Belgium where output is expected to be reduced somewhat. Stratégie Grains’ downgrade reflected a 1.1 million mt cut to 142.7 million mt for soft wheat, and they left the door open for further revision depending upon weather conditions going forward. Barley output was reduced by 1.7 million mt to 59.6 million mt, a multi-year low.
  • Chicago markets have seen soybeans trade sharply lower today, which has pulled the grains lower July ’17 soybean futures have tested, but not broken, key support at $9.40-$9.45. Soybean activity levels have been high, reportedly on the back of a corruption charge that is evolving against Brazilian President Temer, which it is suggested may well lead to his downfall in coming weeks. The news has left the Brazilian currency around 8% lower today, back at levels last seen in December 2016, around 3.38 vs. US$. The future of leadership in Brazil is once again far from certain, and as we all know – markets hate uncertainty! The falling Brazilian Real is prompting higher cash values in Brazil, which is prompting farmer selling, which is in turn pressuring futures prices.
  • If one thing is for certain, it is that trading Brazilian politics is a whole lot tougher than trading weather markets! Cash soybean selling in Brazil is prompting some large fund sales in Chicago. US crops are off to a less than ideal start and cold/wet conditions look set to persist into late May. We are struggling tom advocate either side of the market, bullish or bearish, at this time.

17 May 2017

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  • When you think about the price of protein wheat, it’s just plain cheap! The chart below reflects HRS wheat futures dating back to 1992 and notice that last year’s fall to $3.85 spot futures tested a monthly uptrend line that extended back to 2002. If this trend line holds, it means that July or September MGE wheat could test $4.94-5.00, but amid a potential shortage of US protein wheat, we doubt that there is much additional downside price risk. In addition, with crop damage befalling the US HRW wheat crop it would seem that there is not much to be made of being bearish wheat! 

  • Today has seen higher grain prices in Chicago, and this has pushed through into EU prices in both Paris and London. Soybeans are currently trading around unchanged. Short covering in the grains has been the order of the day. Egypt’s latest wheat tender saw a massive 295,000 mt purchase with supplies being secured from Romania, Ukraine, Russia and the USA for mid to late June shipment. The lowest priced offer was for US HRW (basis fob) at $185/mt, highlighting the competitiveness of this origin on the latest price break. Seemingly, lower protein HRW prices basis US Gulf are also declining. Also of interest is the fact that Russia’s 240,000 mt offered price levels at $198-205/mt suggest that recent offers (well below these levels) were somewhat underpriced  and questions over Russian physical availability bear asking. The US competitive position, despite freight disadvantage, is not in dispute, and prices are reacting higher as a consequence.
  • Our view is that we are at a point  where it would be foolish to be bearish agri commodities today. US wheat is competitive, particularly (and importantly) with Black Sea and EU supplies through to mid-summer.