Monthly Archives: May 2017

16 May 2017

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  • US winter wheat crop condition data has been released as follows:
  • We have seen another day of mixed trade in Chicago with soybeans trading higher and the grains, corn and wheat barely changed. Improved US old crop soybean export prospects have been cited as the driver for today’s price action in soybeans.
  • It would be “normal” at this time of year for volume and/or market activity levels to be high based upon yield risks as we approach the summer period. However, it seems that these risks are not building, indeed they appear to be receding, and the only selling is coming from stale longs in Kansas wheat, which funds are shedding.
  • US corn planting is mostly on a timely basis, the key issue being just how much needs to be replanted due to wet conditions and/or flooding. Soybeans have a better ability to make up for early poor establishment, and are thus differentiated from corn. The question today is whether corn can grow out of its ugliness, and this will be watched closely in the next few weeks.
  • Below to much below normal temperatures will prevail across central US regions for the next few weeks. A peak in temperaturess will be seen in the next 36 hours with a decline thereafter. The cool to cold and wet Plains weather will add to the disease pressure in winter wheat. Soybeans have an export demand story for now with the US making new sales to China in July and August. At some point, and before too long, corn will need more warmth for growth.

15 May 2017

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  • Monday in Chicago sees a stronger soybean complex and weaker grains, led by wheat a volumes appear limited on lack of fresh news input. The soybean rally appears led by strengthening on the Brazilian Real as well as continued uplift in US cash soybean oil values, which is supported by strong domestic demand as well as potential for improved US biodiesel demand on the back of a shutout of Argentine and Indonesian soybean oil due to rising US tariffs. Our explanation for falling IUS wheat values is fundamentally lacking and fund selling appears the only cause. Global cash wheat values are steady to directionless .
  • June and early July are key to Black Sea and EU wheat harvests and the weather in the coming six or so weeks will better define global supplies as US production in 2017 will see a substantial drop from last season.
  • Away from our usual topics, it is the cotton markets that has everyone talking as July futures rose to $0.87/lb, the highest level in three years. It was May 2014 when sport futures were last trading at these levels. The point is that one has to take care when dealing with old and long established bear trends, particularly when demand patterns are strong. Recall our aged mantra of “big crop” vs. “big supply”, and our suggestion that whichever side of the equation emerged the stronger would dictate the likely next price trend.
  • Spain’s cereal organisation has forecast their latest cereal crop at a mere 9.5 million mt, about half that of last year, which will leave them as potentially strong importers in the coming season. Dry conditions and lower pantings will continue to erode crop output. Weather in the next six to seven weeks will be important as further dryness will potentially see further output decline. The UK is also seeing dry conditions and rainfall in the coming six or seven weeks will be influential in  determining overall grain output.

11 May 2017

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  • US export data has been released as follows:
  • Stratégie Grains have reported UK crop condition to be suffering as a consequence of dry conditions as rainfall has been below average again this month. Stress was reported to be evident on areas with light soils, and crops on such land exhibiting signs of stress. Dry conditions have left crops struggling to uptake nitrogen, which has the potential to limit output. A further two weeks of dry conditions have been suggested to significantly impact barley yields .
  • Chicago markets have seen soybeans and corn trade lower whilst wheat has seen price gains. Improved C Midwest weather prospects have led to weaker row crop prices as improved conditions (warm and dry) would assist some of the worst hit wet and flooded regions, particularly better draining regions. Will the weather window last long enough to see significant planting progress or reseeding is the key debate right now. By Sunday it is estimated that 64-68% of US corn and 26-29% of soybeans will be planted, both figures are only slightly behind the five year averages.It is replanting that really needs monitoring, both the area and the timing are important.
  • Corn and soybeans have the potential to ease back price wise as we do not really have a real weather event at this time. It is second half May and later when wet conditions have the potential to impact output. USDA/WASDE new crop demand estimates do not historically change very much from May into August unless there is big drop in the US crop due to drought. Consequently, we can all debate the correctness of US corn, soybean and wheat export estimates for 2017/18, but WASDE tends to move slowly on making adjustment until after the August Crop report (when NASS gets involved on US corn and soybean crops). Thus, it will not take much of a yeild decline to reduce 2017/18 US major grain end stocks and add some spice to Chicago valuations.
  • The recent cold weather across N and W Europe appears to have caused yield loss to the winter crops of wheat and rapeseed. Like W Kansas, it will take some weeks to accurately assess the losses, but temperatures were well below freezing in much of Poland, Germany and portions of N Ukraine in recent days. The UK and France are still sufferig from drought as mentioned earlier  with the forecast offering additional dry weather beyond the weekend. EU winter grain crop output appears to be in decline, the question is trying to gauge the amount at this early date.

10 May 2017

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  • Today’s USDA crop report was initially seen as positive with Chicago corn, wheat and soybeans all a touch firmer but soybeans traded lower into the close. We doubt the data will cause any major trend breakout until such time as we see more information on N Hemisphere growing conditions and potential yields.
  • NASS put their 2017 US all wheat output at 1,820 million bu, almost 500 million bu below last year. This is the largest year on year (non-drought) decline. Interestingly NASS pegged US winter wheat yield at 48.8 bushels/acre, just above trend. It is estimated that around 1.3 million acres of wheat will not be harvested in Kansas, some 16% of the total, and no-one at this time is able to quantify or define what damage will result from cold weather.
  • US 2017/18 wheat end stocks are forecast at 914 million bu, down 245 million from last year, and we would anticipate further downside adjustments due to fungal disease and post-freeze downgrades. Global 2017/18 wheat stocks were pegged at 258.3 million mt, a record large figure, which moderated bullishness emanating from the decline in US stocks.
  • We note that WASDE forecast the 2017 Russian wheat crop at 67 million mt (down 5.5 milion), the EU wheat crop at 151 million mt (up 5.5 million), Indian wheat at 97 million mt (up 10 million) with China at 131 million mt (up 2.2 million). Of note is the fact that China holds a record 128 million mt of wheat or 50% of the world stocks total. China will not export wheat so some of the sheer size of world wheat stocks is attributed to China’s 2017/18 wheat stocks rising 18 million mt. World wheat exporter wheat stocks are declining which is price positive.
  • US 2017/18 corn end stocks are projected at 2,100 million bu, which is down 185 million from last year via smaller 2017 seedings. NASS used a corn trend yield at 170.7 bushels/acre and reduced 2017/18 US corn exports to 1,875 million bu due to record large S American corn harvests. World 2017/18 corn stock were pegged at 195.3 million mt, down a hefty 28.6 million from last year. 2016/17 world corn production was raised 12 million mt to 1,065 million mt. World 2017/18 corn domestic use is record large at 1,062 million mt!
  • 2017/18 US soybean end stocks were pegged at 480 million bu with the old crop lowered to 435 million bu. WASDE pegged 2017/18 US soybean exports at a record large 2,150 million bu and raised old crop exports to 2,050 million bu. World 2017/18 soybean end stocks were forecast at 88.8 million mt, down 1.3 million. WASDE raised China’s 2016/17 soybean imports to 89 million mt (arguably still 2 million too low) with 2017/18 imports at 93 million mt (also likely too low by 2-3 million mt). Brazil’s 2018 soybean crop was pegged at 107 million mt and Argentina at 57 million mt. The 2017/18 soybean stock/use ratio is 25.8%, down from this year’s 27%.
  • Today’s report appears to offer a support peg to Chicago prices with no sharp decline in price seen until mid to late June when more is known about 2017 US wheat and corn crop potential. China will remain more active in new crop purchasing and US 2017/18 end stocks of 480 million bu demands that a one bushel/acre loss in yield will justify prices above $10.15/bu.
  • Right now current US wheat looks too cheap and the volume of US soybean meal exports looks more than supportive to soybean prices.

9 May 2017

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  • Chicago row crop futures rallied on wet weather and potential for further heavy rainfall  in the coming fortnight. However, growers in the W Midwest are seeding quickly and struggle to know where to place their focus. Should rates focus on W Midwest speed of planting or the waterlogged E Midwest and Delta? Tomorrow’s USDA update will likely do little to relieve this dilemma. Currently all we can do is work on trend line yields for corn, soybeans and spring wheat. This may well prove an obstacle for the longer established bearish trends particularly with fund short positions as they are as well as the reluctance of both US and S America farmers to sell at current prices.
  • Bears may well claim that stock levels are, and will remain, large, which is undoubtedly true; however, prices are as low as they have been in the last five years, and any adverse weather will likely trigger a price spike higher. Weather is and will remain the key driver in coming weeks.
  • The soybean markets remains focus upon strong demand patterns and the requirement for US and S America to continue to produce record large crops does not go away. Wet weather in Central US has the potential for disease issues and EU wheat offers remain firm; the mid term outlook appears as if we may have formed a market low and any extended wet conditions could well put risk premiums back into prices for the foreseeable future.

8 May 2017

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  • Chicago markets have been lower in wheat, corn and soybeans today, sliding in moderate volume trade. The USDA’s May report is scheduled for release on Wednesday, but today’s key price driver has been improved weather patterns and planting progress across the N Plains and NW Midwest. Areas previously flooded, E and S Midwest, are still some 5-8 days from fieldwork to plant or replant spring crops, but it is the improved prospects in the west that is pressuring markets today.
  • Brazil’s CONAB data will not be released until after the USDA report, and their soybean output is anticipated to rise to around 112 million mt with corn left unchanged. Their corn crop is just about starting its pollination phase and with the dry season a week or so early, it is unlikely that CONAB will increase their estimates ahead of this key period.
  • There is a lack of fresh news to keep the bulls active today. The Plains HRW crop needs little in the way of precipitation to make a crop, indeed dry conditions would be more welcome.

4 May 2017

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  • Weekly US export data has been released as follows:
  • Weekly EU wheat export totalled 463,401 mt, which brings the season total to 22.65 million mt. This is 4,87 million mt (17.7%) behind last year. Barley exports for the week reached 14,689 mt, which brings the season total to 4.38 million mt.
  • Chicago corn, wheat and soybean futures are all weaker in volume described as moderate. Positioning ahead of a decision by the US Commerce Department as to whether or not Argentina and/or Indonesia are dumping biodiesel into the US is evident. A positive finding could well see a tariff or duty as high as 25% imposed upon imports, potentially as early as Friday this week.
  • The central US weather position is becoming wet when compared with the east , heavy rains are accentuating flooding in the E Midwest, whilst improved planting conditions have occurred in the W Midwest. We anticipate US corn planting hitting 42-45% by Sunday, below both last year and the five year average. 2017’s corn crop will not be viewed as an “early crop” in view of the required replanting in the E Midwest where growers describe the situation as, “a mess”, with conditions wet and fields just not draining.
  • It seems that, given current US weather conditions, neither Informa Economics or the ongoing Crop Quality Tour will quantify crop damage caused by snow/cold conditions in the Plains. Wednesday’s WASDE report will likely show some reduction in 2018/19 world and US wheat end stocks, with all that may bring with it!