Monthly Archives: June 2017

30 June 2017

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  • The much awaited USDA June Stocks and Seeding report offered some mixed results but the market generally took its contents as bullish amid ongoing threats of warm and dry conditions across the Plains and north western Midwest. Chicago wheat, corn and soybeans are sharply higher again.
  • US 2017 cropped acres as estimated by NASS equaled 318,184 million acres, down 1,058 million from the prior year. Total US cropped acres confirmed that US farmers seeded all available acres despite low prices and profitability. Historically, the US Government has to pay farmers to set aside acres, or severe flooding must occur to cut back on US seeded acres. The USDA reported 2017 US corn seeding at 90.9 million acres, up 890,000 acres from the March estimate, but down 3.118 million from last year. The cool/wet spring across the Central & Eastern Midwest did not have any adverse impact on total US corn seeding. US corn harvested acres was pegged at 83.5 million acres, which along with trend yield of 170.7 bushels/acre would produce a 14,187 million bu crop. The biggest corn seeding shortfall occurred in IL at 500,000 acres while combined corn seedings in IN/OH were off just 150,000 acres. Note that N Dakota corn seeding rose 250,000 acres to 3.7 million. Total US Dakota corn seeding was estimated at 8.9 million acres representing 6.6% of US corn production.
  • US 2017 soybean seeding was estimated at 89.5 million acres, virtually unchanged from the March estimate, but up 7.3% from last year to a new record. The states posting the biggest seeding gains were MN with acres up 650,000 acres to 8.2 million acres and N Dakota with soybean seeding up 1.15 million acres to 7,200 million. We would also note that S Dakota soybean seeding was up 200,000 acres to 5.4 million acres. The drought area of the Dakotas has 12.6 million acres of soybeans or 14% of US production. By seeding, N Dakota is the US’s 4th largest soy state!
  • US 2017 all wheat seeding fell to 45.7 million acres, the lowest US total since USDA started keeping records back to 1919. US winter wheat acres held steady from the March report while spring acres fell another 330,000 acres to 10.9 million acres. US durum wheat seeding was also lower and there are supply bull stories in both HRS and durum wheat going forward. We note that US HRS harvested acres are likely to decline further in future reports depending on weather conditions. The marketplace will need to secure additional US spring wheat area in 2018 which will likely curtail US corn and soybean area.
  • US corn stocks as of June 1st were 5,225 million bu, up 514 million from last year and a record. Third quarter US corn use was estimated at 3,400 million bu, up 290 million   The June 1st US corn stocks total was above the average trade estimate and considered slightly bearish. The third quarter feed/residual use estimate is estimated 978 million bu, up 54 million. We do not expect WASDE to alter their annual US corn feed/residual use rate in the July reports.
  • US June 1st wheat stocks were estimated at 1,184 million bu, the high end of trade estimates and up 208 million bu from last year. Fourth quarter feed/residual is calculated at a -57 million bu which compares to -37 million bu in the year before. June 1st wheat stocks define totals for the 2016/17 crop year.
  • US June 1st soybean stocks were 963 million bu, down 20 million from trade estimates, but 91 million above last year. Third quarter US soybean use was record large based on strong US export demand.
  • It would be virtually impossible to advise a bearish stance right now as less than favourable weather moves into the central US and with drought across the N Plains looking likely to expand both south and east into the second half of July.

29 June 2017

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  • US export data has been released as follows:
 
  • Chicago futures have been squarely in the green today with wheat undoubtedly the leader as Minneapolis spring wheat responds to the dry and war conditions previously discussed. The US$ has found a nine month low, supporting commodity prices and StatsCan acreage data suggests that spring wheat rationing will not be an easy (or cheap) task.
  • StatsCan pegged Canadian spring wheat acres at 6.39 million, down 353,000 from April’s estimate. Winter wheat durum acres were increased slightly but total wheat area was down 311,000 hectares. Dryness, particularly across Saskatchewan is not helping the situation either. The wheat crop looks to be no better that 26-27 million mt compared with last year’s 32 million. Higher protein wheat balance sheets are under pressure.
  • Spot Minneapolis wheat futures are up 45 cents at $7.50/bu, and $7.75-$8.00 looks to be the markets next target. This week’s US Drought Monitor has expanded severe drought conditions across the Dakotas and Montana with very little, if any, rain in the next 5-7 days.
  • European wheat futures have followed suit and we would anticipate higher cash market prices tomorrow.
  • Markets are currently all about weather and supplies going forward, will the 8-15 day weather forecast materialise or be changed in the interim period. The upcoming US 4th July holiday and USDA reports add to the current trepidation that is surrounding markets. Wheat markets look poised to move higher and we are approaching the crucial corn pollination period at a time when the risk of excessive heat is growing across KS, NE and the Dakotas.

28 June 2017

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  • Chicago futures have been mixed with corn lower wheat and soybeans a shade higher today in somewhat better traded volumes. Volume improvement is attributed to rolling Jul contracts ahead of first notice day on Friday. The real story continues to be spring wheat in Minneapolis and the continuing supply loss. Yield forecasts continue to shrink with expectations now in the 34-35 bushels/acre range as below average rain and more heat continues to threaten US production. There is also a further concern that Canadian growers have sown more canola (rapeseed) at the expense of spring wheat, and less than optimal growing conditions will not aid the demand pattern. Spot Minneapolis futures have broken our $7.00/bu target, reaching $7.13/bu earlier today, and it feels as if prices can go higher still as demand rationing is not evident yet. High protein physical (cash) wheat is difficult to secure – read all but impossible – and cash premiums continue to rise.
  •  We would anticipate a further sideways trend in Chicago until such time as we see some greater clarity on central US weather conditions and the June Stocks and Seeding report is published.
  • Early Russian wheat yields are being reported to be below last year, but its far too early to establish any kind of trend. Most cash related wheat watchers remain convinced of another large Russian wheat crop and that yields will recover to levels equal to last year. The current heat and dryness could actually help crop quality and boost protein levels. Traders are more concerned by the heat and dryness that is being applied to summer row crops of corn and soybeans, it is something to monitor with Russia now being a modest world corn exporter of 3-4 million mt.
  • The wait continues! Fund managers want to reduce their risk ahead of the USDA report and the end of the quarter. World wheat prices keep rising with HRS in the spotlight. Our concern remains one of July following June and being warmer and drier than normal. Very warm temperatures at night will be the worry for US corn yields.

27 June 2017

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  • Soybeans made gains again yesterday but closed below the session highs. With soybean prices some 30 cents below last week’s highs farmer selling has slowed dramatically and some fund buying has been noted ahead of Friday’s USDA reports. Friday is attracting attention, perhaps at the expense of the weather for a change.
  • Corn ended a fraction higher as weather reports suggest that the intensity of ridging and hot weather is not as high as first thought. Warm and dry weather still lies ahead, although it is difficult to say whether the coming ten days is going to add to, or subtract from, yield potential. Argentine corn prices now reflect a discount to US Gulf, and this will doubtless pressure US export potential going forward, and in turn likely limit or cap future rallies.
  • US spring wheat continues to rally, making fresh highs again, and a test of $7.00/bu looks to be on the cards. Winter wheat prices followed although not to the same extent, the issue for the US is one of surpluses in major exporting regions. Global cash prices have not fallen, as would be expected in advance of the looming N Hemisphere harvest. Russia, unexpectedly, remains the cheapest origin. StatsCan is scheduled to update their spring wheat acreage forecast Thursday, and if it is lowered, output could well drop to 27-28 may, which compares with last year’s 32 million. Black Sea region heat looks set to last at least for the next ten days and overall it seems higher protein wheat supplies remain under intense pressure. Downside price risk in this class of wheat looks very limited, and it is highly likely that this will add some support to other wheat classes by association.

26 June 2017

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  • US crop condition data has been released as follows:
  • In a quiet start to the week soybeans ended a couple of cents higher, products were mixed as meal firmer and oil a round unchanged. After trading closed, NASS reported that 66% of the soybean crop was rated good/excellent, down one point week on week. It is likely that weather that will drive prices more than any other influencing factor as we head into late summer.
  • Corn futures ended a touch higher on correction of technically oversold conditions. Weather models are in pretty good agreement that a high pressure ridge will extend into the heart of the corn belt bringing heat with it, the duration of this ridge is questionable at this time. Corn crop condition remained unchanged as far as the proportion rated good/excellent is concerned, perhaps the crop is stabilising at this time on the back of recent wetter and cooler conditions. Ukraine, on the other hand, remains dry with little in the way of precipitation in the coning ten days, which is following a June pattern that sits at somewhere between 20 and 40% of normal precipitation so far. Mid-July sees the crucial pollination period in Black Sea regions and current weather conditions will need to change in order to prevent further potential crop losses. We caution against a bearish stance.
  • US spring wheat rallied to fresh highs on further dry weather conditions as modest selling resumed whilst fund short covering continued at a more robust pace than expected.Funds are no longer excessively short, which may well give something of a pause to stronger rallies. However, it should be noted that global weather remains less than ideal, our main area of concern being hot and dry conditions across the Black Sea regions. US spring wheat condition continues to fall with 41% now rated good/excellent, a record low at this time of year, and further downgrades are probable in the face of lack of precipitation. French soft wheat condition fell to 68% good/excellent as of June 19, prior to last week’s hot conditions, this is below previous year ratings.
  • Clearly weather conditions are dominating at present.

 

22 June 2017

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  • US export data has been released as follows:
  • We have seen continued weakness in Chicago markets today as July ’17 corn futures pushed lower and breached trendline support levels whilst soybeans eased lower on the back of weather conditions best described as non-threatening in the central US regions. Wheat prices also eased on technical selling and a correction from recent rally. Volume today has been somewhat reduced when compared with recent days, and traders appear reluctant to take on fresh risk. It is probably fair to suggest that wheat, at least, has a fundamentally bullish story, but an overbought market and requirement for correction have taken over, at least for now.
  • Egypt’s GASC have secured a further 175,000 mt of wheat from Ukraine and Romania, perhaps unsurprisingly. The ongoing ergot issue continues to leave traders wondering what is happening in coming weeks in Cairo.
  • The Argentine Peso is sitting just below a record low level, which is potentially keeping pressure on fob prices for corn and soybeans . Corn at 2 cents over Chicago prices is a record low level and points to the large exportable surplus as well as the currency incentives available to exporters.
  • Hot and dry conditions are starting to adversely impact Ukraines’s corn crop and exportable surplus. The USDA has forecast exports of 20.5 million mt from a crop of 28.5 million mt, and many now peg that crop at 26 million, leaving export availability some 2 million mt lower. Ukraine weather is looking even warmer next week.
  • Markets are targetting chart support levels in the absence of continued weather threats. The only bullish story surviving right now is that of hard wheat supplies being downgraded due to earlier weather difficulties, soybean yield judgement is still too early in the season.

21 June 2017

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  • Following mixed markets overnight, soybeans turned down shortly after the morning open on Wednesday in follow through technical trade. Markets settled 9-11 cents lower for the day with commodity fund traders estimated as sellers of 9,000 soybean, 3,500 soymeal, and 3,000 soyoil contracts. The midweek Brazilian vessel lineup was fractionally lower from a week ago as some shipment dates were rolled into July. However, June shipments are still expected to be close to 9 million mt versus last year’s 7.5 million while the July lineup is now showing 1.5 million mt. With the USDA’s Quarterly Stocks and Acreage reports just a week away, we would not advise a bearish stance now. Note that November beans today are $1.80 cheaper than a year ago.
  • Corn fell a shade in lower than average volume, and the trade is left pondering the market’s next move. Crude fell $.80/barrel and continues to flirt with chart-based support. This week’s ethanol update is viewed as slightly negative as production fell and stocks remain perched well above recent years. The Midwest weather forecast is void of any excessive heat through the next ten days, but meaningful precipitation through the period looks to be somewhat scarce in nature. Also there is no evidence that drought conditions will improve across the N Plains. Weather models today lean neither bullish nor bearish, and we should keep in mind there are growing yield concerns in W Europe and the Black Sea as heat expands eastward across the European continent in the next few days. Recall that the US in July of 2016 shifted to a rather wet pattern, and a similar shift will be needed this year to maintain yield potential of 170-172 bu/acre. Crude’s recent collapse, along with ongoing political turmoil in Brazil, has weighed on major exporting currencies and thus keeps other countries more competitive in the world market.  It is tough to define a trend. Until weather in the first half of July is clarified we expect corn futures to continue in a sideways trend, with support pegged at $3.65 and resistance note above $3.90, basis spot.
  • Wheat futures fell 6-8 cents as the Russian ruble hit new four month lows, and on paper this allows Russian wheat exporters to be more aggressive in the world market. Currencies in Australia and Canada also settled a bit weaker, and today was generally marked by commodity liquidation. The weather pattern in Europe and Black Sea into late June remains concerning. The EU and GFS models remain in good agreement that excessive heat and a complete lack of precipitation will move eastward into the Balkan and Black Sea regions by mid/late next week. High temperatures in Romania, Ukraine and S Russia will reach into the upper 90s and low 100s, and already Ukrainian crop potential has been capped by a severe lack of precipitation since late winter. Talk that the US has imported modest amounts of high protein  German wheat started the market’s break today, and indeed high protein cash markets at the Gulf do allow imports to pencil, but work suggests major exporter production could be down 20 million mt from last year, which is significant. We doubt the market has fully digested yield loss in the N Plains at this time.

20 June 2017

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  • US crop condition data has been released as follows:
  • June is going to end up as being one of the driest/warmest of the past two decades across Ukraine and E Europe. The oval shape in the graphic defines the acute area of dryness that is starting to stress crops. We note that wheat is in its reproductive stage, while corn is 3-4 weeks away from pollination. Rain needs are immediate and with heat forecast next week, crop prospects appear to be heading lower.

  • Soybeans began to sell off overnight, and fell at the morning open as weather models added rain and cooler temperatures in near term forecasts, and maintained similar extended outlooks. November soybeans again held resistance against the 50 day moving average overnight and were down 9.75 cents at the close.Traders and analysts have worried over estimated Chinese soybean crush margins, which have been negative since March. Negative margin estimates have little noticeable impact on crush rates, which continue at a record/near record pace. Last week’s crush was estimated at 1.7 million mt, and the cumulative crush figure of 61 million mt is 8% over last year and on pace to reach the USDA’s forecast of 86.5 million mt. To date there has been no indication that imports will slow down, with record large imports expected to continue at least into July. Building soybean meal stocks are becoming a concern. July soybeans have been range bound over the last three weeks, and we doubt that much of trend will develop ahead of next week’s key USDA reports.
  • From the perspective of corn, the major weather models are again in agreement that excessive heat will stay isolated to the W Plains through late June, and moderate rain is due across the E Plains and Midwest in the next ten days. This outlook is much more benign that solutions offered last week, and following recent fund short covering some new selling has emerged. Crude also fell to seven month lows, which has triggered a pause in the recent advance in ethanol margins, and ethanol’s premium to gasoline has widened in the last two weeks. It is all US weather near term, and indeed the nearby forecast has improved relative to recent record breaking temperatures across the Plains. Argentine cash basis remains historically low, and so bullish input so far this week has been lacking. We caution against turning overly bullish. Drought will remain firmly in place across the N Plains into early July, and still net drawdown in soil moisture are expected across much of the Corn Belt over the next seven days. Heat (highs in the 90s & low 100s) is forecast expand into Ukraine and Russia beginning late next week.
  • US wheat futures settled 3-17 cents higher, led once again by Minneapolis following Monday’s crop update. As noted previously, the US HRS yield in 2017/18 is likely no better than 35-36 bushels/acre, which exacerbates the need to ration high protein supplies, and which places much more pressure on non-US production, Canada’s harvest, specifically. Heat and dryness will persist in W Europe through the remainder of the week, and looks to expand into Ukraine and Russia thereafter. Note that the EU and GFS models have introduced temperature readings in the 90s and low 100s across the Black Sea region beginning next Wed/Thurs. Gulf wheat’s premium to other origins is widening, but the world cash market has largely followed the recent advance in US futures. Notice that only Russian wheat is offered below $190/mt for August delivery, which is equivalent to $4.60/bu, basis September futures and which compares to Black Sea prices in August of last year at $165-175/mt. EU crop estimates are in retreat, and recall roughly half of Russia’s crop is spring wheat.

19 June 2017

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  • Prices in Chicago are mixed today as markets appear to have returned to their previous ranges. Wheat is at the top of its range as funds continue to cover their short positions, however corn having covered the majority of the structural and longer term short position has the potential to ease lower. Adverse weather conditions will be required if funds are to turn net long on a large scale. Traders are looking for improved crop ratings tonight on the back of rain last week.
  • EU wheat harvest estimates are in decline, but depending on who you talk to, the size of the decline varies. Some peg losses at no more than 1-2 million mt while others see the loss at 3-4 million. WASDE pegged the EU wheat crop at 150.75 million mt in the June report, so most see the crop as ranging from 149-147 million mt compared to last year’s harvest of 145.5 million. Remember, WASDE sees EU wheat opening stocks at just 11 million mt, which would likely reduce 2017/18 exports to 28-29 million mt. The EU corn crop size is also critical this year to determine the amount of wheat needed for feed. Losses of the EU corn crop cannot be tolerated without Black Sea corn imports, clearly feed supplies within the EU are tightening.
  • Heat and dryness is embryonic across the Plains and growers are concerned that it will shift east with time. Not everyone in the Midwest received good rains last week and the forecast is not offering much relief over the next ten days. June will end up being drier and warmer than normal, making July weather highly important to US corn yields. It is still far too early to turn overly bearish.