10 July 2017

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  • The new week starts with Chicago markets leaping higher with the row crops of corn and soybeans making new summer rally highs. Wheat futures have followed, as have London and Paris markets and traders are closely monitoring heat and dryness which may well be damaging crop potential in Canada as well as parts of Europe. The global supply of durum and high protein wheats can ill afford further losses at this time, unless of course we are to see higher prices beginning to ration demand. Wednesday’s NASS report is expected to sharply cut US spring and durum wheat yields in their first survey of the crop year. Traders in wheat will not want to be overly bearish in a market that could well see a 2017/18 crop decline of some 40 million mt. Tonight’s crop condition report is expected to show some decline.
  • Private traders are further reducing their estimates of the 2017 Australian wheat harvest based on dryness and severe problems being reported with rodent infestations. Some analysts are now cutting their 2017 Aussie wheat crop estimate to 21-23.00 million mt, which is down substantially from last year’s 35 million mt harvest. Outside of Argentina, nearly every major world wheat producer will endure the harvest of a smaller wheat crop. It is not only soybeans, but canola (rapeseed) prices are soaring. Canola prices are at their highest levels since 2013 as the Canadian crop is being threatened by the hot and dry weather. There could be a real shortage of Canadian canola/canola oil in the next 12-13 months as supply shortages collide with strong demand, and improving import interest from China.
  • The old trading saying goes: “The trend is your friend!” That trend applies not only in trading, but also weather. Historically, it is tough to find a year when Central US weather reverses during the middle of July. A close above $10.43 would likely set a target of at least $11.00 in Nov ‘17 soybeans while Dec corn has a target of $4.30-4.50. And amid the surging summer row crop prices, wheat futures are likely to retest their highs.

6 July 2017

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  • Early data shows Chicago wheat futures surrendering to a bout of profit taking after some significant gains in recent days, which left the market in an extremely overbought technical position. The resultant losses have rubbed off into both Paris and London markets although Chicago corn is less impacted and soybeans remain in positive territory. We believe the tick lower in wheat to be a correction rather than a fundamental change of heart, and also think that season highs are yet to be made; the move lower is in our opinion technical rather than fundamental.

5 July 2017

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  • Chicago markets have been both volatile and mixed today with grains trading either side of unchanged and soybeans trading into positive territory.Volume has been sizeable as market players debate weather forecasts in the central US crop growing regions. Longer range forecasts are somewhat non-committed as far as beyond ten days is concerned and the bulls do not have a free run at further price upside, at least for now. More emphasis will be placed upon crop condition reports and yield forecasts until such time as there is better agreement in the longer range forecasts.
  • Minneapolis wheat, the bullish stalwart in this latest run up higher, has traded a wide rage ($0.94/bu) today and, perhaps more significant, is forming a bearish reversal pattern and reversal of trend, which needs closing price confirmation before anything else. This is leading to some caution in both wheat and corn pricing today.
  • US high protein wheat pricing and the current bull phase should provide a supply driven shock to prices, which should be followed by some demand rationing as prices escalate. It seems, right now, that prices have not yet reached levels that have created the latter situation Thus, our feeling is that we have not yet seen a wheat price “top” despite extreme overbought signals being quoted by all and sundry. It is more likely tat we will have to wait for autumn to begin before we see buyers digging deep into their pockets to secure supplies and driving prices to annual high levels. World cash wheat prices continue to rally as evidenced by Egypt’s latest GASC tender in which over 400,000 mt was secured. 60,000 mt was sourced from Romania and  350,000 mt from Russia, the season’s leading supplier to Egypt. The mid-August shipment slot was priced at a shade above $214/mt basis C&F.
  • Current US weather predictions look to maintain warm and dry conditions with below average precipitation into the short to mid term across much of the western US. Soil moisture levels are in decline and there appears little change on the horizon until at least late July. As such we see see more upside potential than downside.

3 July 2017

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  • More upside in Chicago wheat, corn and soybean futures, and sharply so! The wheat chart has the distinct appearance of a runaway market as the last three trading sessions have been categorised by gaps and high volume of trade.
  • Corn and soybeans are similarly making gains and it is all about central US weather becoming warmer and drier, and the fact that concern is growing over crops in the Plains and northwest Midwest. July is the month that can make or break crops, and the market is well aware of that. Today we would not argue agains a sharp decline in corn yield although would await more weather information before suggesting soybeans will suffer similarly. Funds are record net short in soybeans and it would be foolish to ignore what that could do to prices in the event of a change of heart – be warned!

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.