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!

3 May 2017

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  • Since April 25th and looking forward to mid-May, Central US temperatures have been cool. It is the chill and cold that is causing germination and emergence issues. Most traders look back in time and argue that too much rain appears to have a limited correlation with corn yield into mid-May. However, when years are segregated into cool and wet, the relationship becomes more important. This is not the spring start that producers desired.
  • Chicago saw soybeans close higher on technical trade and weather issues, which impacted both old and new crop supplies. Soybean meal continued in its narrow range but led the complex higher with oil finishing just below unchanged. Argentine harvest progress appears to be holding up well if the volume of truck deliveries to port is anything to go by; formal updated figures will be released on Thursday, which should confirm this. Chinese import pace remains solid, at a record, and S American output estimates continue to edge even higher yet Chicago markets continue to focus solely upon US conditions. Fund short positions, which are large, conspire with the global situation to leave the way open for potential fireworks!
  • Corn futures finished a couple of cents higher as the market saw additional rain in the Delta and S Midwest, which will likely lead to some widespread replanting. In S America it is becoming dryer in Mato Grosso and Goias in C Brazil in the coming ten days but forecasts do contain a low confidence that rain will follow thereafter.n The wet season traditionally comes to an end in C and N Brazil by mid to late April. Above normal rainfall will persist across Parana in S Brazil, but half of Brazil’s safrinha corn belt will see just 10-40% of normal rainfall into mid May, one more finishing rain is needed for optimal yield, and too much uncertainty exists with respect to planting dates in the S and E Midwest US. Domestic wheat supplies across the W Plains and finishing weather in Brazil are needed before adopting a bearish outlook.
  • Global wheat markets ended widely mixed, as the trade continues to speculate on yield loss across the W Plains. Day two of the KS wheat tour offered little insight, and as expected yield measurements could not be taken due to snow cover and it is noted that recovery will simply hinge upon weather through the rest of the growing season. EU futures ended lower, EU cash prices ended noticeably higher, and spot Russian wheat fob offers are the worlds’ cheapest at $185/mt. Russia has also set its new crop intervention price at 9,000 rubles/mt, basis grade 4 wheat. Russian intervention purchases are rarely sizeable, but in recent years Russia’s domestic market has generally been well supported at the intervention price target. At today’s ruble value, Russian wheat replacement costs are pegged at $156-170/mt. This suggests downside risk in Black Sea cash markets requires currency weakness or above trend yields this spring/summer for new pressure. With US wheat acreage record low and EU cash markets well supported on breaks, our view remains that better than expected N Hemisphere production is needed to turn the market substantially bearish.

2 May 2017

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  • Chicago markets are seeing something of a “turnaround Tuesday” with corn, wheat and soybeans all trading lower into the close on continued strong volume. Corn’s decline was on the back of chances of drier weather and improved planting progress across the N Plains and NW Midwest towards the end of this week and into the weekend. However, the bulls (unsurprisingly) continue to push the millions of acres of drowned crops and need for replanting. Yes, there are many acres underwater in the S Midwest, and as a consequence of cool and cloudy/wet conditions corn planting progress is stressed to say the least. Additional rains of ½-3 inches are most unwelcome and could well lead to further replanting or abandonment. There is downside potential in corn prices, but at this time we see it as limited until weather conditions become more favourable.
  • This springtime weather has clearly been less than kind to the US grower, and as a result we are not suggesting any lasting bearish price trend will be in place until more is known about yield potential, planted acres and what is enrolled into the prevent plant programmes. This latter point is perhaps more relevant this year than in many previous seasons.
  • S American farmers are not selling stored soybeans or the pending new winter crop corn as talk of adverse weather for the US farmer breed expectations for higher prices. China has continued to secure S American soybeans on a measured pace due to negative crush margins.
  • It feels as if we are at a pivotal point in markets at this early stage in the season. A close eye on weather and prices is strongly advised going forward.