December 5, 2013
Wheat markets were the big loser in today's trade as export sales below 10 million bushels combined with two reports of bigger crops outside the United States.
Corn and soybeans both traded slightly lower on export sales, but not at the level wheat was. The markets are beginning to see traders squaring positions in anticipation of Tuesday's USDA reports that should bring few surprises if the December reports follow history.
With that said, there seems to be at least one good surprise in every report and there is nothing that says this one won't bring something newsworthy. The challenge is knowing where that surprise might fall.
U.S. stocks traded lower again today as too much good economic news is apparently bad for the stock market. Following yesterday's positive news from the Fed's Beige Book, today brought another round of surprisingly good news. The Commerce Department announced GDP increased by an annualized 3.6% rate in the revised third quarter numbers that are a more complete data set. In addition, initial unemployment claims were down 23,000 in this week's report to 298,000. This is only the second week since the recession officially ended in 2009 that jobless claims have dropped below 300,000. Tomorrow will bring new unemployment numbers for November that has been the highly anticipated report for this week. If there is significant improvement in this report, it becomes more likely that the Fed will begin the tapering process in December. Major stock indexes traded from 0.1% to 0.4% lower at the commodity close.
The dollar index traded lower today as the market pulled it down. Crude oil traded another 50 cents higher again today, putting $5 on the nearby contract this week.
Corn traded lower today as export sales were a little lower than expected and rumors about Chinese rejection of corn shipments continue to keep the market unsettled ahead of next week's USDA reports. Export sales came in below expectations at 23.369 million bushels with some of the blame going to the shortened holiday week. Just when ethanol production and exports look to be carrying the market toward some revisions in the WASDE numbers next week, there is a disappointing export sales report to throw a wet blanket over things. Feed use should be improving if hog and poultry numbers are correct, but USDA will likely be hesitant to bump the numbers until January's grain stocks report.
March 2014 corn futures were down 3 to close at $4.335. December 2014 corn was down 1.75 on the day to close at $4.625.
Bottom line: Pricing the largest corn crop in history is getting more difficult as corn prices challenge the $4 level with harvest nearly complete. There is still a chance that season low prices could come after the first of the year when it looks like corn will move into the market.
Soybeans traded just lower today after moving nearly a dime lower early in the day. Export sales were better for soybeans than the grain markets with total sales of 42.652 million bushels reported, in the expected range. Of these sales, 29.586 million bushels were additional 2013 crop and the remaining 13.066 million bushels were 2014 crop. Sales will need to continue to follow seasonal patterns and slow down or rationing of this crop will be necessary. Early expectations are that USDA will lower soybean carryout by 20 million bushels in next week's WASDE report and further reductions may be coming later in the spring. Anything below 140 million bushels starts to increase concern about availability through the summer. USDA announced another sale of 2014 soybeans to China this morning with 4.078 million bushels moving this time.
January 2014 soybeans closed down 1.50 today at $13.28. The November 2014 soybean contract was down 0.50 to close at $11.63.
Bottom line: Soybean prices have moved back above $13 as export demand keeps pulling both beans and meal through the market and holding prices. Basis remains strong as buyers are looking to fill commitments and farmers are reluctant to make sales. Look for opportunities to market beans ahead of the South American harvest.
Wheat markets traded lower again today as carryover from yesterday's big Canadian crop news was supported by a UN FAO increase in their estimate for the 2014 crop and disappointing export sales. FAO has projected a bigger 2014 crop based on planted acres of winter wheat around the world that are showing increases in nearly every country with the exception of Russia and Ukraine where excess moisture hampered seeding. Export sales were only 8.4 million bushels in this morning's report. The holiday could be a part of that, but the numbers were less than half what the market was expecting, so higher prices may be causing slow purchases in the wheat market. Temperatures were as cold as 20 degrees below zero in Nebraska this morning, prompting concern about winterkill, but not enough to help these markets.
Temperatures in the 10 to 20 degrees below zero range in parts of Nebraska and Colorado have brought potential winterkill damage to about 3% of the hard red winter wheat crop area. Damage could be as high as 30% in the affected area, depending on the level of snow cover. Another 6% of the HRW wheat area could be at risk tonight as cold temperatures move further south and east. Minor damage could be felt even further south if temperatures fall more than current forecasts expect. It will be spring before damage can be assessed, leaving wheat farmers to wait and worry.
March 2014 wheat on the Chicago board was down 9.75 to close at $6.52. The July 2014 contract closed the day down 9.50 to finish at $6.54.
March 2014 KC wheat was down 9 to close at $6.9525. The July 2014 winter wheat contract was down 7 to finish at $6.88.
March 2014 Minneapolis wheat was down 8.25 today to close at $6.8425. The September 2014 contract was down 7.25 to close at $7.065.
Bottom line: Wheat exports have slowed as southern hemisphere harvests are coming into the market and prices were above most shippers. Lower prices could pick up some export business for remaining 2013 sales.
The short holiday week takes some of the blame for this morning's disappointing export sales numbers, but it remains to be seen if there is strength down the road. Wheat brought in the poorest numbers, followed closely by corn, and soybeans were down to seasonal levels. The wheat market is looking for anything to build support from, and this report was not helpful. Soybeans need to slow down to keep from getting back into a rationing situation, and the drop back to seasonal levels may be just what these markets needed.
The past few days have brought widespread rains to eastern Australia and disrupted harvest activities for the region. Drier weather is forecast through the weekend to allow farmers back into wheat and canola fields. Cotton and sorghum seeding are moving along nicely and there are few complaints about rain in a country where moisture is always a concern.
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