December 11, 2013
Morning Price Trends
Corn: Up 1 to 2
Soybeans: Up 1 to 3
Wheat: Up 1 to 2
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Grain futures are modestly higher across the board this morning, gaining back some of the momentum lost after Tuesday's December Supply & Demand report from USDA. However, trading volume has dropped off a cliff, in a preview of what could be the start of thin holiday trade.
Corn prices are firm, holding March to a 4-cent range overnight in an inside day on the chart. A little buying kicked in after trade in Asia wound down, with further light gains posted in Europe. But March remains capped by its 40-day moving average, which comes in at $4.38 today.
USDA cut carryout 95 million bushels yesterday, more than expected, but projected ending stocks will remain big at 1.792 billion bushels. USDA raised ethanol demand by 50 million bushels, in line with our estimate based on production for the first quarter of the marketing year. Strong ethanol prices and cheap corn are supporting margins, which should keep production numbers reported this morning for last week at good levels.
The government also raised its forecast for exports by 50 million bushels, though sales are quiet so far this week. Taiwan is tendering for a little U.S. corn and soybeans today, but China apparently has rejected more loads of U.S. corn for containing an unapproved GMO variety. The action could be part of a larger, non-agricultural trade despite, keeping its impact uncertain. A Chinese think tank raised its forecast for production there 236 million bushels above the level forecast yesterday by USDA.
There were no deliveries again today against December futures, and nothing is still registered for delivery. Basis was firm yesterday, with some bids still above option along the Illinois River. Open interest in December futures fell by 2 123 Monday, leaving 2,777 contracts still open. The preliminary report from the CBOT showed daily total volume in corn jumping 55% yesterday, but it was still modest at 212,151, Daily open interest fell 1,431 though funds were flat on the session, suggesting some short covering in play.
Prices elsewhere are mixed. Futures for May delivery on the Dalian exchange in China lost 1.7 cents to $9.856, but March corn in Paris was steady at $6.206, after conversions to bushels and adjustments for currency valuations.
Financial markets are trying to turn higher, bouncing back from yesterday's setback. The dollar is firm, triggering some profit taking in gold after Tuesday's surge in the precious metal. Crude oil is a little soft, after narrowing the gap to the Brent international benchmark this week. This morning's Petroleum Inventory could show crude oil stocks down but diesel supplies increasing seasonally as ag demand weakens.
Bottom line: Growers should be looking for basis pushes, carefully analyzing whether it pays to hold grain into 2014. Farmers have sold less of their 2013 crop than normal, leaving an avalanche of corn to hit the market after the first of the year. For more information, see the Weekly Corn Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily
Soybeans are higher, supported by projections for tightening supplies into 2014. USDA trimmed its forecast for U.S. carrying by 20 million bushels as expected Tuesday, with more cuts possible to the new ending stocks guess of 150 million bushels.
Buyers returned early in the overnight session, but January futures is holding to a fairly narrow range after yesterday's volatile session, sticking to an inside day higher on the daily chart.
Questions remain about the potential for production in South America -- and the ability of producers there to get those beans onto the world market in a timely fashion. USDA kept its forecast for Brazil's output unchanged, but the government there raised its estimate to 3.31 billion bushels, 75 million more than USDA.
Rains worked through Brazil over the past 24 hours, but the forecast for the southern part of the country and much of Argentina is dry over the next two weeks. While that will aid the tail end of planting, it could also begin to raise concerns about moisture in areas prone to problems.
Oilseed markets around the world today are mostly higher. While February futures on Malaysian palm oil eased to 37.1 cents/lb, soybean oil for May delivery in China was up to 54.2 cents. May soybeans in China gained 1.8 cents to $20.048, February rapeseed in Europe was up 11.7 cents to $ 11.518, and January canola in Winnipeg rose 1.9 cents to $9.76 overnight. Note: all prices are in bushel or pound equivalents including currency adjustments to U.S. dollars for contracts with significant volume.
No soybeans are registered for delivery against January futures later this month, with basis strengthening Monday despite the gains on the board. Strong domestic demand for meal also is pushing prices, with nothing delivered again today against the December contract. Soybean oil deliveries fell to 29 lots.
Daily volume in soybeans rose by a third Tuesday to a strong 316,623 contracts, while open interest fell 8,634 on light fund selling.
Bottom line: Growers should use rallies over the next few weeks to wrap up sales. A close below $12.90 January futures means the trend is moving lower. For more information, see the Weekly Soybean Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily
Wheat prices are trying to hold modest gains overnight, following a break to new contract lows Tuesday. Slow but steady buying was seen overnight, taking Chicago and Kansas City March contracts back above the old support line from the November downtrending channels. Minneapolis is still struggling to get back into the long-term channel it blew through on yesterday's slump.
USDA raised its forecast for U.S. carryout by 10 million bushels, bucking trade expectations for a modest decline due to stronger exports. Instead, the government raised its estimate for imports and kept U.S. sales steady, noting a big jump in global supplies caused by larger crops in Australia and Canada.
Tuesday's double digit declines triggered another snap tender from Egypt, which originally sought delivery from a variety of exporting countries around the world. U.S. prices out of the Gulf to Egypt are within a few pennies of French originations, but Egypt's state buying agency later amended its bid to include only Russian grain.
Mostly lake effect snow is in the forecast the next couple of days around the windward edges of the Great Lakes, until a system moves through into Saturday, However, that storm isn't expected to bring any precipitation to the hard red winter wheat belt, according to today's seven-day coverage maps
Official 6- to 10 and 8- to 14-day forecasts out yesterday gave better chances for precipitation on the central Plains in northern Kansas and Nebraska, but were less optimistic for the southern parts of the hard red winter wheat belt. The latest American Model put out before 6 a.m. is only marginally wetter.
In other growing regions around the world, Argentina southern wheat area could see light precipitation this weekend, while southern fields across Australia's wheat belt should be mostly dry over the next week for harvest. Winter wheat in South Russia and Ukraine benefited from precipitation this week, but appears to be turning drier, while China's major wheat looks dry for at least another week, and likely two. China continues to auction reserves, with good demand seen this week.
Prices elsewhere today are firm. Futures on milling quality wheat for March delivery in Paris are up 2.5 cents to $7.614, while futures for eastern Australian wheat were unchanged at $7.364, after conversions to bushels and adjustments for currency valuations.
There were 5 contracts delivered today against Chicago wheat. Only 188 Chicago December futures are still open, down 64 Tuesday. Total volume in Chicago doubled Tuesday to 101,361, while open interest was up 1,257 on moderately active fund selling.
There were no deliveries today against Kansas City futures, with total volume up 78% yesterday to 22,273 on a small drop in open interest. Open interest in December hard red winter is at 81 contracts, down 37 on Monday's session. No contracts were put out today in Minneapolis.
Bottom line: A few weather concerns around the world could provide support headed into winter, with good exports of soft red and hard red winter wheat supporting cash markets. But carry won't pay into winter, sales of 2013 inventory should be down to gambling stocks. Use any rallies to extend 2014 coverage. For more details on the outlook, see the Weekly Wheat Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
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This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to the accuracy, and is not to be construed as representation. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.