December 9, 2013
Morning Price Trends
Corn: Up 1 to 2
Soybeans: Up 4 to 7
Wheat: Up 1 to 2
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Grain futures are higher across the board this morning, with buying in soybeans pacing modest gains in corn and wheat overnight. While December USDA Supply & Demand reports don't normally make headlines, tighter carryout is expected for all three crops Tuesday.
Corn prices are a little stronger today, trading in a narrow range of less than 3 cents a bushel. March futures remain hemmed in by their 40-day moving average, which could keep the market in check until tomorrow's report.
USDA is expected to make only modest reductions in ending stocks due to good exports and ethanol demand. The average guess from the trade is for a cut of only 15 to 20 million bushels, though Farm Futures estimates the reduction could be a little larger, around 50 million. Still, with carryout above 1.8 billion bushels, this report isn't likely to change the market's bearish dynamics.
There were no deliveries again today against December futures, and nothing is still registered for delivery. Basis weakened closer to option along the Illinois River, despite snarls in the movement of corn caused by winter weather.
Open interest in December futures fell by 939 Tuesday, leaving 6,012 contracts still open. The preliminary report from the CBOT showed daily total volume in corn down 10% to a very thin 152,651. Open interest was up only 78, suggesting some light fund short covering.
Friday's Commitment of Traders confirmed short covering by speculative hedge funds, which cut 16,453 contracts off their net long position during the latest week, buying back more after the CFTC data was gathered on Tuesday. Short covering remains the best bet for rallies into the end of the year.
Prices elsewhere today were steady to higher. Futures for May delivery on the Dalian exchange in China gained almost a penny to $9.88, while March corn in Paris morning trade was firm at $6.28, after conversions to bushels and adjustments for currency valuations.
Financial markets are fairly steady, with only minor profit taking seen overnight after Friday's big gains on Wall Street. Stocks surged when the November employment report showed a larger than expected drop in joblessness as well as good growth. While that could hasten the day when the Federal Reserve begins cutting back on its financial stimulus, stocks moved mostly higher in Asia on good Chinese economic data, before turning lower in Europe. The flow of data from the U.S. is light this week, though several Fed officials speak today.
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 advancing, taking January futures a little closer to last Monday's spike high. Expectations USDA will trim 15 to 20 million bushels off carryout tomorrow support prices, with strong Chinese demand balanced by good weather for crop development in South America.
Rains are moving through northern Argentina this morning, after providing good coverage to the growing region. Showers are also expected to benefit crops in Brazil this week.
No soybeans are registered for delivery against January futures later this month, with cash prices staying well above option along the Illinois River. Strong domestic demand for meal also is pushing prices, with nothing delivered again today against the December contract. Soybean oil deliveries fell to 124 lots.
The start of the Goldman roll on Friday kept volume decent at 176,116, though that was off 13% on the session. Daily open interest was up 5,070 on light fund selling, though the CFTC report showed hedge funds adding 5,500 to their net long position earlier in the week.
Oilseed markets around the world today are mixed. February futures on Malaysian palm oil eased almost a half cent to 37.4 cents/lb, despite concerns over falling production, while soybean oil for May delivery in China was steady at 53.9 cents. May soybeans in China surged 9 cents to $20.021, February rapeseed in European morning trade was down 4.7 cents to $11.606, and January canola in Winnipeg rose 1.7 cents to $10.061. Note: all prices are in bushel or pound equivalents including currency adjustments to U.S. dollars for contracts with significant volume.
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 mostly higher, trying to hold against further losses following last week's bearish break. Winter wheat futures tried to move past resistance at their November trading channels but failed, while Minneapolis tested Friday's contract lows.
Traders on average look for USDA to cut 25 million bushels off carryout tomorrow due to stronger exports, but the reduction could be less, maybe just 10 million, according to Farm Futures' estimates. Hopes that lower U.S. prices were competitive on world markets so far haven't stimulate more business, as importers are still content to only buy hand-to-mouth.
Temperatures are below zero in parts of northern Kansas this morning that have only light snow cover, keeping winterkill threats in play. However, any damage won't be known for several months and this morning's maps don't have any additional cold in the outlook.
Today's seven-day coverage maps call for only light precipitation across the Plains, with rain focused on the South and Southeast. Official 6- to 10 and 8- to 14-day forecasts out yesterday call for below average precipitation to continue across the hard red winter wheat belt, with the latest American Model put out before 6 a.m. showing few changes from that trend.
Elsewhere around the world, rains over the weekend likely caused more harvest delays in Argentina with showers this morning also seen in southeastern Australia. Winter wheat in South Russia and Ukraine benefited from precipitation over the weekend, but China's major wheat belt remains dry.
Futures on milling quality wheat for March delivery in Paris morning trade lost 1.4 cents to $7.691, while futures for eastern Australian wheat were steady at $7.312, after conversions to bushels and adjustments for currency valuations.
There were no contracts delivered today against Chicago wheat. Only 299 Chicago December futures are still open, down 167 Friday. Total volume in Chicago fell by 44% on Friday to just 49,384, contracts, while daily open interest dropped 1,992 on light fund selling. The CFTC report said funds trimmed 4,420 contracts off their net short position in the latest week.
There were just 5 deliveries today against Kansas City futures, with total volume down by a third Friday to 14,411. Open interest in December hard red winter is at 167 contracts, down 122 on Friday's session. Daily open interest gained by 1,064. Speculative hedge funds were light buyers in the latest week. Only 3 contracts were redelivered 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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