December 5, 2013
Morning Price Trends
Corn: Down 2 to 4
Soybeans: Down 2 to 3
Wheat: Down 1 to 5
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Grain futures are lower across the board this morning, pressured by a wheat market still trying to dig out from under a huge crop reported Wednesday in Canada. Financial markets are quiet, treading water ahead of Friday's employment report.
Corn prices are weaker this morning, giving back some of Wednesday's rally, which appeared driven in part by short covering from large speculators.
Demand news remains positive, but this year's record crop should still provide plenty of surplus. The average guess for next week's USDA report sees only a modest reduction in carryout; Farm Futures puts stocks down 50 million bushels, a drop in the bucket for a 14-billion bushel crop.
Export Sales out this morning should be decent, around 35 million bushels, while ethanol production is also holding up, thanks to cheap corn prices. Output last week fell by 14,000 barrels a day, but remains strong at 913,000 barrels a day, while the total for the first quarter of the marketing year is up 7%. Stocks remain fairly tight, rising just 102,000 barrels on the week.
There were no deliveries again today against December futures, and nothing was registered for delivery. Basis along the Illinois River weakened Wednesday, with bids falling below option as the Mississippi River shuts down for the season along northern stretches.
Open interest in December futures fell by 4,074 Tuesday, leaving 8,292 contracts still open. The preliminary report from the CBOT showed daily total volume in corn up 43% at 247,931, while open interest was off 3,303 on fairly active fund buying.
Prices elsewhere today followed Chicago lower. Futures for May delivery on the Dalian exchange in China were off 1.3 cents to $9.85, and January corn in Paris morning trade lost 3.5 cents to $6.247, after conversions to bushels and adjustments for currency valuations.
Financial markets remain on the defensive this morning, moving mostly lower in Asia and Europe after yesterday's choppy trade on Wall Street. Private sector employment reported Wednesday was strong, with Friday's total for November likely to approach 200,000. That's good news and bad news for investors, who fear better economic data could cause the Federal Reserve to begin pulling back on its financial stimulus.
Wednesday's Petroleum Inventory showed crude oil inventories down 5.6 million barrels last week, but diesel supplies were lower, easing both basis and wholesale prices after a spurt higher in November.
Bottom line: Growers should be looking for basis pushes, carefully analyzing whether it pays to hold grain into 2014. With carry tightening, potential basis appreciation should guide the decision. Upside in futures remains limited without weather problems in South America or a surge in Chinese buying. 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 lower, holding January futures to an inside day on the charts as the market tries to make up its mind about generating another leg higher.
Export sales this morning are expected to run almost 40 million bushels – a strong number most years, but down from some of the big totals seen this fall. Traders expect USDA to chop 20 million bushels or so off carryout in Tuesday's report due to strong demand from China; Farm Futures puts ending stocks at 150 million, compared to 170 million last month.
One sign of that demand is in the cash market. The remaining 55 lots of soybeans registered for delivery along the Illinois River were taken off the shelf Wednesday, leaving nothing available, with cash above option there and January retaining a premium to deferreds. Strong domestic demand for meal also is pushing prices, with nothing delivered again today against the December contract. Soybean oil deliveries rose to 684 lots.
Daily volume in soybean futures was up 9% on Wednesday to 217,787, with open interest gaining 1,603 on moderately active fund buying.
Oilseed markets around the world today are mixed. January futures on Malaysian palm oil eased slightly to 36.6 cents/lb, while soybean oil for May delivery in China fell almost a half cent to 53.6 cents. May soybeans in China were up 5.4 cents to $19.927, February rapeseed in European morning trade lost 7.7 cents to $11.582, and January canola in Winnipeg was up 4 cents at $10.266. Note: all prices are in bushel or pound equivalents including currency adjustments to U.S. dollars for contracts with significant volume.
Brazil is due for more showers today, with rains redeveloping in Argentina again later this weekend. Conditions remain favorable for big crops in South America.
Bottom line: Growers should use rallies over the next few weeks to wrap up sales unless weather problems in South America develop soon. 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 seeing follow-through selling, after falling apart yesterday on estimates of bigger than expected production in Canada. Winter wheat futures in Kansas City and Chicago are testing the bottom of their November channels, though Minneapolis held the contract lows set on yesterday's plunge.
Temperatures are also plummeting, falling below zero this morning on the western Plains, with only light snow cover reported in northwest Kansas and northeast Colorado. Today's seven-day coverage map keeps heavy precipitation in the outlook from the far southeastern Plains through the Ohio River Valley. Official 6- to 10 and 8- to 14-day forecasts out yesterday remain cold and dry for the Plains, though the latest American Model put out before 6 a.m. brought a little more snow to parts of Kansas and Nebraska later in the two-week period.
Elsewhere around the world, Argentina could see more rain delays for harvest this weekend. Showers are winding down in eastern Australia, but Western Australia could see some delays from rain over the next couple of days. Winter wheat in South Russia and Ukraine continues to benefit from scattered precipitation this week, but China's major wheat belt remains dry.
Futures on milling quality wheat for January delivery in Paris morning trade were down 4.9 cents at $7.806, and futures for eastern Australian wheat lost 4.6 cents to $7.321, after conversions to bushels and adjustments for currency valuations.
U.S. wheat is becoming more competitive on world markets, but export sales may take time to show improvement. Sales are expected to fall below 20 million bushels in today's weekly report. USDA could cut its forecast of carryout a little on Tuesday. Farm Futures sees a cut of 10 million bushels, while the average guess from the trade is down 25 million.
There were 649 contracts delivered today against Chicago wheat. Some 1,161 Chicago December futures are still open, down 206 Wednesday. Total volume in Chicago was up 26% today to 70,676, though open interest gained 284 on light fund selling.
There were 13 deliveries today against Kansas City futures, where volume remained flat at just 11,844 Total daily open interest rose just 71, with open interest in December hard red winter at 350 contracts, down 206 on Wednesday's session. Just 44 contracts were redelivered in Minneapolis, following the big break on the board.
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, so plan to wrap up sales of 2013 inventory soon. 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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