December 6, 2013
Morning Price Trends
Corn: Up 1
Soybeans: Down 4 to 8
Wheat: Steady to up 2
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Grain futures are mixed as the overnight session winds down, while outside markets wait for key jobs data in the November employment report due out at 7:30 a.m. Chicago time.
Corn prices are a little higher, turning around early losses as traders got going in Europe this morning. Quiet trade today could reinforce a narrowing range on the charts ahead of Tuesday's monthly supply and demand update from USDA.
The agency is expected to make only modest adjustments to its carryout forecast, with no update of production estimates here in the U.S. until January. Farm Futures sees a likely cut of 50 million bushels in ending stocks, not enough to make any difference with a 14 billion bushel crop.
Export market activity is dominating the headlines this morning. Taiwan bought a load of U.S. corn overnight, but South Korea, which normally buys ahead of government reports, rejected offers on a deal today. Traders are still waiting for clarification from China on approval of the GMO variety that cause three shipments to be rejected in recent weeks. Export Sales reported Thursday were disappointing last wee at 23.4 million bushels, though shipments were decent, hitting 41 million bushels.
There were no deliveries again today against December futures, and nothing is still registered for delivery. Basis weakened again along on parts the Illinois River but some bids remained above option.
Open interest in December futures fell by 1,341 Tuesday, leaving 6,951 contracts still open. The preliminary report from the CBOT showed daily total volume in corn down by a third on Thursday to a weak 169,367. Open interest rose by 2,288 on light fund selling, suggesting the short covering rally by big speculators may be over for now.
Prices elsewhere today are firm. Futures for May delivery on the Dalian exchange in China rose almost a penny to $9.876, while January corn in Paris morning trade was steady at $6.265, after conversions to bushels and adjustments for currency valuations.
Financial markets are mostly bullish this morning, after mixed economic out this week clouded the potential for the Federal Reserve to begin winding down its financial stimulus program. Investors expect today's report from the Labor Department could show employments gains last month of 200,000 jobs, sending U.S. stock index futures higher after this week's losses. The dollar is stronger, pressuring gold and crude oil a little.
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 weaker this morning, with choppy trade continuing in the wake of Monday's big bearish reversal lower from chart resistance. Expectations for a huge crop in South America are balanced by strong demand for U.S. soybeans and the potential for shipping delays moving all those beans out of Brazil in a few months.
Export sales reported Thursday were a bit disappointing, at 42.7 million bushels, with a third of the total for 2014 crop delivery. Still, total sales and shipments to date have reached 95% of USDA's forecast for the entire marketing year, increasing potential for the agency to cut its forecast of carryout in Tuesday supply and demand report. Farm Futures thinks a reduction in carryout of 20 million bushels, to 150 million, is likely, with more reductions possible this winter.
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 186 lots.
Daily volume in soybean futures was down 7% but was still stronger than corn at 202,027 contracts. Open interest was up 2,623 while funds were even on the session Thursday, unlegging some of the long meal/short oil spreads.
Oilseed markets around the world today are mostly lower, following the trend in Chicago. January futures on Malaysian palm oil bucked the trend, rising almost a half cent to 36.9 cents/lb, but soybean oil for May delivery in China fell to 53.9 cents. May soybeans in China were 8.1 cents weaker at $19.884, February rapeseed in European morning trade gave back 5.4 cents to $11.643, and January canola in Winnipeg was down 2.8 cents to $10.211. Note: all prices are in bushel or pound equivalents including currency adjustments to U.S. dollars for contracts with significant volume.
Weather remains favorable in South America. Good rains are expected into next week over most of the growing region in Brazil. Showers are moving out of northern Argentina today but should redevelop over the weekend. The grain exchanges in Buenos Aires reported 57% of the crop is planted.
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 trying to hold, after a steep drop this week following news of record production in Canada. Japan issued a special tender for only Canadian originations today, but said the unusual move was to deal with potential shipping issues caused by the big crop and winter transportation delays.
Temperatures are below zero again this morning in parts of the western central Plains, where lack of adequate snow cover could cause problems to winter wheat. Today's seven-day coverage map shows only light potential for additional moisture over the next week. Official 6- to 10 and 8- to 14-day forecasts out yesterday remain cold and dry for the hard red winter wheat crop, which little change in the the latest American Model put out before 6 a.m.
Elsewhere around the world, Argentina could get more rain over the weekend, with only 29% of the crop harvest. Rains should also fall across Western Australia, with potential for showers in the northeast next week. Winter wheat in South Russia and Ukraine is picking up beneficial precipitation today, while China's major wheat belt remains dry.
Futures on milling quality wheat for January delivery in Paris morning trade fell 3 cents to $7.828, while futures for eastern Australian wheat were down 2.3 cents at $7.328, after conversions to bushels and adjustments for currency valuations.
There were 139 contracts delivered today against Chicago wheat. Only 390 Chicago December futures are still open, down 771 Wednesday. Total volume in Chicago rose 25% yesterday to 88,519, while open interest was up 1,573 on new fund selling.
There were 53 deliveries today against Kansas City futures today, with total volume doubling to 21,565 on open interest that fell 1,118. Open interest in December hard red winter is at 289 contracts, down 61 on Thursday's session. Just 15 contracts were redelivered in Minneapolis.
Weekly sales of just 8.4 million bushels pressured prices yesterday. Taiwan bought a load of U.S. wheat overnight, but sales into the Middle East remains stymied.
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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