December 10, 2013
Morning Price Trends
Corn: Down 2
Wheat: Down 2 to 4
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Grain futures are mostly lower this morning, with only soybeans hanging on to gains ahead of this morning's December USDA Supply & Demand report. That release is expected to come out as scheduled at 11 a.m., even though the rest of the government is closed due to the winter storm along the East Coast.
Corn prices are softer, giving back some of yesterday's gains. March futures remains capped by its 40-day moving average, with an attempt to break through stymied once trading started in Europe today.
USDA is expected to make only modest reductions to carryout in its December report this morning, trimming carrying perhaps up to 50 million bushels due to stronger export and ethanol demand. That should still leave projected Sept. 1 ending stocks above 1.8 billion bushels, a burdensome number that could cap gains.
Another figure to watch for today: Brazilian production. USDA reduced its forecast to 2.75 billion bushels in November, and there's talk growers there could plant more second crop beans instead of corn. However, the Brazilian government today upped its forecast to 3.1 billion bushels.
Export demand remains decent, and Monday's Export Inspections were good at 40.2 million bushels. That included 17.6 million bushels taken by China, despite rejection of a few shipments recently that contained an unauthorized GMO variety.
Supplies in the export pipeline remain tight. There were no deliveries again today against December futures, and nothing is still registered for delivery. Basis was firm yesterday, with some bids above option along the Illinois River.
Open interest in December futures fell by 1,112 Monday, leaving 4,900 contracts still open. The preliminary report from the CBOT showed daily total volume in corn off another 10% at only 136,844 contracts. Open interest was up 3,437 on moderately active fund buying. The best bet for a rally now comes from short covering by big speculators, who still hold a huge bearish bet in corn.
Prices elsewhere followed Chicago lower overnight. Futures for May delivery on the Dalian exchange in China were off around a half-cent at $9.873, and March corn in Paris was 6.1 cents lower at $6.215, after conversions to bushels and adjustments for currency valuations.
Financial markets are mixed, with stocks yielding earlier modest gains. The dollar is weaker, giving a lift to gold and crude oil, but interest rates are also easing on firmer Treasury prices.
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 trying to hold on to gains, after a push higher Monday. USDA is expected to cut 20 million bushels off its forecast of carryout today, taking ending stocks down to 150 million bushels due to stronger exports, with more cuts likely down the road if strong demand continues.
There were no signs of interest waning Monday. Export inspections hit 60.4 million bushels last week, with China accounting for 41.4 million bushels of the total. USDA also announced the sale of another 8.45 million bushels of 2013 crop soybeans and 2.2 million from the 2014 crop to China, under its daily reporting system for large purchases
Still, potential for a huge crop in South America this winter and spring overhangs the market. The Brazilian government today raised its forecast to 3.31 billion bushels, 75 million more than USDA's November estimate. Growing conditions remains favorable. Storms moved through southern Brazil over the past 24 hours, after brining good rains to Argentina over the weekend.
Oilseed markets around the world today were mixed. February futures on Malaysian palm oil eased to 37.3 cents/lb, while soybean oil for May delivery in China was steady at 54 cents. May soybeans in China gained 5.8 cents to $20.014, February rapeseed in Europe was off 3.1 cents today to $11.558, and January canola in Winnipeg was steady at $9.946. 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 rose to 202 lots. Daily volume in soybeans rose 36% to 238,641 on Monday, with open interest gaining 5,929 on moderately active fund buying.
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 weaker, with futures making new contract lows overnight on all three exchanges. Bearish news out of Canada from a record crop there continues to pressure Minneapolis, spilling over into the rest of the market.
Japan issued a special tender for Canadian wheat last week that was filled today for 4 million bushels. That was less than the 6 million bushels sought, with the tender arranged in a bid to overcome logistical issues caused by the big crop and weather.
USDA should increase its estimate of world stocks due to bigger crops in Canada and Australia, which should provide plenty of competition into Asia. U.S. carryout projection could see a modest reduction today, perhaps 15 million bushels, due to stronger exports in the first half of the marketing year.
Today's seven-day coverage maps keeping precipitation light for hard red winter wheat, with official 6- to 10 and 8- to 14-day forecasts out yesterday still calling for below normal precipitation except north of I-80. The latest American Model put out before 6 a.m. did shift a little wetter in the second week however.
Elsewhere around the world, Argentina looks dry into the weekend, improving harvest weather, while rains also look lighter for much of Australia's wheat belt. Winter wheat in South Russia and Ukraine continues to pick up precipitation this week, but China's major wheat belt still looks dry, with only a chance for light precipitation this weekend.
Prices elsewhere today are mixed. Futures on milling quality wheat for March delivery in Paris lost 4.3 cents to $7.622, but futures for eastern Australian wheat gained 2.3 cents to $7.374, after conversions to bushels and adjustments for currency valuations.
There were11 contracts delivered today against Chicago wheat. Only 252 Chicago December futures are still open, down 47 Monday. Total volume in Chicago rose slightly to 50,716, up 1,249 on light fund selling. There were no deliveries today against Kansas City futures, with total volume Monday down 13% at 12,538 on open interest that rose 1,389. Open interest in December hard red winter is at 118 contracts, down 49 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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