11/25/2014 Morning Comments

Good Morning,


Outside Markets as of 6:15am: Dollar Index down 0.0100 at 88.1410; Euro down 0.00020 at 1.24340; Aussie Dollar down 0.77% at 0.85320; S&P’s are up 2.25 at 2069.75; Dow futures are up 20.00 at 17,812.00; 10-yr futures are up 0.11%; The Nikkei closed up 0.29% at 17,407.62; The DAX is up 0.86% at 9,869.88; The IBEX-35 is up 0.99% at 10,748.30; Gold is up $4.10 at $1200.70; Copper is up $0.10 at $300.70; Crude Oil is up $0.46 at $76.24; Heating Oil is up $0.0162 at $2.3830; Paris Milling Wheat is down €0.75 at €178.00/MT.

There really isn’t anything grabbing more headlines than the situation in Ferguson, MO, at least not in the US.  This analyst is not a social commentator, so boring economic data will have to do.  In the US today we’ll get a revision to Q3-GDP which is expected to be lowered to +3.3% (q/q) from the last estimate of +3.5%.  The downward revision is expected to stem from a wider-than-forecast trade deficit and a lower contribution to GDP from net exports.  We will also see US FHFA home prices for the month of September which are expected to show an increase of +0.4 m/m, and for the Case Shiller Composite 20 house price index to show an increase of +0.25%.  November US Consumer Confidence is expected to show a +1.5 point increase to 96.0, adding to the +5.5 increase and new 7-year high seen in October.  The Aussie Dollar is making new 52-month lows this morning.

The majority of the Midwest is open this morning, although there are snow showers over the Great Lakes region, as well as MT and WY.  Moisture will move into the Northern Plains and central Midwest tonight through Thursday, bringing varying amounts of precip to the area.  In terms of moisture ND is expected to see a general 0.50”, which will likely fall as snow, while MN is closer to 0.40”, IA at 0.30” and MO at 0.20”.  SD could see a dusting, but doesn’t look like much more.  Heavy precip is also expected over the Atlantic seaboard closer to the weekend.  NOAA extended maps show a band of dryness from W-TX to SD, but above normal precip on either side.  Temps will also diverge with ND/SD/MN/MT seeing below normal temps but almost every other state, especially those in the US-SE, seeing above normal temps during the 6-10 day timeframe.


A little bit of a Turnaround Tuesday in each respective market this morning as soybeans lead strength across the Ag complex.  To suggest the strength is related to any one news event or story is false as volumes are depressed due to the Thanksgiving Holiday, and light trading can push our markets around this week.  Still, domestic soymeal and soybean basis values have stabilized, and spreads have even clawed back part of last week’s gains, especially in soybeans.  It would appear our markets are settling into some fairly well defined trading ranges, with little on the immediate horizon to jar us out of them.  The demand for soybeans nearby remains astounding, so the pipeline needs to remain full.  Cash corn markets have been strengthening, but don’t seem enough for another leg higher.  Wheat markets have Southern Hemisphere production to keep tabs on, but little occurring in the Northern hemisphere now that most crops have been pushed into dormancy.  We’re about to enter the period between Thanksgiving and Christmas where news, and volume, becomes light.  The next major market-moving event won’t be until the January WASDE and SIAP reports.

Before diving into anything related to the major Ag markets, wanted to broach the subject of sorghum exports as it doesn’t seem to be getting its share of attention.  Yesterday’s export inspections report showed 5.1mbu shipped in the week ended 11/20, which pushed the marketing-year-to-date total to 76.1mbu.  This would be up 132% from a year ago, and already accounts for 33% of the entire marketing year export forecast of 230mbu.  For comparison’s sake, we’ve shipped just 18.7% of the corn forecast.  Even more astounding is how many total commitments we already have on the books at 3.878MMT, if one includes the flash sale from yesterday morning.  3.878MMT would compare with 4.700MMT for the entire 13/14 marketing year, and the 6.23MMT for the entire marketing year in 2001-2002, which was the largest year of the last 16.  The 3.878MMT accounts for 94.4% of the entire marketing year export forecast on the last WASDE report, and we’re only 3-months into the marketing year. China is obviously the reason for the increase, but if you think their NGMO argument is fluff, look no further than sorghum exports.

One other note before leaving inspections, soybean exports were again massive at 102.3mbu, which puts the last 6-weeks exports at 568mbu.  Of this week’s 102.3mbu, 78.3mbu were destined for China, and puts cumulative exports to China at 713mbu which are up 21% from a year ago.  Exports for wheat and corn have been disappointing the last several weeks as they compete with soybeans for elevations.  Until the soybean program winds down, whenever that may be, expect wheat and corn inspections to remain limited, even though there remains plenty of time for both to catch back up.

Yesterday also saw the last crop progress report published until next April, another reason for the dearth of news in coming weeks.  Corn harvest advanced to 94% complete, spot on with a year ago and ahead of 92% for the 5-yr average.  There actually remains a fair amount of corn left in the field around the Great Lakes region with 149mbu left to pick in MI, 134mbu in WI, 80mbu left in OH, 22mbu in PA and 96mbu in IN.  Combined there is still 481mbu left to harvest in these five states, which would be around 3.3% of the expected total production.  Not a huge deal, but harvest of these bushels will remain slow, and can’t be expected to hit maximum yield potential.  Soybean harvest was pegged at 97% complete vs. 95% last year and 98% average.  The only state really lagging averages is KY at 87% complete vs. 96% average, although there is still a fair amount of harvest left in NC as well.

Winter wheat conditions saw a universal decline across all geographies and all wheat classes yesterday as the crop heads into dormancy.  The largest decline actually came from NE which saw G/E conditions decline 9pts to 69% G/E vs. 71% a year ago.  WA also saw conditions decline by 5pts to 23% G/E vs, 77% last year.  Emergence nationally is estimated at 92% vs. 89% average, although SRW states remain the concern.  In particular, IL sits at 76% emerged vs. 90% average, IN at 88% vs. 89% average, OH at 91% vs. 92% average and MI at 86% vs. 98% average.  While some of these states may not be far from average, rarely have we had the kind of cold temperatures in the ECB we’ve seen in November.  SRW acres are already expected to see a decline, and using Informa Economics’ latest survey results, SRW acres in those four states were expected to be down 12.5%.  Assuming all of these states reached 100% planted, which they didn’t, 309,400 acres of the total 2.030 million never made it out of the ground prior to entering dormancy.  While that doesn’t necessarily mean complete winterkill, stands will be affected.

One last note, January soybeans have declined 6 of the last 10 years on the Wednesday before Thanksgiving, while advancing 7 of the last 10 years on the day after Thanksgiving.  Just something to monitor.


Bottom Line:  Turnaround Tuesday in effect for crops so far, but it doesn’t feel like our markets possess a great deal of conviction this week.  Soybeans need to keep moving to fill the pipeline, but South American weather is nearly ideal for Brazil.  Provided nothing is derailed, world carryouts will be massive during 2015, but we’re not there yet.  Range bound trade as we settle in for winter.


Good Luck Today.


Sorghum Outstanding Sales 11-25


Tregg Cronin

Market Analyst






COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.