10/4/2017 Morning Comments

Good Morning,


Outside Markets as of 6:30am: Dollar Index down 0.2500% at 93.3770; Euro up 0.165% at 1.18160; S&P’s are down 1.50 at 2531.25; Dow futures are down 10.00 at 22,598.00; 10-yr futures are up 0.14%; Crude Oil is down $0.19 at $50.23; Heating Oil is up $0.0058 at $1.7562; Paris Milling Wheat is down €0.25 at €166.75/MT; Paris Rapeseed is up €1.25 at €368.25/MT; Dalian markets remain closed for Golden Week.

Widespread frost across the Dakotas this morning with temps dipping below 32* and wind chills well below 30*.  Some areas will be seeing the end to their growing season this morning or later this week with more chances of frost early next week.  Extended maps from NOAA keep the below normal temps firmly in place for the next 10-14 days.  This will limit dry down for crops which didn’t need/want a freeze, but should accelerate dry-down for crops which were lagging maturity.  Best chances of rain in the coming 7-days will definitely be in IA where the entire state looks to receive 1.75-5.00” by the end of the weekend.  Heavy totals will also be seen in OK/OK/E-NE/MO/IL?WI/N-IN/S-MI.  After that system passes, below normal precip moves into the Plains and Corn Belt for the 6-14 day outlook.


Quiet markets overnight with corn and soybeans inside 2c ranges, and wheat mainly inside a 3c range.  Soybean prices stabilized after heavier losses early for all of the reasons outlined in yesterday’s communique.  However, barge freight also loosened up yesterday with some quotes dropping 250-400% at some stations due in part to heavy rain forecast for the Illinois and Mississippi rivers.  This helped CIF corn and soybean bids shed premium as the volume of grain coming at the market is still more than it has homes for.  More open interest increases across the floor yesterday with SRW wheat up 3,463 contracts, corn up 12,759 contracts and soybeans up 2,440 contracts.  Since the end of August, corn open interest is now up 118,962 contracts, or close to 600 million bushels.  Adding to the bearish sentiment toward corn is the continued new contract lows in spreads for various contracts.  The CZ7/CZ8 hit new contract lows of -46.00c yesterday and overnight with some analysts expecting -50.00c before bottoming.  CN8/CZ8, which is a proxy for ending stocks, hit a new contract low overnight of -16.50c.  The coiling, descending triangle pattern still intact for corn contracts, however.

Yesterday saw deliverable stocks report released for the various exchanges which we’ve glossed over the last couple of weeks, but Minneapolis saw a huge build the last work week.  HRS stocks in Duluth/Minneapolis rose 2.934mbu, which is the largesse single week build since August of 2015.  Combined wheat stocks now total 25.127mbu which compare with 30.848mbu a year ago.  Stocks usually hit their seasonal peak sometime in September, but that could come a little later this year given the drawn out harvest efforts in ND/MN.  While the delivery market is certainly pressuring spreads, one supportive feature is the amount of on-farm wheat which we continue to dig into.  Yesterday, we talked about the amount of total wheat in MN/SD/ND/MT as of Sept 1 being the lowest since at least 1986/87.  Today we looked at just the amount of wheat on-farm in those states as of Sept 1 which totaled 316.00mbu, the lowest since 1966.  This is a massive draw down from a year earlier when farmers held 494.00mbu.  Farmers in those states are holding 58.72% of all the wheat on-farm which is down from 91.80% a year ago, and would be the lowest since 1966 as well.  This can be looked at in several ways as the higher percentage of wheat off-farm should be a cap on futures, but should also imply firming spreads and basis as the year progresses.

The other wheat point worth noting after digging through more data from Monday would be the delayed HRW planting progress.  As of October 1st, there were 36% of the intended winter wheat acres planted which is down from 43% last year, but above the 31% from 2-years ago.  However, this year is tied for the second slowest for this date since 2001.  The individual states really tell the tale with KS just 21% planted vs. 39% average, and would be the slowest progress since 1999.  OK is 30% planted which is below the 5-yr average of 43%, but the second slowest pace behind 2016 since 2001.  CO is 57% planted vs. the 5-yr average of 69% planted and among the slowest for the last 30-years.  MT at 53% planted is the second slowest since 2001.  Some are blaming dry conditions, but rains are headed for the southern plains this week.  As we’ve written about here previously, odds are growing for another year of winter wheat acreage declines based on relative values to other crops and producers tiring of yield adversity, quality discounts, etc.  While the Sept 1 Stocks report tempered some of the strength in the wheat market, the 18/19 balance sheet is growing more supportive by the day.

While discussing stocks, there were several other data points from Friday’s SIAP report for minor feed grains and specialties worth pointing out.  In the sunflower market, the discussion for much of the summer was about the lowest amount of acres since 1976.  Friday’s data helped temper that mood, however, when it was revealed sunflower stocks on September 1 totaled 648.8 million pounds, the largest since the 784.1 million pounds in 2006 and the second largest on record.  Lots and lots of carryover sunflower stocks, but could still be talking about a tightening market in 2018, especially if oil content is not as high as last year.  Barley stocks totaled 179.5 million bushels, which was the lowest since 2011, and the second smallest going back to the 1940’s.  Oat stocks totaled 71.805 million bushels, the smallest since 2013, and the second smallest on record as well.  Making the barley and oat market even more interest is the current estimate for the smallest production on record for both crops on record going back 70 years.  While row crop production keeps growing in the Northern Plains, wheat and minor grains keep tightening.


Bottom Line: Looks like another quiet session as we continue to watch cash markets, spreads and field harvest reports.  The Northern Plains continues to plug away at soybean harvest, but still a long way to go before most will feel comfortable about their progress.  Volatility is dropping, and the odds for sharp moves in either direction dropping along with it.  Markets look and feel like they are snuggling in for the winter already.


Good Luck Today.

Tregg Cronin

Market Analyst






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