11/7/2017 Morning Comments

Good Morning,


A few scattered snow showers this morning in SD, NE and IA, while rain showers moving through OH.  Otherwise fairly quiet.  The Midwest should be fairly dry the next several days until rain/snow chances increase for IA/MN/WI/IL/IN Friday through Sunday.  Odds are good this falls as snow given the current temp outlook, but by Saturday/Sunday, temperatures are predicted to warm up for most of the Midwest and stay that way through the 8-14 day outlook.  Precipitation also remains below normal during that time frame, which should allow harvest to catch up where grain is actually dry.  South American outlook calls for average rains in Argentina and Southern Brazil while soaking rains fall in Northern Brazilian growing regions.  No issues to report at the moment.


Easier markets across the board this morning as our space tries to give back the gains made yesterday.  Appears to have been some short-covering on yesterday’s bounce as corn open interest fell 8,203 contracts, SRW wheat fell 2,294 contracts and KC wheat fell 132 contracts.  Soybean open interest dropped just 86 contracts, which probably signifies ownership changing hands, while products were up with soymeal up 5,031 contracts and soy oil up 821 contracts.  Soybeans have once again defended the bottom end of its rising trend channel support, while wheat has bounced right to the top end of its downtrend channel resistance, keeping both trends intact.  When it comes to corn, most traders are simply trying to figure out if their quote machines are still working as opposed to worrying about a trend in either direction.

Yesterday saw the weekly crop progress report released with corn harvest reported at 70% complete vs. 70% expected, 54% last week and 83% average.  Big progress was made in the WCB, although many still face sizable deficits relative to average.  SD is 61% complete vs. 80% average, ND 59% complete vs. 73% average, MN 60% complete vs. 87% average, IA 67% complete vs. 84% average and WI 37% complete vs. 63% average.  Most ECB states are within spitting distance of average.  Moving forward, it will be about grain moisture and whether the farmer has the ability to dry on farm or wants to pay drying changes at the elevator.  Soybean harvest was reported at 90% complete vs. 83% last week and 91% average.  Nothing really to dive into here as nearly every state is complete or at average pace.  Winter wheat conditions improved 3pts to 55% G/E vs. 58% last year thanks to some large jumps in HRW states.  For example, MT jumped 21pts to 43% G/E but well below 76% G/E last year.  MT’s jump was reminiscent of CO’s corn conditions this summer.  NE was up 7pts to 62% G/E, TX was up 6pts to 46% G/E and KS improved 4pts to 59% G/E.  Planting progress nationally advanced 7pts to 91% complete vs. 91% average, but as we’ve been discussing, it’s more about the individual states which have already passed final insurance planting dates.  KS is 93% planted vs. 97% average, OK is 90% planted vs. 95% average and MO is 69% planted vs. 75% average.  Winter wheat emergence was 75% vs. 77% average.

Other data yesterday included weekly export inspections which were solid for soybeans, terrible for everything else.  Wheat inspections totaled 10.4mbu which is the second lowest in nine weeks and well below the 17.9mbu needed weekly.  Total shipments for the year of 419.7mbu vs. the 446.6mbu on this date a year ago.  Corn exports totaled 17.5mbu which is well below the 36.7mbu needed weekly to hit the USDA export projection.  Cumulative exports now measure 218.1mbu vs. 400.7mbu a year ago, a 45.6% deficit.  Soybean shipments were solid at 91.5mbu vs. the 38.5mbu needed, but was still below last year’s weekly pace over this stretch.  Total shipments measure 545.9mbu vs. 599.6mbu on this same date a year ago.  Producers in the Northern Plains and WCB have been complaining about the weak basis levels on all commodities this fall, and one need look no further than exports out of the PNW so far this marketing year.  Combined corn, soybean and wheat shipments out of the PNW since September 1st have been below year ago levels in seven of the last eight weeks.  They’ve been below the 3-yr average in five of the last eight weeks.  It isn’t just the PNW, however, as both the Center Gulf and TX-Gulf are behind last year’s pace and mostly the 3-yr average pace.  With regard to the PNW, a lot of the basis issues there come down to a set amount of demand, and too many export houses and country elevators competing for that same demand.  We went from not enough capacity to too much in the span of 4-5 years.

HRW premiums carried over their strength from last week with the spot floor trading up another 5c for 11.40-11.60% with other protein grades unchanged.  12.0’s are indicated at +175/190 vs. 171/185Z a week ago.  The Iraq business was definitely the shot in the arm US exports needed, and given the business was conducted via a direct government to government sale, it increases the likelihood of additional business.  Iraq was tendering over the weekend for a nominal 50,000MT with offers due this past Sunday and remaining valid through November 12th.  The spring wheat spot floor was up 5c to down 10c with 14.0% called +110/150Z vs. +115/145Z a week ago.  The spring wheat protein story has taken longer to develop than has the winter wheat story, but the marketing year is much younger for HRS than HRW.  Given the well discussed protein shortages in the Canadian crop, and the decent carries being offered in spring wheat right after harvest, a similar setup to HRW seems likely with end users unable to buy spring wheat from a farmer who doesn’t like the flat price, and unable to pry bushels loose from hedged commercial inventories without a major basis rally.

Lastly, the USDA Attache to Russia released his latest report on the Russian grain crop last week with several noteworthy nuggets included.  He put average wheat yields at 3.24MT/ha which is up 16% from 2016/17 and the third record yield in a row.  There is no definitive data on crop quality from Russia, but according to the Attache, industry sources claim there are no quality concerns with the crop this year.  Protein and test weight is indicated above last year.  Total production is called 83MMT vs. USDA’s current 82MMT with exports put at 33.5MMT vs. 32.5MMT.  Attache sees ending stocks at 16.832MMT vs. USDA at 17.330MMT, both of which will be the highest since the early 90’s.  As of October 12th, Attache said Russia had planted 15.5 million hectares out of the total 17.4 million hectares forecast by the Russian Ministry of Agriculture, which is slightly ahead of last year’s pace.  Attache did cut Russian corn production to 13.8MMT vs. USDA at 15.3MMT due to poor yields.  Exports were also cut to 4.2MMT vs. USDA at 5.5MMT with ending stocks seen at 529TMT.


Bottom Line:  Lower markets as we try to give back everything we gained on the COT-influenced short-covering yesterday.  It doesn’t appear as though our markets are ready to sustain any sort of gains until we get past this week’s WASDE or know more about South American weather.  Corn almost seems like it is taking on a “let a sleeping dog lie” role with its lack of volatility, huge large spec short position, and harvest having come and gone without any real concentrated selling by the producer.


Good Luck Today.


Tregg Cronin

Market Analyst






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