Friday, June 26, 2009

A quiet end to the week as grain markets wait for news. Corn futures lost $.15 for the week but $.14 of that loss was on Monday while the rest of the week was non eventful. Soybeans were also quiet much of the week with the main feature being continued support for old crop as July futures gained $.22 for the week as users chase a dwindling supply of cash soybeans with new crop November losing $.15 as a traders generally interpret weather to be negative.

On Tuesday, June 30, USDA will release two key reports that could have big-picture ramifications for the grain markets. Given the old crop tightness in the soybean balance sheet and the ongoing uncertainty about domestic corn feed usage, the June Grain Stocks report could have notable implications for near term trading activity. On the other hand, the extremely divergent planting conditions across the U.S. this spring, combined with the estimated large reduction in total U.S. cropland from last year has resulted in widespread views on this year's planted area. Accordingly, the acreage report hold the potential to include notable surprises as well.

Corn - The largest unknown for corn is feed usage, animal numbers continue to run well behind year ago levels and the pace of that may continue for some time. The reduced feed demand could lead to a 12% reduction in feed demand for the year to date. Exports seem to be following along USDA forecast and the ethanol industry is getting fired back up as margins improve. I would look for June 1 corn stocks to be near 4.2 billion bushels compared to a year ago at 4.03 billion. Corn acre ideas seem to be coming in around 84 - 84.5 million acres down slightly from the USDA March estimate of 85 million.

Soybeans - Given the strong old crop cash basis and the $2.00 premium that the July contract has vs. November the Junes Grain Stocks report could hold significant ramifications for old crop price action in the coming months. The USDA currently is estimating a soybean carryout of 110 million bushels for a record tight 3.6% stocks to usage ratio, this explains the strong cash basis levels... The strong export program this year is starting to wane as South American stocks have become available to the market but the domestic market has been able to step in an provide demand for soybeans. Traders have been watching for signs of a slowdown in usage with domestic processors crushing about 6% less beans than last year, will this slow more or not? We would expect to see June 1 soybeans stocks at 580 million bushels or so compared to 676 a year ago with the average trade guess of 586 million. Warning, a year ago USDA surprised the trade in September with a reduction in "residual" usage which increased carryout, a stocks number of 600 million bushels or so on Tuesday would be a warning that they may be inclined to reduce the current 73 million bushel estimate. Soybean acres are the biggest wild card on the board for Tuesday, Vegas hasn't started to lay odds on it but that is where the action would be. We are looking for an increase in acres from the March 76 million acre estimate but how much? I'll say up 2 at 78 million compared to the average trade estimate of 78.3. Bean acres seem to be where we may "find" some of the lost acres from a year ago... Stay tuned.

Phil Farrell

Wednesday June 24, 2009

Grains in Chicago closed mixed with corn slightly lower and beans marginally higher.

Why cant corn rally?? Index Funds hold 33% of Chicago Wheat open interest. Which is more the the total US soft red winter wheat production. Livestock markets continue to take it on the chin. July Hogs closed down the $3.00 limit. Weather forecast are generally for greenhouse conditions all the way into July 4Th weekend. The corn crop conditions as a nation are 70% Good to Excellent versus 59% last year. Next week is not only final acreage report, it includes quarterly stocks which is the best indication of disappearance of corn into feed rations. Notice the change of how much less corn is headed into the southwest feed market today versus just a few years ago. On a positive note December corn appears to have good support in the 3.90-3.95 area and likely will not breach that prior to next weeks report.

Soybeans a different animal, a market that is in need of rationing yet today as old crop stocks are dwindling and appears that the Delta harvest will not be as early as in years past. This indicating a need for a HUGE premium potentially for early harvested soybeans. That will be the next item of interest. Will it be done by futures, basis, spreads, or all of the above?

Stay Tuned,
Jeff Neisler

Tuesday June 23rd, 2009

A day late on these comments, sorry for the delay. Temperatures and basis levels are heating up while the crude oil and grain futures market seem cool with more sellers taking profits and commercials not ready to jump in and buy just yet. Corn basis at the river terminals is at -.01 Morris and +.02 Ottawa, with Corn Products at +.08. River beans are hanging in at +.12 as export sales are being filled instead of the usual cancellations at this time of year. United States corn is affordable for the world with the recent weakness in the dollar and should keep demand steady into August.

Have you been watching new crop bean basis? December delivery to the Morris Terminal went home last night at +1/2 over the January futures with elevator basis levels strong accordingly. Lots of economic data out on Wednesday which should give the stock market and crude oil direction.

Thanks

Scott Meyer

Monday June 22, 2009

One look at the broad markets this morning gave a fairly good idea at the driving force behind our grain trade today. The traders were booking profits on commodities in droves as the dollar looks to have put in at least an interim bottom. While we do expect to see additional inflows of capital into commodities to close out the month/quarter, what we’ve seen the past few trading sessions is a whole different dynamic. The distinction being that we’ve been seeing the hedge funds leaving commodities, not necessarily the index money.

The Midwest has been hit by its first heatwave of the summer, forecasters said on Monday, boosting crop development and speeding winter wheat harvest, which pressured grain futures prices. Farmers are still trying to wrap up soy planting in the southeastern Midwest due to all the rain. The wet weather has also delayed the start of soft red winter wheat harvest, and raised concerns about crop quality.

Crop progress report out this afternoon has IL corn at 51% good/excellent, beans at 52% good/excellent, while Iowa, Nebraska and Minnesota were all at or above 80% good/excellent for corn and soybeans were above 70%.

Chris Spurlock