Corn has had a mixed week of emotions. Making new 3 yr lows early in the week to surprising USDA yield estimates followed by a larger than anticipated prevent plant number from FSA. All this left the corn marking searching for direction, by late today the bear had won out and took corn 8-9 cents lower. Funds were sellers of 7000 contracts on the day and the Z/H gave some relief to those that are trying to lock in carry. CZ/CH finished at -12 ½ and the CU/CZ added 1c to settle at 10 ¼. Close attention needs to be kept to the freight market when evaluating the Z/H spread. From Oct to Dec in the rail market there is a 20c inverse and a 22c inverse in the barge market for the respective periods. This would give the cash market a “carry” by way of freight thus not obligating the futures spreads to create all the incentive. Basis in the west has found some strength this week, Hereford is up 40+ on the week trading 10-15c above posted values. Grp 3 is rumored to be around the +150U adding a dime from Monday. Cooler temps (lack of GDU) has some out looking for early Sept coverage giving some influence to the stronger OC basis this week. In 1965 Marvin Gaye sang “How Sweet It Is (To Be Loved By You)”, that song came to mind today after the USDA announced they would purchase unwanted sugar and sell it at a loss to ethanol plants to produce more Biofuels. Some have estimated this to replace about 50 million bushels of corn demand. USDA estimate a sugar surplus of 2.3 mln tons at the end of Sept. The market will focus on the weather next week as heat is scheduled to appear across much of the corn country. The question is will this create enough energy to spark some needed rains and if so how far south do they cover.
Soybean futures finishing the day down $.06 ¼ cents at $12.59 ¼, after touching a high of $12.72 early in Thursday night’s session. The USDA announced more soybean sales with Unknown buying 126,000 mt’s, and China buying another 284,000 mt’s. We keep clicking these types of sales off about every other day. Combined Unshipped old crop and new crop sales has 2012 running slightly ahead of 2011 now, which is a record of Unshipped sales for this time of year. The U.S. now has an export commitment that is 50% of the total USDA projection. First quarter demand export demand will now be as large or larger than last year. The same can be said for export meal sales. We currently have a record of unshipped old/new crop soybean meal sales on the books. And, rumor has it, that a Chinese delegation will be in the United States in early September. Sometimes they make additional purchases while they are here. Combine this with being in the back stretch of August, an August that hasn’t had a lot of rain, and crop prognosticators will suggest the bean crop is getting smaller. Throw in a little frost fear, and no wonder producers aren’t selling new crop soybeans. Weather forecasts don’t have a lot of water in them until later next week, but the market will get an update on that potential Sunday night. Until the producer feels comfortable selling soybeans, basis and spreads should remain in lockstep working to pry loose bushels. SX3/SH4 forward spreads are inverted, and the SX3/SF4 is pretty close to being inverted, showing a $.02 ½ cent carry. This should be a volatile week.
Routine trading day for the wheat participants to end the week with prices following the corn/soybean weakness to close 3-6 ¢ lower across the 3 exchanges. Fundamental news sticking close to the meteorologist reports as weather in Australia and Brazil will be key global production factors over the next 2 months. French wheat harvest is now approaching 90% complete with yields and quality better than expected. Quality has been much better than expected out of the German crop as well, with UK production the biggest remaining question mark. Cash values for EU feed wheat have moved from a 5 cent/bu discount vs milling wheat to a 25 cent/bu premium. Russian wheat harvest is 2/3’s done with some forecasts now indicating a slight drop from early guesses. Winter wheat harvest in Manitoba Canada should be ½ done by the end of the weekend, at least 2 weeks behind normal. Yields are better than expected at 60-80 bpa. Spring wheat harvest will be following closely, with active harvest in the Red River Valley of ND next week on the favorable weather outlook. Mid proteins in KC were a nickel stronger, though the Sept/Dec spread was actually ¾ cent weaker closing at 4 cents carry. Basis levels hovering right at a single car DVE value delivered the gulf. There were 500K bushels of wheat put under loan this week bringing the 2013 total to over 2 mbu. The total isn’t significant, but does represent the resistance of the farmer to sell into a market that is asking for wheat. If fall logistics now require space for the HRW elevator, DP management of wheat might be an easier strategy than fall grains. Basis levels are at historic levels and demand is clearly front-loaded. Talk to your broker about quality and space implications. Mnpls Sept/Dec working towards even money closing at a penny carry. Have a great weekend!
This data is provided for information purposes only and is
not intended to be used for specific trading strategies without
consulting Advance Trading, Inc. No guarantee of any kind is
implied or possible where projections of future conditions are
attempted. Past results are no indication of future performance.
All information is based upon data that is believed to be reliable,
but its accuracy is not guaranteed. Please see
http://www.advance-trading.com/index.php/disclaimer for full disclaimer