Sent: Wednesday, September 25, 2013 4:28 PM
To: Undisclosed recipients:
Subject: Advance Insight - 9/25/13

 

Corn

Corn closed higher on what was noted as short covering led by the firmer tone in wheat – Dec corn closing at $4.54 ¾  up 6 ¼. Wheat firming in light of concern over Argentine frost and talk of export demand potentially coming to the US from China and Brazil. Harvest is growing across the belt – seeing a higher number of “better than expected” compared to “disappointing yields” at this point.. Weather forecasts are favorable for an increase in harvest activity next week – calling for some scatted showers/light precip in the corn belt this weekend but then dry warmer than normal temps next week. Cash markets are still riding the line between new crop harvest and nearby usage that needs to get covered. Generally basis was steady to slightly weaker in most markets although the weaker tone seems to me more about the buyer wanting to call it/bid weaker. Movement due in part to minimal harvest, is limiting the availability of new crop into the pipeline providing nearby support to most cash markets. Would look for erratic basis movement going into next week with the market patiently waiting for gut slot harvest to refill holes in demand. Although Black Sea corn values have firmed over the past week, they remain well below US equivalent values. Based on values seen Tuesday and on Tuesdays close, Ukraine corn is trading at a 40 cent/bu discount to US into North Africa/MENA region. Have heard some rumblings of rail logistics problems in the Ukraine moving corn to the port areas limiting nearby supply for loadings forcing some sellers to switch origins to other areas – Bulgaria in one example. Other examples of weak US Export demand was noted in Japan, a traditional buyer of US corn,  has year to date purchases 15% below a year ago levels and the lowest we’ve seen in 25 years. With the market pretty well consuming much of what is getting harvested today, it feels like we are only increasing the amount of available space throughout the corn belt. Taking increase space availability into account together with light new crop producer selling and an end user that is needing to get their hands on nearby corn, the argument for a firming tone to basis continues. Good time to review your overall spread scenario and talk to your broker about locking in more Dec/March or go further out to May or July. For those who may have made deferred sales versus the May or July – suggest you stay classic and get hedges out to where they need to be.

Paul Dubravec

 Beans

Weather has been terrific and bean yields continue to pour in from all over the grain belt. Latest yields as of this writing: EC IL 70, 60+; NE IL 41; IL/WI border 53; NW OH 52, 50; NW IA 51, 66, 62, 45; SC IA 38; SW MN 50, 55; dryland NE 56. There are some areas disappointed, but the vast majority thus far pleased with early yield results. Nov beans traded 6 lower early in the session and then rallied on short covering and on a steadily higher day in the corn and wheat pits. The quarterly stocks report slated for Monday Sept 30 has a range of 155 to 106 for soy carryout and an average guess of 124 which is right in line with current balance sheet data. Decatur dropped their bean basis by a dime for deliveries that must arrive by Friday of this week. CIF values were steady/touch firmer on the day. A statement in an online news story caught my eye this afternoon (http://www.farmandranchguide.com/news/opinion/soybeans-us-export-trend-is-up-share-of-world-exports/article_dc3305cc-25fa-11e3-ba67-001a4bcf887a.html), and I thought it worth repeating, particularly as we consider the voracious appetite of China in contrast to the relatively tight projected carryout in the US. If you don’t read the story, here’s the line that got my attention: In less than two decades, China has gone from meeting virtually all of its domestic soybean complex needs with domestic production to the point where domestic production equals just 16.9 percent of domestic consumption. While China seeks to maintain self-sufficiency in grains, it clearly has made an exception to its self-sufficiency policy for soybeans.

Phil Reginelli

Wheat

Argentine wheat was hit with frost on Tuesday and forecasts are calling for more cold weather in the days to come. EU futures moved higher (as did SAFEX prices), and CME prices followed along as Chicago December Wheat traded as much as 17 cents higher on the day. Additional support in the market was attributed to internal Chinese prices moving to record levels (thus leading many to believe they will ramp up imports to weaken prices) and to concerns over the stock building program in Russia which is scheduled to begin next month. Russia’s crop quality has consistently been described as “poor” and supplies of milling wheat are in decline. Russia has taken 46 MMT of wheat this year compared to 37 MMT last year. Export sales are expected to be solid on Thursday with estimates in the 18-26 mmt range. CIF values improved on Wednesday with Sept up 9 at 74/80. Basically it was solid day higher for wheat futures with the only significant intraday setback coming in the final 40 minutes of trading. Nearby Chicago spreads were steady but deferred spreads tightened a few cents on the day.

Phil Reginelli

 

Garrett Merkle

Advance Trading, Inc.

309-664-2358

gmerkle@advance-trading.com

 

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