Subject: Advance Insight - 8/15/13
Attachments: AI 081513.pdf
CZ +17 at 472 ¼ , CU/Z – ¼ at 9 ¼ inverse, CZ/H + ¾ at 12 ¼ carry. Cash movement was decent east and west on the flat price rally with enough processors showing stronger basis, well above DVE bids to encourage selling. Most putting short hedges in the CH and keeping any long hedges in the CU. Bullish catalysts for corn prices were plentiful today. FSA released prevented planting acreage numbers this morning which were 7.7 mln total, 3.4 mln corn and were viewed above earlier expectations. FSA acreage is an apples to oranges comparison to NASS planted acres historically, but the absolute number exceeded earlier expectations; the question remains has NASS taken this into account already, probably a good chance they have. The old crop 2.5mbu sale to China was another catalyst, but with 16 days left in old crop that could easily roll to next marketing year none the less 10 year highs in outstanding sales 13/14 is a positive, especially if the US realizes a 399mbu SON export program compared to 221mbu LY, implied by YTD unshipped book regression analysis. The poultry industry stats showing more potential corn demand developing with egg sets up 4.7% over LY and Chick placements up 1.9% over LY. Lastly the forecast remains cool, but dry, and turns warmer next week, eventually at this pace lower crop condition scores. Sep and Oct Chi platts ethanol prices increased enough to cover 50% of the rally in corn futures, and cash crush is mostly function of the corn basis performance from old to new crop and the lack of GDU accumulation is not helping speed the transition. Margin remains decent enough in ethanol to keep paying up for corn. Bearish news much less plentiful, and that is the crop still looks great, and there is plenty of corn being grown worldwide to meet expected demand which remains undefined.
The bean rally caused another round of farmer movement and plants took advantage to lower posted bids 5 to 20c in IA/NE and 40 to 50c in MN. Eastern plants were a little more mixed with a few IN/OH locations dropping bids 5 to 10c. Meal basis was mostly $2 - $5 weaker, which should continue to put pressure on crush margins. Interesting to see Cargill at Lafayette announce they are coming back online and bidding for LH Aug. Cargill Wichita is expected to be back online by the 19th and they are pushing to find old crop origination, before southern new crop, and they raised their posted bid 20c to +180SX. Wichita has raised their bid $1.05 in the past 3-days. NOPA crush for July was 116.4 mbu, oil stx 2.050 and meal exports 352k. July crush increased 5% from June and was dn 4% from LY. Meal exports YTD are 10.8 MMT, up 2 MMT from LY and makes the USDA export forecast of 10.9 MMT look low. Beans sales were a strong 69.6 mbu with China the main buyer. They had been a pretty active buyer prior the latest run-up in the board. The commercial is short basis and with the lack of ownership it continues to narrow the SX/SF. SH/SK inverted another 7c to close at 17 ¼ as the weaker Brazilian Real, near a 3 ½ year low, causes additional farmer selling. FSA data showed PP acres of 1.6 mln. With the recent resurvey for the Aug report, I believe the PP acres have most likely been accounted for in the USDA’s latest projections.
Wheat was labeled a follower of corn and beans today at up 3 to 7c. The Dakota’s and west should get some harvesting done now and into weekend, but have harvest interrupting rain in their forecast 19th through the 25th. Spring wheat protein levels coming in a little light of expectations. Last week’s export sales reported as 18.o MBU vs. 26.7 last week, 13.8 needed, and guesses of 20 to 28. Open interest in KWU is rather large at 38296 kts., with first notice day 8/30/13. The KWU:KWZ has moved from -22 on 7/3/13 to -3 ¼ today, thus short of covering interest cost by about 5c bu. With the TX Gulf basis something higher than +140 KWU, negative carry form KWU to KWZ, big corn crop competing for space, and lots of short hedges in the KWU, seems like someone needs to sell nearby cash wheat.
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