Sent: Friday, August 16, 2013 4:03 PM
Subject: Advance Insight - 8/16/13
Corn
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.
Troy Presley
Beans
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.
Jack
Fitzgerald
Wheat
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!
Kelly Herrick
Alex Grohsmeyer
Advance-Trading, Inc.
309.664.2392
agrohsmeyer@advance-trading.com
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