COMMENTARY 11/21/14

The U.S. forecast has a strong system pulling sharply warm air north, developing heavy rains across SRW wheat areas of the Delta and eastern Corn Belt from tonight through Sunday night.  In South America, three fronts will trigger storms across Argentina, Brazil, and Paraguay the next 10 days. Widespread, heavy rainfall of 2.00” – 4.00” should impact Brazil and Paraguay (average: 2.00”) with lesser amounts occurring in key areas of Argentina. Dryness should not be an issue in the former 2 countries through at least mid Dec and enough precio should occur in Argentina too to stem the effects of recent dryness.

St Louis river levels DROPPING at +3.7 ft  and forecast to be 1.8 by 11/26.  <- THIS FORECAST IS DANGEROUSLY LOW Good news is that we have a pretty decent chance for some accumulation Sat – Mon which should help the low water levels.  The Upper Miss will start closing early this week and the Mid Miss the following week (this is a week earlier than normal due to low water and the Polar Vortex).  As the export transportation pipeline shrinks, it stresses the lower system to perform.

CORN      

DOWN 1         

MIXED FUND ACTIVITY!   Rumors circulated of a pending EPA announcement about the renewable volume obligation (RVO) for 2014 mid-morning.  Funds bought most of the day, then turned into the last few minutes.  Some additional  export sales of 132 K MT sold to Unknown this morning were announced, poultry numbers continue to expand, and ideas that producer selling may become more calendar driven unless the market rallies to rewards him.  Yesterday’s Export Sales were healthy at 35.8 mbu, exceeding both the trade’s 20-28 mbu range and the near-23/week pace needed, with big volume going to Japan.   Argentine producers planted corn only 1% more acres last week, shifting their focus to soybeans.

There are multiple origins offering cheaper corn than the U.S.  Private sources indicate China has recently bought approx 1.1 MMT of Ukrainian corn.  (Fundamentally, these are bearish items – especially when we have such a huge crop in the bin – and subject to change at any time).  Monday’s Export Inspections too were very disappointing at only 15.8 mbu.  This was well below expectations of 26-33 and 35.2 per week needed.   Sales NEED to be 30 million+ per week going forward.  Improving Brazil corn prices could raise area planted to corn according to private sources.

 The market has moved nearly 50 cents higher during October on no real change in fundamentals.  Don’t allow Fund buying to make you too bullish, preventing you from making PROFITABLE sales.  Look to improve upon existing sales.  (Lock in  these higher CA$H values for Dec, Jan, Feb, Mar, & APR). This is a great time to make up for not having much sold prior to harvest!  Have offers in to take advantage of a higher board, should one materialize.

Last Monday’s Crop Progress report:   US HARVESTED 89% TW, 80% LW, 90% LY%, and 88% AVG.  The State of IL HARVESTED 94% TW, 87% LW, 95% LY, and 89% AVG.

 

BEANS     

UP 18    

FUND BUYING!   Another case of H5 strain bird-flu was reported in the Netherlands the market views on the U.S. bean pipeline are mixed with some saying we have ample supplies, while others argue producers have locked the bin doors awaiting higher prices and/or the New Year.  Bean  planting in Parana reaches 84%, 5 points behind LY.  The BA Exchange says the Argentine planting pace nearly doubled to 30.4% while trailing 2013 by about 8 points.

Thursday’s Export Sales at 17.7 were on the light side relative to trade expectations of  26-37 million.  South American Meal is cheaper than that of the US. More data confirms that several more bean meal vessels are being switched from US origins to SOUTH AMERICA.  Additional export demand is still needed and the market is not terribly concerned about South American weather at this point.  South American meal MAY be cheaper, but one consulting firm concludes that the good ‘ol U.S. logistical network is more reliable than either Argentina or Brazil.  On average, U.S. beans arrive within 3 days of expected delivery date, Argentina within 7 days,  and Brazil as high as 15 days.

 

Last Monday’s Crop Progress report:  US BEANS HARVESTED 94% TW, 90%LW, 94% LY, and 96% AVG.  IL HARVESTED 95% THIS WEEK, 91% LW, 98% LY 97% AVG.

 

WHEAT          

Unchanged

MIXED FUND ACTIVITY.  Strength bled over from corn and beans early.  Thursday’s Export Sales were routine at 13.3 mbu  vs expectations of  11-18 and 11.8 per week needed.  Despite military activities in Russia, consultant APF-Inform expects Ukrainian wheat exports to reach a record 10.4 MMT this year, up from 9.7 million last year.  Acreage for next year will likely fall, down 6% for winter grains.  Harvest pace in Argentina moves just beyond 21%.

Last Monday’s Crop Conditions Report: US Winter Wheat CONDITIONS  60% G/E THIS WEEK,  60% LW, and 63% LY.  STATE OF IL CONDITIONS 57% G/E this week, and 60% LW. US WINTER WHEAT PLANTED 95% TW, 93% LW, 99% LY, and 97% AVG.  THE STATE OF IL WINTER WHEAT PLANTED 90% TW, 84% LW, 100% LY, and 95% AVG.  US WINTER WHEAT EMERGED 87% TW, 83% LW, 88% LY, and 84% AVG.  THE STATE OF IL EMERGED 64% TW, 52% LW, 85% LY, and 81%AVG.